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Threat of Sharp losses dulls shares

Japanese tech groups including Panasonic and Sony have undertaken heavy restructuring to focus on divisions with growth potential, but analysts say Sharp's troubles are compounded by the paucity of such business areas.

"The prospects for its main businesses - from TVs, phones, panels, solar to appliances - are worsening," said Atul Goyal, analyst at Jefferies.

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Fears of ballooning losses sent shares in Sharp down nearly 10 per cent as the troubled Japanese display maker said it is considering seeking fresh support from its lenders to execute deeper restructuring.

The Osaka-based supplier of displays to Apple may further streamline its struggling businesses through closures or consolidation of plants, which would require additional bank assistance, a person familiar with the matter said.

The company said on Tuesday that it is studying various restructuring measures but no decision has been made. Sharp has previously said it will redraft its turnaround plan, which will be outlined in May.

The statement followed a report by the Nikkei newspaper that Sharp may seek Y150bn ($1.25bn) in a debt-for-equity swap from Mizuho Bank and Bank of Tokyo-Mitsubishi UFJ, and that the company's net loss could swell to more than Y100bn for the fiscal year that ends this month.

Shares fell as much as 9.8 per cent in Tokyo before ending down 3.5 per cent.

Sharp has been banking on expanding sales of smartphone panels to rapidly growing Chinese handset makers, but is facing intense competition and price pressure. With continuing reliance on bank assistance, the company is unlikely to make active investments, potentially widening the competitive gap with rivals.

Domestic rival Japan Display, for example, is considering building a $1.7bn plant in central Japan with financing from Apple in anticipation of continuing bumper sales of iPhones, according to people familiar with the talks.

Last month, Sharp projected an annual net loss of Y30bn - reversing an earlier forecast of a Y30bn profit - blaming slow sales of handsets in the Chinese market that led to an inventory glut.

The company eked out a small profit last year following a combined loss of nearly $8bn in the previous two fiscal years, after eliminating jobs and pulling out of solar cell production and television sales in Europe.

At the time, the company appeared headed for recovery, after it in 2012 expressed "material doubt" about its survival. Now analysts expect more restructuring, involving further reductions in TV and solar businesses in other regions.

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In home appliances, a business that is still profitable, the weaker yen has cut into Sharp's profit from products such as air purifiers and refrigerators manufactured abroad and sold in its home market.

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