* Hon Hai, Sharp to issue statement this week - Hon Hai
* Sharp shares up 1.1 pct on Tuesday
* Talks over renegotiating March investment deal
* Sharp's woes unlikely to dent Apple supply chain -
By Clare Jim and Tim Kelly
TAIPEI/TOKYO, Aug 7 Taiwan's Hon Hai Precision
Industry said it was in talks with Sharp Corp
about buying a bigger stake in the struggling Japanese TV maker
and paying less per share as part of a renegotiated investment
deal between the two Apple Inc suppliers.
Sharp's deteriorating earnings outlook has battered its
share price and allowed Hon Hai to squeeze Japan's TV pioneer
for a better deal than the one agreed in March, under which it
would buy around a tenth of Sharp for $844 million, or 550 yen
per share. On Tuesday, Sharp closed at 183 yen.
"Without Hon Hai's money, Sharp is in danger of bankruptcy,"
said Pelham Smithers, managing director of a London-based market
research firm of the same name. "It's just a matter of what
terms Hon Hai is able to extract."
At Sharp's current market value, Hon Hai's planned
investment could buy it a third of the Japanese firm's stock.
"A bigger stake and price cut are both being discussed, but
we need to do it step by step," Hon Hai spokesman Simon Hsing
told Reuters on Tuesday. "We first need to work on a joint
statement to tell investors whether we need to honour the
The two companies will issue a joint statement later this
week, he added. Hon Hai on Friday said Sharp had released it
from the terms of the original, but Sharp on Monday insisted the
deal stood. Sharp declined to comment on Tuesday.
Analysts have said Sharp will likely have to accept less
money from Hon Hai or sell a bigger stake to the Taiwanese firm,
ceding more management control that could see TV assembly plants
closed and solar panel and appliance units sold off.
Barclays Capital analyst Kirk Yang has predicted Hon Hai
would buy around a 10 percent stake in Sharp, but at a
renegotiated price of 200-300 yen per share.
Battered by foreign competition and waning demand for its
TVs, and too few customers to buy its LCD panels, Sharp's shares
have slumped 73 percent this year and the cost of insuring its
debt against potential default has soared. The
company's bonds, too, are under pressure, with debt maturing in
2013 last quoted at below 63 cents in the dollar.
Sharp, which pioneered LCD televisions and invented the
electronic calculator, is relying for backing on its main banks,
Mizuho Financial Group and Mitsubishi UFJ Financial
Group. A source at one of Sharp's main banks told
Reuters those lenders may insist on closer ties with Hon Hai and
the sale of non-LCD businesses to raise cash in return for help.
Those assets include some 40 billion yen ($511.25 million)
in marketable stocks, such as a 9.2 percent stake in rival
Pioneer and shares in medical device maker Olympus Corp
, Toshiba Corp and banks.
The century-old company last week warned it would report a
100 billion yen ($1.28 billion) operating loss this fiscal year,
prompting ratings agencies to cut their credit ratings.
It said it will axe 5,000 jobs, about a tenth of
its global workforce and its first redundancies in six decades.
Sharp's woes are unlikely to squeeze Apple's supply chain as
it gears up for the launch of its latest iPhone expected in
October. Analysts say Apple has the clout to secure alternative
"What they supply to Apple can be found elsewhere. It's not
unique proprietary technology," said Shaw Wu at Sterne Agee in
Sharp, which makes screens for the iPad and other Apple
gadgets, plans this month to begin shipping screens from its
Kameyama plant that are widely known to be for the new iPhone.
Sharp's competitors - South Korea's LG Display
and Japan Display Inc - a government-brokered merger combining
parts of Toshiba, Sony Corp and Hitachi Ltd -
also provide displays for iPhones.