A tale of three corporate restructures


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A look at 3 restructures that happened in the last 12 months or so in APAC + Japan. What differentiates them is the timing of each restructure in terms of where the business stood at the time of restructuring. Only time will tell whether these restructures will propel them into higher growth or will they need another tweaking to their corporate structure.

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A tale of three corporate restructures

  1. 1. A Tale Of ThreeCorporate RestructuresThe objective of this presentation is not to ascertain whether restructuring is good or bad or even toquestion the decisions. The purpose is rather to analyze the timing and nature of it.The views expressed are that of the author and the document is meant to provide an analyticalperspective . April, 2012 Amit Phatak +65-6603 1564 p.amit@marketprobe.com 1
  2. 2. Corporate Restructuring On The Rise• 2011 and early 2012 saw a rise, in the number of corporate restructures across business verticals be it manufacturing, services, banking or technology• Electronics and Telecom/Technology company restructures captured most attention ⁻ Perhaps driven by a larger market cap garnered in the recent past or driven by their larger foot print in the digital media• Corporate restructuring is nothing new, and most often is the need of the hour• Interesting though is the timing at which it takes place. That leads us to the topic – A tale of three corporate restructures 2
  3. 3. So Why Particularly These 3……• The timing of restructure in terms of where these business are (were during restructure) makes them unique: o Case in point – Sharp (Japanese Electronics Giant), Sony (another Japanese giant) and SingTel (A Singapore based Telecom giant)• To be fair – these three businesses are very different in terms of the competitive environment in which they operate, the markets they serve and the product/ services they offer• But the common thread among them is their corporate restructuring; and the timing at which this restructuring took place makes them very different from each other as well• Let us look at what led to restructuring and what is the new vision for these 3 businesses 3
  4. 4. Forced Restructure – The Sharp Story Group Revenue (billion Yen) 2011 Revenue Breakup 3417 2012* is mean of forecast by Sharp 8.8% 5.7% 3500 3,021 2,847 2,755 2,750 3000 47.2% 20.3% 2500 2000 9.0% 8.9% 1500 1000 Audio Visual Comm Equipment Health & Environ Equipment 500 Information Equipment LCDs 0 2008 2009 2010 2011 2012* Solar Cells Other Electronic DevicesWhat led to restructuring: Data Source: Latest Published Annual reports Consumer and Information Products segment as well as Electronic components were taking a hit both domestic (Japan) as well as International (strengthening Yen and weakening International outlook) Sharp not leading any of the key product segment either in Japan our in International business (low cost low end production in China and Korea extremely competitive) LCD TV as well as display business was not growing to the expectation of the management Healthcare and Environment business the sole silver lining Solar cells division showed some promise but not able to compensate for the loss / decline in other segmentsRestructuring Focus: Restructure Audio Visual business with attention on large LCD TV & components Restructuring Solar cell business & focus on growing healthcare & Environ Equipment business Resource (human and capital) maneuvering to new focus areas 4
  5. 5. Timely Restructure – The Sony Corp Story Group Revenue (billion Yen) 8,900 7,700 7,200 7,200 2008 2009 2010 2011 Data Source: Latest Published Annual reportsWhat led to restructuring: Korean companies (Samsung and LG) eating share in key electronics categories Huge domestic competition within Japan across categories Loss in small and medium sized display and chemical businessRestructuring Focus: Strengthen the 3 core consumer businesses (Digital Imaging, Game, Mobile) Realign its television business with focus on LED and emerging markets Expanding business across segments in emerging markets Creating new businesses and accelerating innovation Realigning the business portfolio and optimizing resources 5
  6. 6. Pragmatic Restructure – The SingTel Story Group Revenue (million S$) 18,071 16,871 14,934 2009 2010 2011 Data Source: Latest Published Annual reportsWhat may have triggered this restructuring: Increasing regional mobile foot print vs. two large domestic businesses (SingTel Singapore, Optus Australia) Strong focus on digital lifestyle products led by recent acquisitions Distinctive needs for B2B segment (ICT) versus consumer groupRestructuring Focus: 3 separate groups formed with horizontal operational structure (Finance, HR, Strategy, Legal etc.) Consumer Group (covering SG, Australia and Regional markets) Digital Life with focus on Next Gen TV, Innovation, ecommerce, Amobee, Communications systems etc. ICT Group to focus on business needs (Enterprise data and IT ) 6
  7. 7. Lets Try And Compare Apples With Oranges Revenue fast declining Revenue flat with Timing of losses in specific Revenue on the rise in with increasing losses most categories restructure across categories categories Rejuvenate/ restart Distinctive focus on What is the new Focus on distinctive consumer versus B2B ailing segments, realign markets and productsvision/ restructure resources categoriesPurely on face value Fairly different with Clear and distinctive Not too different, innovation being the with innovation beinghow different is the rather realignment new structure key component at the center Potential room/ Almost reaching the Critical for ailing Enough room and time time for another point of no return segments to perform for rejig/ tweaking change 7
  8. 8. Key Takeaways• Not only the timing but the degree of demarcation from the prior set-up is very vital in any corporate restructure• Merely realigning existing structure with a few tweaks within existing SBU or Line of Business (LoB) may not be sufficient• Just because a particular corporate structure is working well, does not necessarily mean it will, in the near future• Proactive attention to competitive ecosystem (Domestic and International) as well as one’s core competencies (encompassing acquisitions) can be the game changer• Pragmatic restructures are bound to yield long term gains as Corp Restructure 2.0 or 3.0 may still be possible• Distinctive Corporate Restructuring at the right time most often result in agile corporations 8
  9. 9. Thank You Amit Phatak (p.amit@marketprobe.com) Market Probe Asia-Pacific 51 Bras Basah Road #07-01 Manu Life Center/ Plaza by the Park Singapore 189554 Board: +65 6603 1560 Mobile +65 9457 5102 Fax: +65.6837.3693 www.marketprobe.com 9