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To: ForYourEyesOnly who wrote (13324)	1/28/1998 11:34:00 PM
From: Shakush	Respond to of 25960

NEC slashes forecast, modest reduction in equip spending ft.com NEC: Chipmaker slashes forecasts on chip price fall THURSDAY JANUARY 29 1998 By Michiyo Nakamoto in Tokyo NEC, Japan's largest semiconductor and personal computer maker, yesterday slashed its profits forecast as a result of the plunge in semiconductor memory chip prices and the severity of Japan's economic slowdown. NEC said group net profits would be less than half last year's level, at Y45bn ($358m), rather than Y80bn previously expected. The forecast for pre-tax profits was cut from Y140bn to Y100bn, 18 per cent lower than last year's result. The profits warning follows a similar revision this month by Toshiba, which competes in many of the same markets as NEC. Sales at NEC are expected to rise 2 per cent to Y5,050bn, rather than to Y5,250bn, as previously forecast. NEC blamed the sharp decline in semiconductor memory chip prices for its lower forecast. Prices of dynamic random access memory chips in particular have plunged as a result of overcapacity and a fall in PC demand. PC sales in Japan have also been adversely affected by aconsumer slowdown after a rise in the consumption tax as well as turmoil in financial markets. NEC, which has the largest domestic share of the PC market, said sales to small and medium-sized companies were particularly hard hit. The company expects PC sales to be further hit by the weakness of domestic consumption. NEC's PC shipments fell 9 per cent in the first half of the year to 1.55m units. In the second half, its PC shipments are expected to be 6 per cent lower, at 1.7m units, compared with an earlier forecast of a 20 per cent rise to 2.15m units. For the full year, NEC forecasts a 7 per cent fall in shipments to 3.25m units, rather than a 6 per cent increase to 3.7m units. The company is under further pressure from the currency turmoil in south-east Asia, where its subsidiaries face increased costs in repaying dollar-denominated loans. This would cut NEC's group profits this year by Y5bn-Y6bn, it said. PC sales in Japan are expected to continue to decline, pulling down semiconductor demand with them, according to Naoki Sato, industry analyst at HSBC James Capel in Tokyo. Mr Sato also said that price competition would also intensify, affecting companies' profits. The key to a rebound in NEC's profits is semiconductor prices, he said. NEC is responding to the disappointing performance by cutting capital spending from a previously planned Y300bn to Y290bn.