Anjother take...
Hitachi Shares Jump After Upbeat Earnings
By Edmund Klamann
TOKYO (Reuters) - Shares in Hitachi Ltd surged on Tuesday to a nine-month high, rewarded for the Japanese electronics sector's most upbeat earnings surprise so far in this year's earnings season after it beat profit forecasts.
A key driver behind the company's strong results, which defied a string of earnings disappointments from high-tech manufacturers worldwide, was profit growth in its data storage systems that helped offset the damage from a recent downturn in demand for semiconductors and electronic components.
Hitachi, Japan's largest electronics manufacturer, reported 342.3 billion yen ($2.77 billion) in consolidated operating profit for the year to March 31, on sales of 8.4 trillion yen.
Despite its reputation for conservative earnings forecasts, the company had been widely expected to fall about 10 to 15 percent short of its 2000/01 operating profit target of 335 billion yen, after a sudden slump in demand for high-tech goods and components during the second half.
Hitachi was one of the few big Japanese electronics makers not to cut profit targets this spring that had been set in headier times last autumn.
The market seemed not to care much that Hitachi missed its net profit target, posting a 104 billion yen figure instead of the 125 billion yen it projected, nor that it expected an 18 percent drop in operating profit in the current business year to 280 billion yen due to continued weakness in chips and devices.
Hitachi's shares, the most actively traded on the Tokyo Stock Exchange on Tuesday, surged to 1,355 yen, their highest in more than nine months, before retracing modestly to close 11.7 percent higher at 1,338.
Hitachi's results were announced after the end of trade on Friday and the markets were closed on Monday for part of this week's series of Golden Week holidays.
Growth In Storage
The market appeared to be focusing on the strong results and prospects for Hitachi's new data storage products, which have won praise from industry analysts and racked up strong sales in recent months despite a slowdown at rivals such as industry leader EMC Corp
Demand for data storage systems has shown relative resilience amid the technology sector's recent downturn, given their ability to boost efficiency and cut costs for corporations with vast volumes of data to store.
Hitachi said its computer division, which includes storage systems, scored 33.9 billion yen in operating profits in 2000/01, far above the target of 6.0 billion yen, while a more than doubling of that to 71.0 billion yen was forecast for 2001/02.
This, Hitachi said, would help offset an 88.0 billion yen drop in operating profit in 2001/02 from its semiconductor and electronic device division, which is forecast to be one billion yen in the red this year on an operating basis.
Analysts wrote glowingly about Hitachi's prospects in storage systems, with Merrill Lynch citing them as a key reason for raising its long-term rating on Hitachi to ``buy'' from ''accumulate.''
``Storage product profits are beginning to exceed management's target, suggesting that Hitachi's efforts in this area are gradually beginning to pay off,'' Merrill Lynch analyst Hitoshi Shin wrote in a note to clients.
Hitachi and U.S. data management software vendor Veritas Software Corp in February announced a sales and service alliance, beefing up what analysts said was a weak spot in the Japanese company's offerings.
Hitachi's pleasant earnings surprise marked a sharp turnaround from just two years ago when it reported a net loss of 337 billion yen, its biggest ever, due largely to restructuring costs in its semiconductor operations.
The company, which makes a wide range of products from washing machines to nuclear power plants, has reported progress in several areas, including reduced exposure to the volatile DRAM chip business and higher profitability at its electric power and industrial systems division. |
