Samsung May Sell Its Stake In Japan Skyscraper -- Update

By Takashi Mochizuki

South Korean conglomerate Samsung may sell its majority stake in a Tokyo skyscraper, people familiar with the matter said, in a move that is likely a cost-cutting initiative.

The conglomerate's Japan team plans to move out of the 27-story building in Tokyo's upscale Roppongi neighborhood at the end of March, the people say, partly to consolidate a few of its office locations in Tokyo.

Samsung has already reserved floors at an office complex in the lower-rent Iidabashi area, also in Tokyo, they said. The Roppongi area houses many financial and technology companies including the offices of Google Inc., Yahoo Inc. and Goldman Sachs Group Inc.

It is unclear how much Samsung, which holds a 57% stake in the skyscraper, would raise from selling its stake. Mitsui Fudosan Co., a real-estate company which has a minority stake in the building, declined to comment.

The building was completed in 2003, the year Samsung celebrated the 50th anniversary of its Japan business launch and when it was actively recruiting engineers from Japanese electronics companies such as Sony Corp. and Panasonic Corp.

Samsung's Japanese arm has long been a weak spot in terms of sales performance. Unlike other countries Samsung has entered, it hasn't been able to obtain a top position in consumer electronics, mainly due to stiff competition from local Japanese brands, including Sharp Corp. and Toshiba Corp.

According to research firm Euromonitor, Samsung's market share for TVs in Japan was just 0.1% in 2007 before the company pulled the plug that year, while its Galaxy smartphones, according to research firm Counterpoint, had only a 6% share in November last year, making it the fifth largest in the market behind Apple, Sony, Fujitsu and Sharp. Apple had 51% of the market as of November 2014.

Samsung doesn't sell appliances in Japan.

Samsung executives often used the Japan office as a venue for important management meetings. People familiar with the matter said that some Samsung executives no longer viewed Japan as an important growth market or a place to look for new technology.

"Samsung has a strong attachment to the Roppongi building. It worked hard to design it so the structure will become a landmark of the area," said one of the people.

Samsung has been looking to cut costs as earnings have declined sharply. In the latest quarter, Samsung saw its operating profit from its mobile business fall 64% from a year earlier. Its mobile division has been undergoing restructuring and several top executives have left their posts in recent months, including mobile marketing chief D.J. Lee.

According to a person familiar with the situation, Samsung has also been cutting some workers in Japan in recent years and replaced a person in charge of its Japan operations late last year.

With the relocation of its Japan office, Samsung also plans to cease activities in Japan, including classes to teach the elderly how to use smartphones, a person said.

"We were told the program would be discontinued because Samsung could no longer spare a budget for us," a person involved with Samsung Japan's activities said.

Samsung is focusing its resources to turn around its mobile business, which has been trying to counter rising competition from Chinese smartphone vendors including Xiaomi Corp.

Kosaku Narioka in Tokyo and Min-Jeong Lee in Seoul contributed to this article.

Write to Takashi Mochizuki at takashi.mochizuki@wsj.com

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