NEC warns: Tuesday February 20, 2:18 am Eastern Time
NEC Cuts Profit View on Chip, PC Slowdown
By Edmund Klamann
TOKYO (Reuters) - Japan's NEC Corp. on Tuesday became the latest technology group to issue a profit warning, as last year's optimism fades in the face of a slowing U.S. economy, weak Japan consumer spending and competition from Asian rivals.
NEC, the world's third-biggest chipmaker and Japan's largest supplier of personal computers, said consolidated operating profit for the year to March 31 would be 190 billion yen ($1.64 billion), or 24 percent below its previous estimate in October, on sales of 5.4 trillion yen, down from 5.5 trillion yen.
The news was of little surprise to the market, which has been braced for bad news from Japan's big electronics makers since signs began emerging of a U.S. slowdown late last year, and many analysts are hopeful that a turnaround awaits in the second half of this year.
``The outlook isn't particularly bad,'' said Akira Minamikawa, technology analyst at WestLB Securities. ``For PCs, we should see further adjustment in January-March, some initial orders in April-June, and a resurgence in July-September.''
The revised operating profit figure would still be a 72 percent gain from the previous year's result.
NEC's shares dipped modestly at Tuesday's open after a news report indicating a profit warning was likely, but they quickly bounced and ended the session up 2.17 percent at 2,115 yen, outperforming a 0.98 percent rise in the market's benchmark Nikkei share average
The shares have shed more than 15 percent of their value over the past month, however, compared with a 5.6 percent drop in the Nikkei, although they are still above a one-year low of 1,899 yen hit on November 22.
Japan's high-tech sector had already been hit two weeks ago by a profit warning from NEC rival Toshiba Corp, which cut its 2000/01 group operating profit estimate by 30 percent.
SUBDUED MOOD FOR ELECTRONICS
Fujitsu Ltd. has also said operating profit in its semiconductor business would fall about 10-15 billion yen short of prior forecasts, and several analysts have trimmed their profit forecasts for Hitachi Ltd. and Mitsubishi Electric Corp T) , Japan's two other big chip and electronics makers.
The Japanese chip and electronics sector's subdued mood is widely expected to continue through the April-June quarter.
``Regarding semiconductors and PCs, we're not optimistic about the first quarter of the next business year,'' NEC Executive Vice President Shigeo Matsumoto told a news conference.
He added the company was still formulating how it would respond to market changes in the next business year, although there was a consensus that capital spending would be cut from this year's levels.
NEC was particularly hit in recent months by a sudden slowdown in growth in the domestic PC market.
``In the first half (April-September) the PC environment saw growth of more than 20 percent, sometimes as much as 30 percent,'' Matsumoto said. ``But circumstances clearly changed after we moved into the second half.''
He said the domestic PC downturn appeared to reflect both weakness in consumer demand and a preference for mobile devices, with mobile-phone carriers like NTT DoCoMo Inc offering popular wireless Internet services via Web-enabled handsets.
Profits on memory chips were also hit hard, with prices for 128 megabit DRAM chips slumping to about $5 a piece from more than $12 in October, an NEC spokesman said.
Matsumoto said the company expected a 10-15 billion yen loss on DRAMs in the October-March period.
Even in liquid crystal displays (LCDs), a technological forte of Japan's big electronics makers, NEC's profits were eroded by heightened competition in the low end of the market from Taiwanese and South Korean manufacturers.
NEC cut its LCD-related 2000/01 operating profit forecast by 10 billion yen from the October figure.
($1-116.06 Yen) |
