Financially troubled Toshiba Corp. will shutter its U.S. commercial phone service division based in Irvine in the second local business closure enacted by the Tokyo conglomerate in a year.
Toshiba America Information Systems Inc.’s Telecommunication Systems Division employs about 150, putting it at No. 8 among the largest telecom employers with operations in Orange County, according to Business Journal research.
The cuts amount to about 8.5% of Toshiba’s estimated 1,745-member employee base here. It entered the year as the third biggest foreign-owned company in OC based on local employment.
Toshiba plans to wind down the division over an unspecified period of time during a global restructuring effort necessitated by a pending charge-off related to its floundering U.S. nuclear business that the company estimates will eclipse $8 billion, and by other mismanaged operations.
Toshiba recently filed a layoffs notice with the state Economic Development Department indicating it will cut 50 positions from its phone division at its diminishing Irvine operation. The cuts will conclude next week, according to the filing.
“During this wind-down, TSD will maintain a small group of mission critical staffers to ensure its customers and dealer partners receive the responsive and professional support they have come to expect from Toshiba,” a Telecommunication Systems Division spokesperson told the Business Journal.
Some of the customers and partners were caught off-guard by the move, according to trade reports.
The telecom division, established 30 years ago, provides IP, digital and cloud-based phone systems and services, and related support and maintenance. It’s one of five Toshiba America Information Systems business units. The others are Digital Products, Visual Products, Imaging Systems and Storage Devices.
Earlier Cuts
The Business Journal reported about a year ago that Toshiba’s U.S. electronics unit, also headquartered in Irvine, exited the consumer PC market in a major strategic shift that underscored the changing habits of end-users and the lingering challenges facing legacy manufacturers in Japan and elsewhere.
The move followed big job cuts at Toshiba America Information Systems, which shed 200 workers a few months earlier, or roughly 20% of its workforce. The unit primarily handles marketing and sales operations in the U.S. for its Tokyo parent.
It’s Toshiba’s largest local unit, with annual sales of about $3 billion, and sells business laptops; LCD and LED televisions; Blu-ray and DVD players; camcorders; imaging products for the security, medical and manufacturing markets; and storage products for the automotive, computer and consumer electronics sectors.
Parent’s Troubles
The latest development comes as Toshiba faces challenges on numerous fronts and prepares to move its medical device unit in Tustin to University Research Park next to the University of California-Irvine.
The Tokyo parent last week reported a net loss of about $8.4 billion related to write-downs in its bankrupt U.S. nuclear business, Westinghouse Electric, which it acquired in 2006 for about $5.4 billion.
The results were unaudited, which raised more questions after two reporting delays, coupled with downgrades from Moody’s Investors Service, and Japanese credit rating firm R&I, which threatened its listing on the Tokyo Stock Exchange, where it has traded since the exchange was established in 1949.
The company is still reeling from an accounting scandal in late 2015 in which senior management overstated profits by about $1.2 billion over a seven-year period. The fallout tarnished the brand globally and led to the resignation of Chief Executive Hisao Tanaka, Vice Chairman Norio Sasaki, and eight board members.
The latest projection follows a $4.8 billion loss in its previous fiscal year.
A potential sale of Toshiba’s flash memory business, which is valued at about $17 billion, could save the company from financial ruin, but it’s running into several obstacles.
Manufacturing partner Western Digital Corp., which recently moved its headquarters from Irvine to San Jose, is trying to nix an auction of Toshiba’s chip business and prohibit any sale without its approval.
The bidding war, which includes Apple Inc. supplier Foxconn, Singapore-based Broadcom Ltd. and private equity firm KKR & Co. LP, has widely surpassed what Western Digital was willing to pay.
Western Digital last week filed a Request for Arbitration with the Chamber of Commerce International Court of Arbitration to unwind the transfer of assets in Toshiba’s newly formed unit, Toshiba Memory, arguing that any sale would violate terms of their joint venture.
The companies have been strategic partners for more than a decade. Last year, the joint venture established a 297,000-square-foot flash memory manufacturing plant in Yokkaichi, Japan.
A majority of Western Digital’s NAND-flash memory is primarily supplied through its business ventures with Toshiba, according to its annual report. NAND flash is the most popular rewritable memory chip used in USB drives, cameras, iPods, smartphones, tablets and other devices.
OC Effects
Toshiba’s global tumult has spilled into Orange County, where the tech giant sold its 26-acre campus at 9740 Irvine Blvd. in the Irvine Spectrum in December and prepares to move a local unit to a smaller site last used by Broadcom Ltd. at University Research Park.
The $65 million campus sale to Irvine-based real estate investor LBA Realty included a nearly 450,000-square-foot office and industrial space.
New York-based Toshiba America Inc. finalized a lease in March for 96,000 square feet at 5231 California Ave. and 5241 California Ave. It markets, sells, distributes and services diagnostic imaging systems, including computed tomography, magnetic resonance imaging, nuclear medicine, ultrasound and X-rays.
Newport Beach-based Irvine Company told the Business Journal at the time that Broadcom agreed to move out of the two buildings ahead of schedule so the Toshiba unit could move in by October.
Broadcom is steadily vacating space at 11 buildings it leases at the 36-building, 2.2-million-square-foot office campus Irvine Co. built for the chipmaker in 2005. Broadcom is moving its operation to Great Park Neighborhoods near Irvine’s train station and agreed this month to sell back the campus that’s under construction for $443 million to Aliso Viejo-based master developer FivePoint Communities Inc.
Broadcom Ltd. was established last year after Singapore-based Avago Technologies Inc. acquired Broadcom Corp. in Irvine for $37 billion and settled its U.S. headquarters in San Jose.
A potential silver lining in Toshiba Corp.’s woes: It projects a $441 million profit in its fiscal year ending next March, largely based on the chip business sale.
