Memory loss: Toshiba will sell off chip biz

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The Tokyo-based group faces massive write-downs on its US nuclear power business.

Toshiba (TOSYY) said Friday it will spin off a part of its chip business in a bid to strengthen its finances eroded by the greater-than-expected loss resulting from the acquisition of its US nuclear unit.

Toshiba's Westinghouse Electric Company subsidiary entered into a deal to acquire the construction company, which specializes in nuclear power projects, in 2015 as part of Toshiba's push into the nuclear power space.

Toshiba will sell a stake of less than 20 percent in its flash memory operation to raise several hundred billion yen to avoid falling into negative net worth in the current business year to March, sources familiar with the matter said earlier.

While Western Digital, which operates a NAND plant in Japan with Toshiba, may seem like a natural buyer of a large stake in the chip business, a sale might be hard to pull off before March as it would likely invite a review by anti-trust regulators.

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The company has been in a downward spiral since the end of 2016, falling more than 45% after a botched deal with U.S. subsidiary Westinghouse Electric. Strategic investors and foreign private equity funds are among the potential bidders, and Toshiba aims to select a buyer by March 31, the people said.

The acquired company's operations are a complicated mess, and the particulars of the transaction are still disputed - the short story is that Toshiba is facing a $1 billion hit if things don't go its way.

The spinoff will allow the company to strengthen the competitiveness of the flash memory business and boost the entire Toshiba group's capital at the same time, Satoshi Tsunakawa, president and chief executive officer at Toshiba, told a press conference.

Japanese business weekly Toyo Keizai reported that Terry Gou, chief executive of Foxconn, the world's largest contract electronics maker, is interested in either taking a stake in or buying some of Toshiba's businesses.