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Toshiba to Implement Reforms to Improve Profitability in Digital Products Business

26 Jul, 2013

TOKYO—Toshiba Corporation (TOKYO: 6502) today announced that it will implement further structural reform of its LCD TV and PC businesses to accelerate profit-focused resource allocation and to establish an asset-light management strategy that reduces fixed costs, improves profitability and strengthens business foundations.

 Toshiba will execute these measures immediately, and will also follow up with structural reforms in this fiscal year, including a review of production and a reform of sales operations in Japan and overseas.

Background

Last year, Toshiba transferred the LCD TV design and development function from Fukaya Complex in Saitama prefecture to Ome Complex in western Tokyo, Toshiba's development hub for PC and tablets. Concurrently, Toshiba concentrated technical service operations for LCD TVs in Fukaya Complex to a group subsidiary.
 
Despite these efforts, Toshiba has recorded losses in the LCD TV business for 2 consecutive years, the result of continuing lower demand in Japan following the completion of the transition to terrestrial digital broadcasting, yen depreciation and price reductions in the global market, and lower demand in the sluggish economies of Europe. In addition, the PC market is expected to see lower demand, reflecting the growing popularity of smartphones and tablets.

In these circumstances, Toshiba will promote a new round and continuing structural reform of its LCD TV and PC businesses, aiming to see positive figure in the Digital Products business in the second half of 2013.

Objective

Toshiba plans to increase sales and profit by accelerating profit-focused resource allocation and establishing a business strategy to reduce fixed costs, improve profitability and strengthen the business foundations. It will also seek to promote sales in emerging markets, focusing on B2B business and developing high value-added products.

In order to accomplish these plans, Toshiba will reorganize its Digital Products & Services Company, aiming to speed up decision making, and concentrate human resources into selected businesses.

Through these measures, plus the structural reforms that it initiated last year, Toshiba plans to reduce fixed costs in the LCD TV and PC businesses by approximately 10 billion yen in FY 2013 and approximately 20 billion yen in FY 2014, against FY 2012, and by doing so establish the sound business foundations required to win against global competition.

Measures

1. Profit-focused resource allocation

LCD TV

(1)
In sales, Toshiba will accelerate resource allocation and hone its market focus, including its business in emerging markets. The company expects to generate 30% of its sales in emerging markets in FY2012 and to boost this figure to approximately 40% in FY2013
(2)
In terms of products, Toshiba will expand its line-up of high value-added products in the global market, including large screen 4K LCD TVs, promote the provision of cloud services, and continue to reinforce development of local-fit products in emerging economies. Toshiba will also strengthen its B2B business, including digital signage and LCD TVs for specific sectors, such as hotels and hospitals, and will seek  to raise B2B sales to approximately 10% of all sales in FY2014
(3)
Toshiba will draw on its wide-ranging know-how to diffuse its technologies into new business areas, including bringing glasses-free 3D TV technology into medical business.

PC

(1)
Toshiba will accelerate resource allocation to expand business in emerging markets and B2B business and transform B2C focused business foundation. Sales in emerging markets are expected to rise from approximately 30% in FY2012 to approximately 40% in FY2013, and B2B sales are expected to rise from approximately 20% to approximately 40% in the three years of FY2012 to FY2015
(2)
Toshiba will launch a new line-up enterprise products that offer improved security and mobility, and that provide solutions, including energy savings and lower cost asset management, through its client manager utility. The company will also promote business in the education and healthcare markets, in both hardware and software. In addition, the company will integrate its solutions businesses and seek to promote new business relationships with major clients.
(3)
In the B2C market, Toshiba will launch strategic high value-added products, such as an Ultrabook™ with an advanced handwriting function, and expand direct sales through its online shopping site, Toshiba Direct, laying the foundations for more diversified sales channels and long-term profitability.

2. Asset-light management strategy

LCD TV

(1)
Toshiba will promote global standard product design and reduce costs in development and design by reducing the number of product platforms from 14 in FY 2012 to 9 in FY2013, and the number of models from 115 models to 67 models in the same timeframe.
(2)
Toshiba will reduce costs by reducing the number of global original design manufacturers (ODMs) to 1/3 and also promote selection of in-house manufacturing or ODM for individual products.
(3)
Toshiba will tighten up control of inventories and logistics costs by improving operating processes from manufacturing through to distribution.

PC

(1)
Toshiba will tighten up control inventories and logistics costs by improving operating processes from manufacturing through to distribution.
(2)
Toshiba will streamline and speed up development by reducing the number of product platforms and models, and will reduce the number of platforms from 20 in FY2012 to 15 in FY2013

3. Human resource allocation to focused business

Toshiba will transfer approx. 400 employees, 20% of the total staff working in the LCD TV and PC businesses in Japan, from the design, sales and administrative departments of the LCD TV and PC businesses in Japan to social infrastructure businesses within this fiscal year.

4. Organizational reform

Toshiba will reform the organization of its in-house company, the Digital Products and Services Company on August 1, 2013. The company introduced a regional division system in 2011. While leveraging synergies generated by its regional business operations, the company will reform its operations into three divisions: the "Visual Solutions Division" that includes LCD TVs and Blu-ray disc players and recorders; the "Personal Solutions Division" that includes PCs and tablets, and the "Business Solutions Division" that includes B2B businesses. The company aims to promote business by rightsizing its organization and speeding up business decisions, and also aims to cultivate a B2B business and promote strategic business evolution through a specialist organization.

 

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Information in the press releases, including product prices and specifications, content of services and contact information, is current on the date of the press announcement, but is subject to change without prior notice.

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