NEC back in black as mobile, PC chip sales surge
(UPDATE: Adds president comments, updates share price)
By Yuka Obayashi
TOKYO, Oct 26 (Reuters) - Japan's NEC Corp , the world's second-biggest chipmaker, said on Thursday it returned to profit in the past half-year, helped by robust sales of chips on strong global demand for personal computers and cell phones.
It posted a group net profit of 20.53 billion yen ($190 million) in the April-September period, against a 51.18 billion yen net loss in the same period a year earlier.
``Stability in chip prices over the six months and our efforts to cut costs such as job reduction have helped us to return to the black,'' NEC President Koji Nishigaki told a news conference.
NEC also lifted its full-year profit estimates, forecasting a a record group operating profit of 250 billion yen for this business year to March 31, up 19 percent from its May projection.
The half-year result was in line with its August forecast of 20 billion yen, which in turn was double its initial estimate.
``It's not a just bounce back, it's a spectacular result. Conditions are very good, revenues and profits are both growing,'' said Tsubasa Securities analyst Yoshihide Otake.
Group sales for the six months totalled 2.48 trillion yen, up 9.3 percent from 2.27 trillion yen in the previous first half.
A sharp profit recovery in its electronic device operations and buoyant sales of personal computers and cell phone handsets in Japan had offset weak demand for colour liquid crystal displays and a system integration services, it said.
PROFIT, DIVIDEND FORECASTS HIGHER
NEC, also Japan's biggest personal computer maker, raised its annual dividend forecast to 11 yen from six yen while boosting its full year group net profit estimate to 90 billion yen with earnings per share (EPS) of 55.15 yen, against its May forecast of 46.05 yen per share and the previous year's profit of 6.4 yen.
Before the announcement, its EPS was estimated at 55.08 yen by First Call/Thomson Financial, a researcher tracking broker forecasts.
``We expect dynamic random access memory (DRAM) prices to fall drastically in the January-March period due to seasonal factors, but that has been factored into our latest estimate,'' NEC's Nishigaki said.
``If demand is weak, we will deal with our capital expenditure plans appropriately,'' he added, suggesting that spending on plant and equipment could be put on hold.
NEC has raised its group capital spending plans for the current business year to 350 billion yen from a May estimate of 320 billion yen.
BOARD CHANGES
The company also said it plans to appoint five new outside directors, changing its board so that one third would be made up of non-company executives -- a move aimed at strengthening corporate governance in an increasingly competitive world.
``This is part of efforts to smooth our planned listing on the New York Stock Exchange (NYSE),'' Nishigaki said. NEC said in July it hopes to list its shares on the NYSE by March 2003.
After the announcement, shares in NEC recovered slightly from a plunge in the morning caused by Wednesday's slide in the U.S. Nasdaq index. Its shares closed at 2,115 yen, down 5.37 percent.
The price has fallen 13 percent so far this year and 39 percent since a lifetime peak of 3,450 yen in early July, giving up its gains from earlier this year due to investor concern about weakening global chip demand next year, fuelled by a revenue estimate cut at the world's top chip maker Intel Corp (NasdaqNM:INTC - news).
But Tsubasa's Otake said NEC would not have to worry about slackening chip demand until at least the end of this business year.
``The difference between Japan's chipmakers and Intel is that they depend less on chips for personal computers. A drop in PC sales hits Intel, but in Japan the chips are being used for other products such as cars and digital cameras.''
Mami Indo, senior analyst at the Daiwa Institute of Research, recommended buying NEC on dips, saying Japanese chipmakers had more potential to rise although they may not escape short-term damage from falls in the Nasdaq.
Indo said she rated NEC ``A,'' meaning it is expected to outperform the Tokyo Stock Exchange first-section TOPIX index by more than 10 percentage points over the next six months. |
