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On 100th birthday, Sharp seeks salvation in talking vacuums

Jay Alabaster | Sept. 18, 2012
It's probably fair to ask why Japanese electronics maker Sharp -- deep in debt and red ink, cutting workers and salaries, awash in excess inventory in the brutal LCD market -- is actively promoting a line of talking vacuum cleaners.

Many investors are actively betting that Sharp will soon go bankrupt. But the company has been to the brink many times in its hundred-year history and has always bounced back.

In 1923, Hayawaka's mechanical pencil (called "sharp pen" or "sharp" in Japanese) business was thriving in Tokyo when the city was struck by the Great Kanto earthquake, a 7.9-magnitude temblor that set off deadly fires that burned for days through the city's wooden neighborhoods. Over 100,000 died in the quake and fires, and the founder lost his wife and two children, as well as his factory, later moving to Osaka to pay off his debts.

He recovered and restarted the company, eventually betting everything on the booming radio market, which drew over 80 domestic rivals. Amid the devastation after World War II, the market collapsed, and in 1950 the firm became mired in a situation similar to its current one: over-invested in a commoditized product, with deep losses adding to its growing debts and facing tough demands from its banks.

Then, as now, the company had to reduce its workforce, but it secured enough capital to survive and kept innovating, developing radios for military use. With a boost in orders from the U.S. government when the Korean War unfolded, Sharp was profitable again less than a year later.

"Hayakawa would see Sharp's current situation as a turning point, a chance to develop new businesses," said Atsushi Okitsu, who helped organize an exhibit about the Sharp founder at the Osaka Entrepreneurial Museum.

"If it hadn't been for the Tokyo earthquake, Sharp might still be making mechanical pencils," he said.

In 1952, Sharp tried to develop its own televisions, hoping to avoid borrowing technology from another company. It succeeded in building an experimental set, but decided it was too far behind to compete and licensed monochrome technology from U.S. maker RCA. Thirty years later in 1986, as RCA went under, Sharp was showing its first LCD TV at electronic shows, a 3-inch model with 92,000 pixels developed completely in-house.

The company continuously poured resources into LCDs and got its ultimate reward in 2008, reporting record profits for the fifth straight year, as its "Aquos" TVs became a global brand. Sharp spent US$121 billion building two massive new LCD factories over the last decade, much of it borrowed on the promise of future earnings.

But its timing couldn't have been worse. The average price of a 32-inch LCD panel for use in TVs has fallen from $1,770 in 2003 to $144 this year, according to data from research firm NPD DisplaySearch.

Even as its fortunes have become become increasingly dependent on its LCD business, which accounted for just 20 percent of revenues last year but still dragged the company into a deep loss, Sharp continues its tradition of quirky tech. Recent products include "Healsio," a family oven that cooks using superheated steam, its "Plasmacluster" line of products that purifies the air by blasting it with high voltage, and "Cocorobo," its squat line of talking vacuum cleaners.

 

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