Impaired vision

Streamlining could help Toshiba regain lost value

Toshiba can regain some of its lost value through streamlining. The scandal-hit Japanese electronics group has finally produced figures for the last financial year, reporting a net loss of 37.8 billion yen ($318 million), and also restated results for the six previous years. Adjustments for dodgy accounting erased a total 155.2 billion yen of previously disclosed net income. With clarity on the numbers and overhauled corporate governance, Toshiba can now start regaining investors' trust. Shedding troublesome units like personal computers would help.

The bad news, which began to dribble out in April, is not quite over: fines and other sanctions loom. But such punishments are comparatively lenient in Japan, and Toshiba's new leaders must hope the worst is past. Former Shiseido boss Shinzo Maeda is in line to chair a largely independent board; financial controls will be improved; and a confidence vote by top managers is meant to stop future Toshiba presidents running amok.

Still, investors will need some convincing. Toshiba's shares have crashed 31 per cent this year. The company's enterprise value is now just 0.42 times last year's 6.66 trillion yen of sales: well below the average of 0.5 times trailing revenues over the last decade.

Perhaps it's asking too much to hope that the crisis spurs a wholesale rethink of a sprawling business that makes everything from nuclear reactors to household appliances. Japan simply does not carve up its corporate titans. But smaller moves would still count. Joint venture structures for some subsidiaries, along the lines of Panasonic's healthcare alliance with KKR, could help make any disposals less controversial.

PCs are the clearest headache. This business was the biggest source of accounting shenanigans, producing 57.8 billion yen of overstated net income over the years. The lifestyle unit, which houses both PCs and televisions, is serially loss-making and reported a negative nine per cent operating margin last year. To be sure, Toshiba has already retrenched from selling consumer PCs in some markets. And it's hard to see a sale of the business, perhaps to a bargain-hunting Chinese buyer, generating a knock-out price. But it would still be a useful signal that Toshiba is focused on rebuilding value.