Toshiba’s nightmare 12 months ends with annual $1 billion loss

Toshiba’s nightmare year is not over yet. After declaring its nuclear arm bankrupt, putting its chip unit up for sale and enduring countless legal battles with disgruntled partner Toshiba’s annual financials are the final kick in the company’s proverbials. After tax related deductions for its chip unit sale, Toshiba’s annual loss comes in at just under $1 billion.

The forecasts takes into account taxes on the basis of assets and liabilities of the transferred business at the time of the split. However the $1 billion does not reflect expected gains from the 2 trillion yen ($17.6 billion) sale of its chip unit as the deal has yet to receive regulatory approval. In fact Toshiba may have to wait until March 2018 (at the earliest) before they can get the hands on the money from the sale.

Toshiba said that due to the tax impact, it expects a loss of 110 billion yen ($970 million) in the year to March, instead of its previously forecast profit of 230 billion yen.

After seven months of negotiations, lawsuits, twists and turns, Toshiba bosses finally penned an $18 billion deal for its chip unit, paving the way for a consortium led by Bain Capital and Apple to take over its memory unit. The deal looked like it was done some time before but Apple demanded new terms at the last minute sparking doubt that the deal would be complete. The consortium also includes SK Hynix, as well as Dell, Seagate Technology and Kingston Technology.

But bosses at Toshiba will now be scrambling to satisfy the March regulatory review, which usually takes six months to complete. Cutting it fine, if the deal does not close before then, Toshiba – hurt by liabilities at is now bankrupt nuclear unit Westinghouse – is likely to end a second consecutive year in negative net worth, putting pressure on the Tokyo Stock Exchange to strip it of its listing status.

The sale also faces legal challenges from Western Digital, Toshiba’s chip venture partner and rejected suitor, which is seeking an injunction to block any deal that does not have its consent. Western Digital’s attempts to block the deal shouldn’t come as a surprise though. Western Digital says that it has legal rights to block any deal made without its consent. An independent arbitration panel is set to be formed in the coming days, and an injunction could come later this year. A final ruling isn’t expected until at least 2019. 

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