Daily Tech Snippet: Wednesday, March 3rd

• With Bet on Japan, Sharp Stumbles: When flat-screen televisions began replacing boxy analog sets in the world’s living rooms more than a decade ago, few companies bet bigger on the new technology than Sharp of Japan. The century-old manufacturer, which got its start making belt buckles andmechanical pencils before World War I, defied corporate orthodoxy by building an advanced new display factory in its homeland, while rivals outsourced to cheaper countries. The gamble paid off — for a while. Made-in-Japan Kameyama model TVs, named for the factory, became a hit, and Sharp reaped big profits. “We were winners then,” said Yukihiko Nakata, an engineer who worked for 33 years at Sharp. Those days are over. Sharp is now mired in losses and its future is in doubt. Sharp’s plight is a story of missteps by executives who failed to anticipate major shifts in the global electronics industry. China, long the home of cheap manufacturing, has become increasingly sophisticated, making gadgets that can rival Japan’s in quality. Rivals elsewhere are challenging Japanese companies on innovation. The industry’s center of power has moved away from Japan to places like China, South Korea and Silicon Valley in the United States. Sharp’s leaders were slow to adapt, employees and industry experts say. Unwilling to change strategy when business conditions turned against them, they doubled down on investments in increasingly unprofitable businesses, deepening the company’s financial distress. As prices of liquid-crystal displays, or LCDs, began falling quickly in the mid-2000s, because of advances in manufacturing and a supply glut in China, Sharp scrambled to keep ahead of cheaper competitors. It developed ever-bigger TV displays and expanded into touch screens for smartphones and tablet computers. But rivals matched it more quickly than executives had anticipated, said Mr. Nakata, who left Sharp a decade ago and is now a professor at Ritsumeikan Asia Pacific University in Japan. Sharp had found a rescuer in a Taiwanese company called Foxconn, which makes gadgets for Apple and others and was offering a $5.5 billion lifeline. But Sharp unexpectedly told its would-be rescuer last week that it could be liable for close to $3 billion in potential costs, according to a person with knowledge of the talks. Foxconn is still examining the sudden disclosure, and it isn’t clear whether the Taiwanese company will complete the deal.

• Messaging Startup Slack Seeks Up to $4 Billion Valuation in an 'Up' Funding Round: The company is said to be in talks to raise $150 million to $300 million in financing. Slack Technologies Inc., which runs a messaging service for businesses, is seeking an investment that would value the company at $3.5 billion to $4 billion, according to people familiar with the matter. Slack is looking to raise $150 million to $300 million as part of the round, said the people, who asked not to be identified because the terms aren't finalized. The talks are ongoing, and a lead investor has not been selected, the people said. If successful, Slack's fundraising round would stand out. Venture investment in startups dropped about 30 percent in the fourth quarter compared with the previous one, according to research firm CB Insights. Also during the last three months of the year, 26 percent of mature startups raised money at lower valuations than in earlier rounds, according to a study by law firm Fenwick & West LLP. Even as startup fundraising shows signs of slowing and valuations begin to tumble, a few companies are pushing ahead. Slack said it raised $160 million less than a year ago, valuing the company at $2.8 billion. It's raised more than $300 million in total and has also used its fundraising clout to create an $80 million venture fund with several of its investors to back Slack-related apps. Slack, which launched its current business about two years ago, said it has 2.3 million daily active users, up from 520,000 a year ago. The company also said it had more than $64 million in annual recurring revenue. The metric projects the value of current customers over the course of a year, and the number can differ substantially from actual revenue for fast-growing startups.

• Tech start-ups the new gold for China's wealthy as economy slows: More wealthy Chinese are ploughing money into technology start-ups which are increasingly seen as a safe haven as the slowing economy eases hopes of extracting returns from traditional investment such as stocks, property or gold. While Chinese shares are being pummelled and the yuan is under pressure, these private investors are turning to businesses such as taxi-hailing company Didi Kuaidi, which saw its valuation rise 25 percent to about $20 billion in a $1 billion funding round launched last week. This gain sharply contrasts with the 43 percent plunge in the CSI 300 index of top-listed companies in Shanghai and Shenzhen since June last year, underscoring the appetite for tech firms. China's stock markets are the worst performing in the region, according to Thomson Reuters data. Even some mid-sized banks, including China Merchants Bank are investing into tech ventures. What is unique about China's venture capital and private equity industry is that a good chunk of yuan fund raising comes from wealthy individual investors. This contrasts with Western markets, where institutional investors take the lion's share of such placements. A lawyer told Reuters she had recently structured several investment deals into tech companies for wealthy clients. She declined to be named, or give details of the deals due to the confidentiality of the matter.

• Is Verizon Buying Yahoo? A Resounding … Maybe. Verizon is still considering a purchase of Yahoo, but said it needs to better understand the Internet company’s assets before deciding whether to make a formal bid. “I don’t think anybody knows what’s under the hood,” CFO Fran Shammo said at a Morgan Stanley investment conference on Tuesday. Shammo said the company is considering all kinds of merger and acquisition options, including both purchases and divestments. He confirmed that the company is still weighing, for example, whether to hold on to or sell its data centers. “Is it better off outside of our portfolio?” he said. “We’re looking at that.”