Kyocera Sees Profit Rising 37% on Handset Sales (Update2)
By Junko Fujita
Kyocera Sees Profit Rising 37% on Handset Sales (Update2)
(Adds analyst comment in fourth paragraph. Adds new section
on DDI in 13th paragraph.)
Kyoto, March 28 (Bloomberg) -- Kyocera Corp. expects pretax
profit to rise 37 percent next year, led by sales of its handsets
following its purchase of Qualcomm Inc.'s phone-making unit, a
move that gave the Japanese maker of mobile phones a foothold in
North America's cell-phone market.
Current, or pretax, profit for the year starting April 1 will
likely be about 120 billion yen ($1.1 billion), up from an
expected current profit of 87.5 billion yen this year, Kyocera
President Yauso Nishiguchi told Bloomberg News. Sales are expected
to be about 1.2 trillion yen, up from 798 billion yen this year.
Kyocera, which is expanding its role in Japan's
telecommunications market through its stake in DDI Corp., in
February completed the purchase of Qualcomm's mobile phone-making
unit. The business, on which Qualcomm was losing money, is
expected to be profitable next year with sales estimated at about
190 billion yen, Nishiguchi said. The Qualcomm unit has received
orders for as many as 10 million mobile phones next year, he said.
``It's too early to assess the phone unit's profitability now
but the unit has significant meaning to Kyocera,' said Norikazu
Tabata, an analyst at Taiheiyo Securities Co. ``It has given
Kyocera a chance to play on the global stage.'
To prepare for the purchase, Kyocera formed a unit, Kyocera
Wireless Corp. of San Diego. Additionally, Qualcomm fired several
hundred employees, mainly at a manufacturing joint venture with
Sony Corp., that weren't chosen by Kyocera to remain with the
business.
Kyocera Wireless now has 800 full-time employees and 300
temporary workers.
Focus Shift
Kyocera, which is shifting its focus to a supplier of
telecommunications equipment, expects to sell as many as 16
million mobile phone handsets next year -- 10 million in the U.S.,
4 million in Japan and 2 million in Korea.
Capital investment next year will be between at least 45
billion yen and 50 billion yen, Nishiguchi said. Most of the
investment will be for the production of telecommunications
components, he said.
With its purchase of the Qualcomm unit, Kyocera, a maker of
personal digital cellular and cdmaOne mobile phone handsets and
components, is taking over a business that makes cell phones based
on code-division multiple access technology, or CDMA. The
acquisition gives Kyocera a share of the CDMA handset market, now
dominated by Motorola Inc. and Nokia Oyj.
CDMA is a ``spread spectrum' technology, meaning information
transmitted by a particular signal is spread over a much greater
bandwidth than the original signal.
Shares in Kyocera, positioning itself through DDI as a
challenger to Nippon Telegraph and Telephone Corp., the former
government telecommunications monopoly, more than tripled in 1999
on expectations the company will gain from its exposure to Japan's
cell phone industry, a market expected to grow fivefold in the
next 10 years.
DDI, Toyota
Kyocera has agreed with Toyota Motor Corp., Japan's largest
automaker, to become ``strategic partners' mainly in the
development of an ``intelligent transport system' using wireless
networks provided by DDI, Nishiguchi said.
``The linkages between the auto business and wireless
communications will be stronger than ever,' Nishiguchi said.
``Automakers will be increasingly required to send real-time
information to passengers.'
Toyota's ``enormous customer base' stands to benefit DDI,
which provides mobile and fixed-phone services as well as data
transmission services.
DDI, in which Kyocera holds 25.16 percent as the largest
stakeholder, announced last year it would buy KDD Corp., Japan's
largest international phone company, and IDO Corp., the cell phone
unit of Toyota.
Toyota owns 63 percent of IDO and 8 percent of KDD. The
company has taken stakes in both carriers to expand its operations
beyond automaking.
Under the agreement announced in December, Kyocera will have
a 15.8 percent stake in the new DDI and Toyota a 10.3 percent
stake. DDI will issue new shares to Toyota to narrow the gap in
stakes between the two companies.
The new DDI will be Japan's largest provider of international
phone services and will have a nationwide cellular phone network.
Kyocera's shares rose 4.9 percent, or 740 yen, to 16,000. |
