Sharp shares jump on Intel investment report

Image caption,
Electronics makers such as Sharp have been hurt by slowing demand and falling prices of TVs

Shares of Japan's Sharp have jumped, following media reports that the chip maker Intel could invest as much as 40bn yen ($500m; £315m) in the struggling manufacturer.

Its shares rose as much 9% to 165 yen on the Tokyo Stock Exchange.

Sharp has been trying to restructure its business amid mounting losses and falling sales.

However, it has found it tough to raise money after its credit rating was cut to "junk" status earlier this year.

When a firm's bonds are rated as "junk", or high risk, some institutions and investors may no longer invest in it, making it harder for the company to raise fresh capital.

'Desperate to raise funds'

Sharp, like many other Japanese electronics makers, has been hurt by a slowing demand for TVs, which coupled with falling prices and a strong yen has hurt its profitability.

Earlier this month, the electronics maker issued a warning about its survival, as it forecast a loss of 450bn yen for the financial year, ending 31 March 2013.

In an effort to revive its fortunes, the company has been looking for potential investors.

In March, it agreed a deal to sell a stake of about 10% to Taiwan's Hon Hai Precision Industry, for $800m. However, that deal is yet to be concluded.

Sharp's shares have plunged nearly 70% since then and there are concerns that the deal may not happen at all.

Analysts said that Sharp needed to raise capital quickly to secure its future.

"They are desperate to raise funds as they have a huge cash flow problem right now," Gerhard Fasol of Eurotechnology Japan told the BBC.

"They not only need money to run their day-to-day operations, but also to service some of their debt that will be due in the coming months."

Mr Fasol added that Sharp also needed to invest in research and development, to come up with products that will help to regain some of its market share.

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