U.S.-based Intel Corp (NASDAQ:INTC)and Qualcomm Inc (NASDAQ:QCOM) are in talks to jointly invest about 30 billion yen ($378 million) in debt-stricken Japanese consumer electronics maker Sharp Corp, two sources familiar with the matter said on Wednesday.
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Details of the talks were not known, but Sharp, whose displays are used in Apple Inc's (NASDAQ:AAPL) iPads and iPhones, is looking to small displays to spark a revival in its fortunes and sees the new generation of high-end laptops as a fresh market.
Intel, which has been promoting a new category of thin "Ultrabook" laptops with touch screens, has long been interested in Sharp's power-saving IGZO displays, as it responds to a shift from PCs to smartphones and tablets.
Sharp may reach an agreement as early as the end of this month with Qualcomm, said one of the sources, who asked not to be identified as they were not authorized to speak to the media, adding talks with Intel are less concrete amid the chipmaker's unclear financial picture.
Shares in Sharp jumped 11 percent on the news, but brokers said the rally was likely to be brief as the potential investment would do little to address the firm's fundamental problems as it struggles with a TV business in retreat, aggressive competition and a $13.8 billion debt load, according to Thomson Reuters data.
"Sharp has talked about cutting debt and inventory, but they haven't made it clear how they plan to generate cash flow and strengthen their capital base," said Toshiyuki Kanayama, senior market analyst at Monex Inc.
Japan's top LCD maker has been in talks for months with Taiwan's Hon Hai Precision Industry Co Ltd, which is considering becoming the century-old Japanese firm's biggest shareholder, but has said it is looking at other alliances as well.
A Sharp spokeswoman said no decisions have been made about accepting investments from other companies, while an Intel official declined to comment. Qualcomm officials were unable to immediately comment.
The Osaka-based firm, which has lost three-quarters of its value so far in 2012, nearly doubled its forecast full-year net loss to 450 billion yen ($5.7 billion) earlier this month after booking a $1.1 billion restructuring charge in July-September.
Effectively shunned by the debt capital markets because of its massive losses and falling market share, Sharp received a guarantee for 360 billion yen in loans from its two main lenders, Bank of Tokyo-Mitsubishi UFJ and Mizuho Corporate Bank, in September.
The loans are enough to sustain the company through its next financial year to March 2014, which includes the redemption of 200 billion yen in convertible bonds next September, Sharp Chief Financial Officer Tetsuo Onishi told a briefing.
For a bond price chart, click: http://r.reuters.com/gyg93t.
Intel is promoting ultrabooks to counter tablet computers from Apple and earlier this year signed deals with several panel makers to ensure adequate supplies for a wave of ultrabooks with touch screens that use Microsoft Corp's Windows 8.
In late morning trade, Sharp shares stood at 162 yen, up 6.6 percent, while the benchmark Nikkei 225 was little changed.
"Those who shorted the stock are covering their positions, so the rallies will likely be short-term," said Makoto Kikuchi, chief executive of Myojo Asset Management.
(Additional reporting by Reiji Murai, Ayai Tomisawa and Mari Saito in Tokyo, Noel Randewich in San Francisco; Writing by James Topham; Editing by Richard Pullin)