January 30th, 2017 by Adam Armstrong
Toshiba Moves To Split Off Memory Business
All industries have companies that float up and down within them. A new company, such a Violin Memory, can shoot up to the top in a given niche within the industry, all-flash arrays, only to be facing their demise a few years later. Toshiba has been a major player in the storage arena for a several years now. The company has stumbled through a number of pitfalls recently and announced that it intends to split, separating its memory business.
Toshiba was founded in 1938 as Tokyo Shibaura Electric K.K. (the name was changed to Toshiba in 1978); the result of a merger of two other companies Shibaura Seisaku-sho (founded in 1875) and Tokyo Denki (founded in 1890). While Toshiba has had a long and mostly successful history, where it becomes more relevant to you dear reader, is in 1984 when they first introduced flash memory (as electrically erasable programmable read-only memory or EEPROM). From there on Toshiba began to release several storage devices. In 2009 Toshiba acquired the HDD business from Fujitsu and in 2014, Toshiba acquired the storage company OCZ.
In 2015, Toshiba announced it was investigating accounting irregularities. This investigation found that the company had inflated profits over the previous seven years by as much as $1.2 billion dollars. The fallout from this investigation was the resignation of several executives, losing $8 billion in market share, and a two year freeze on raising funds. Also in 2015, Westinghouse Electric (which was acquired by Toshiba in 2005) acquired the CB&I Stone with the intention of expanding into nuclear power. Unfortunately CB&I Stone was valued at several billion less than its book value. These two problems, combined with the inability to raise funds, has brought Toshiba to where it stands today.
Toshiba will be splitting off its memory business “including the SSD business, but excluding its image sensor business.” Toshiba states that its memory business will be its focus business; the fate of the HDD and peripheral business is unclear. In march 2017, Toshiba intends to hold a special meeting with its shareholders to approve of the split, more specifically a course of action for how to split the company. The meeting will also decide what assets are transferred to which company and the possibility of “an injection of third-party capital.” Toshiba will also decide on what type of split they will undergo, either a incorporation-type company split or an absorption-type company split in which the wholly owned subsidiary will become the succeeding company.