TOKYO—Sharp Corp., the troubled Japanese electronics maker, came under increased pressure Friday to find an investor for its smartphone panel business after the company said its financial results in the current period would fall short of expectations and its share price plunged.

Sharp has been speaking with several potential investors in its liquid crystal display arm, including Hon Hai Precision Industry Co. of Taiwan, also known as Foxconn, and Japan Display Inc., according to people familiar with the situation. But a deteriorating outlook for the LCD business is weakening its hand, and a Sharp spokesman said no deal had been struck.

The company, once a global powerhouse in consumer electronics, has sold off its television-making operations in much of the world outside Japan to focus on making smartphone panels for Apple Inc., alongside Japan Display and LG Display of South Korea. But prices of panels have fallen sharply because of a slowdown in the Chinese economy and an oversupply of high-end displays, analysts say.

Sharp shares fell 6% Friday after the company said the "severe environment" in the display business meant it would fall short of the ¥ 10 billion ($83 million) operating profit it previously forecast for the six months ending Sept. 30.

In May, the company secured its second bailout in three years, lining up ¥ 225 billion in new funding from Japan Industrial Solutions Ltd., a fund that specializes in turning around troubled companies, and two Japanese banks: Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc.

At the time, Sharp chief executive Kozo Takahashi said the company had no intention of selling a stake in the smartphone panel business. But Mr. Takahashi later reversed course and said Sharp would consider bringing in outside investors.

People familiar with the situation say the banks, which together hold more than ¥ 600 billion in Sharp loans, are putting pressure on the company to strike a swift deal. Engineers have been fleeing the company in droves, they say, undermining the technological know-how that was the foundation of Sharp's former success.

Analysts say potential investors might be reluctant to commit. Japan Display, which was formed through a merger of units of Sony Corp., Toshiba Corp. and Hitachi Ltd., is already building a new plant in Japan to help it meet demand from Apple. Any investment in Sharp's LCD business could also raise antitrust concerns.

People familiar with the situation say Sharp considers Hon Hai a more promising candidate for a deal. But that company, which also assembles iPhones for Apple, has been wary about such an investment after the collapse of a previous agreement to buy a stake in Sharp, struck in 2012. This time, according to these people, the Taiwan company is insisting on a majority stake in the Sharp panel business or a deal that gives it management control.

Foxconn and Japan Display declined to comment.

Takashi Mochizuki and Atsuko Fukase contributed to this article

 

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(END) Dow Jones Newswires

September 25, 2015 07:05 ET (11:05 GMT)

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