Foxconn outfoxes Sharp’s sharpest

8/17/2012 2:15 PM EDT

@Junko: "I am still wracking my brain why Sharp was not able to close the deal when the two companies announced the deal in March."

Easy enough. Money.

The business landscape is littered with the corpses of ventures like this that foundered because the economy changed and the value of one of the parties dropped substantially. the other party says "You aren't worth as much as you were when we made the deal, so we aren't going to pay as much!"

Hon Hai certainly has an interest in getting a piece of Sharp, but they would arguably be getting a lot less for the money if they bought at the originally agreed upon price.

I think the question is whether Sharp needs the deal badly enough to cut the price they are willing to accept.

8/17/2012 2:50 PM EDT

Well put. I agree.

Unfortunately, Sharp is running out of both money and time.

Hon Hai now wants 20 percent of Sharp.

See the other story here:
http://www.eetimes.com/electronics-news/4394255/Hon-Hai-now-wants-20-percent-stake-in-Sharp

8/18/2012 12:37 AM EDT

I saw it, and commented. It came as *no* surprise, and was about what I'd expect to happen.

8/14/2012 3:33 PM EDT

Yes, you are correct. Sharp is among a few display vendors expected to supply new LCDs to Apple's new products. (LG is another) But that alone, appparently, won't save Sharp. The company's financial trouble has grown much bigger as it kept investing in its fabs over the years.

I won't blame Hon Hai either for trying to renegotiate the deal.

The problem is, I think, that both companies have reached the point of no return, and yet there is little enthusisam left for each other.

8/18/2012 12:50 AM EDT

"The problem is, I think, that both companies have reached the point of no return, and yet there is little enthusisam left for each other."

That lack of enthusiasm could be a major stumbling block. The del has changed from being something Shard reluctantly accepted to something a lot like an unfriendly takeover.

Hon Hai may get what it wants and wind up calling the shots, but if it doesn't get the Sharp management and rank and file on board, it may have problems getting value from the investment.

8/15/2012 10:51 AM EDT

Apple is always a factor. But the problem with Sharp today is much larger than that, I think.

8/15/2012 10:57 AM EDT

Yes, that's so true, Rick. The company puts itself in a constant rat race for cheaper labor.

In theory, though, if Foxconn can work out a deal with Sharp, the Taiwan contract manufacturing giant could go up the food chain. Developing advanced displays with its parter... at least, from what I understood, that was Hon Hai's original intention of courting Sharp.

8/19/2012 12:33 AM EDT

Rick, please remember one principle that is mostly true (rare exception occasionally but don't expect to see this once every 10 years :): successful business always involve a lot of untold dirty tricks and ethics. The on-the-surface 1% profit is not what Hon Hai and Mr Gou actually are making. They have subsidiaries where the real money (lot of it) are being made. For example, the owners of the DRAM manufacturers in Taiwan have subsidiaries who handle assembly, testing, logistics. They are all making handsome money while the DRAM factories are borrowing money from the banks to operate at loss. If you think about this, Taiwanese learnt all these market innovation created and invented by USA who has been at the fore-front of market economy for the past 50 years. The same kind of market innovation also brought us the collapse in CY2007!

8/19/2012 12:59 PM EDT

@WW Thinker: "The on-the-surface 1% profit is not what Hon Hai and Mr Gou actually are making. They have subsidiaries where the real money (lot of it) are being made."

Money made by subsidiaries counts toward the parent's revenues and profits, unless you assume the books are being cooked and money is being concelaed.

Hon Hai may actually be making 1% overall, but so what? Different industries have different business models, and different measures of health.

The supermarket business makes about 1% profit, but supermarkets are going concerns. They may make a penny on the dollar, but they take in a *lot* of dollars, and the measuring sticks to apply are inventory turns and return on assets, not profit margins.

Look at Hon Hai that way and a different picture may emerge.