KYOTO, Japan -(Dow Jones)- Kyocera Corp. expects profits in the
second half of this fiscal year to be better than the first half because
of sales of new telecommunications equipment and an improvement in its
semiconductor parts business.
Kyocera (KYO) executives, interviewed Monday by Dow Jones, said these
factors will help the company increase profit for the year ending March
31, 1999, even though profit will be down in the first half.
Kyocera now forecasts its parent pretax profit will increase 14% for
the full year to 75 billion yen ($557.6 million) from 65.7 billion yen a
year ago. In May, it forecast a profit of 76 billion yen. In the first
half ended Sept. 30, it sees parent pretax profit declining around 13%
from the year-ago period to 28.7 billion yen. Previously, it had
forecast a profit of 31 billion yen.
Full-year sales are seen rising 2.1% from a year before to 502
billion yen from 491.7 billion yen a year earlier after falling around
9.5% in the first half to 222 billion yen.
The company will announce its first-half results in mid-November.
Speaking at the new Kyocera headquarters building, the executives
said the company is now preparing for the mass production and shipment
of handsets for the Iridium global satellite communications network
which will begin service next month.
In addition to Japan, the company will start shipments this month to
the U.S., Europe, Southeast Asia and other parts of the world. Kyocera
will also supply pagers for the Iridium mobile communications service,
and it expects two million subscribers world-wide at the end of March
2002.
Kyocera also expects to benefit in the second half from stronger
sales of code division multiple access, or CDMA, handsets. CDMA is
expected to eventually replace Personal Digital Cellular, or PDC - the
main digital cellular standard in Japan - because of better voice
quality, faster transmission times and better cost performance.
"At the moment, the number of CDMA subscribers is less than
originally expected," said Akihiko Toyotani, a spokesman for the
investor relations group and finance group of Kyocera. "In the second
half, we think the number of subscribers will increase significantly"
because of the superior technology.
DDI Corp., an affiliate of Kyocera for which Kyocera acts as the main
supplier of CDMA handsets, expects that the number of its CDMA
subscribers will grow to around 700,000 by the end of next March,
Toyotani said. DDI only began the CDMA business this past July.
He said that Kyocera's CDMA handset sales will also get a boost from
sales to Nippon Ido Tsushin Corp., which he said will start CDMA service
in the Tokyo and Nagoya regions next spring.
While opportunities for Iridium sales will occur mostly overseas, the
main market for CDMA handsets will be Japan, said Toyotani. Still, there
will be sales opportunities in South Korea and the U.S. as the CDMA
standard is used in those countries as well, he said. CDMA was developed
by Qualcomm Inc. (QCOM) of the U.S.
Toyotani said that sales of personal handyphone system equipment, or
PHS, - another mobile communications system used in Japan - will be down
in the second half of the year because Kyocera has basically completed
the installation of base station equipment for DDI.
But PHS subscribers will increase in Japan in the second half and
handsets will show steady, though not significant growth, Toyotani said.
The market for cellular handsets using the PDC standard may be
stagnant in the second half, and Kyocera may be hurt by severe price
competition, though the company hopes to increase market share from
lightweight technologically advanced products, Kyocera officials said.
With growth driven by Iridium and CDMA equipment sales, Kyocera said
overall sales of telecommunications equipment will increase
"significantly" in the second half compared to the first half.
But some analysts are skeptical. "Although orders have started coming
in for components for ultra-light PDC- and CDMA-type cellular phones,
and for Iridium global satellite phones, those for existing PHS and PDC
systems are declining at a double-digit rate," wrote Etsuko Matsuoka and
Yoshiharu Izumi, analysts at Warburg Dillon Read, in a recent report.
"Under these circumstances a sharp recovery in Kyocera's communications
division in the second half now appears unlikely."
Kyocera also believes its parent company semiconductor parts sales
will be about 10% higher in the second half compared to the first half
and also about 10% higher than the same period a year earlier. The
company didn't provide amounts.
"We think the worst is over for the package business, and in the
first half of the year sales will have hit bottom," Toyotani said. He
said Kyocera expects to start mass production of plastic packages for
microprocessor units for a major customer, though negotiations are still
in the final stages before agreement. He wouldn't say if that customer
is Intel Corp. (INTC).
Packages are used to protect integrated circuits, and plastic
packages are noted for their low weight and cost effectiveness. Toyotani
said Kyocera plans to increase production of plastic packages to over 1
million units a month next January from around 400,000 units per month
now, an increase of 150%.
The other thing the company hopes to benefit from in the second half
is an increase in demand for its mainstay ceramic packages because of an
order from another unnamed microprocessor-related customer.
Toyotani said that initially the profit margin of plastic packages
will be lower than that for ceramic packages, but next fiscal year it
may rise to the same level as mass production increases. He wouldn't say
what the profit margin for ceramic packages is now.
Kyocera doesn't expect that its profits will be hurt by the failure
of Mita Industrial Co., a photocopier maker which was a customer of
Kyocera's electronics components. Kyocera has expressed interest in
helping Mita Industrial rehabilitate its operations.
Hideki Ishida, a director of Kyocera, said the company hasn't decided
on any support policy for Mita Industrial, though a decision could come
soon.
-James Paradise, jparadise@ap.org., 813-5255-2947 |
