Toshiba 2011 Annual Report Download - page 77

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(2) Success of strategic business alliances and acquisitions
The Group actively promotes business alliances with other companies, including the formation of joint ventures and
acquisitions, in order to grow new businesses in research and development, production, marketing and various other areas.
If the Group has any disagreement with its partner in a business alliance or an acquisition in respect of financing,
technological management, product development, management strategies or otherwise, such business alliance may be
terminated or such acquisition may not have the expected effects. In addition, the Group’s operating results and financial
condition may be adversely affected by additional capital expenditures and provision of guaranties to meet the obligations
for such partnership business that may be incurred due to the deterioration of the financial condition of the partner, as
well as for other reasons. Based on these assumptions, the Group pays careful attention to optimizing business formation
to secure correspondence to the nature of the relevant business.
(3) Business structure reformation
The Group as a whole is taking measures to reform its business structure, mainly focusing on strategic allocation of
resources in its businesses in order to convert its structure into one that enables the Group to generate profit regardless of
the market situation. In connection with these measures, there is a possibility that the Group will incur expenses for
business structure reform. Although there is a possibility that the Group’s operating results or financial condition may be
affected in the event of the failure of such program to produce the expected results, the Group, including its management,
has continuously followed-up on the progress of such programs, and, as a result, the number of businesses subject to such
programs has been steadily decreased.
(4) Measure for defense against hostile takeover
The Company has introduced a plan outlining countermeasures that may be taken against any large-scale acquisitions of
the Company’s shares (the “Takeover Defense Measures”). If an entity making a large-scale acquisition of the Company’s
shares does not comply with the procedures under the Takeover Defense Measures, the Company will counteract by
making a gratis allotment of stock acquisition rights (shinkabu yoyakuken) under the Takeover Defense Measures. Although
such Takeover Defense Measures were introduced for the purpose of protecting and enhancing the corporate value of the
Company and the common interests of its shareholders, they may limit the opportunities for the shareholders of the
Company to sell their shares to hostile acquirers.
2. Risks related to financial condition, results of operations and cash flow
(1) Business environment of the Digital Products business
The market for the Digital Products business is intensely competitive, with many companies manufacturing and selling
products similar to those offered by the Group. Additionally, this business may be heavily affected by economic
fluctuations and consumer spending trends, and decreases in demand may cause declines in product prices. On the other
hand, in times of rapid increases in demand, the Group’s profit may be reduced due to the need to purchase costly parts
and components, and a shortage of these parts and components may hinder the Group’s ability to supply products to the
market in a timely manner. The Group makes every effort to implement this business, monitoring the latest trends in
market demands in order to flexibly meet changes in supply and demand conditions and to thoroughly control production,
procurement, sales and inventory (PSI). At the same time, the Group makes every effort to avoid risks and reduce costs in
connection with the procurement of parts and components by promoting package procurement and comprehensive
procurement on a Group-wide basis. The Group also makes every effort to minimize any impact from changes in the
market by undertaking regional strategies for the promotion of business expansion and similar purposes in developing
nations, including China, where its growth rate remains comparatively high in a fast changing market, and by
appropriately revising the composition of products, such as introducing commoditized products streamlined for the
required functionality and having strong cost competitiveness. However, any rapid fluctuation in demand may result in
price erosion or increases in prices of components, which may adversely affect the Group’s financial results with respect to
this business.
In storage products business, merger and acquisition transactions among competitors are ongoing, and, thus, the
business environment has been changing. The Group, however, aims in the future to strengthen its storage products
business that integrated HDD, SSD, and NAND flash memories, to be consolidated with semiconductor businesses,
utilizing the strength of having high-spec SSD and high-capacity HDD.
(2) Business environment of the Electronic Devices business
The market for the Electronic Devices business is highly cyclical, depending on demand, and intensely competitive, with
many companies, mainly in overseas markets, manufacturing and selling products similar to those offered by the Group. The
results of this business tend to change with economic fluctuations and, in particular, to be heavily affected by exchange rate
fluctuations. Although the performance of the semiconductor business was strong and positive for FY2010, unforeseen
market changes and corresponding changes in demand at the time of production may result in a mismatch between the