NEC Corp, the third-biggest chipmaker, may have lost money or at best it broke even for the first quarter amid slumping demand for personal computers and microchips used in PCs and cellular phones, analysts say.
NEC "is likely to post an operating loss" in the quarter ended June 30, said Takashi Mimura, an analyst with Societe Generale Securities (NP) Ltd, who rates NEC shares "hold." Morgan Stanley Dean Witter Japan Ltd analyst Takatoshi Yamamoto said NEC's earnings will probably break even.
Operating profit or loss is revenue minus production costs, wages, salespeople's transportation fees to visit customers and other costs of doing business. It doesn't include interest payments or charges from share sales.
A global slowdown of PC sales and dropping prices of dynamic random access memory chips, the main memory used in computers, is hurting Japan's biggest PC maker. Benchmark 128 megabit DRAM spot prices have fallen by two-thirds in the past six months. It's time for NEC to scale back memory production, analysts say.
"NEC should shrink the DRAM business as soon as possible," said Ryoji Yamawaki, an analyst with Shinko Securities Co, who also said the chipmaker is likely to lose money in the first quarter. "Other kinds of semiconductors are hitting NEC's earnings, too."
The Tokyo-based company's earnings in the six months ending Sept. 30 will probably break even, missing the company's earlier profit forecast of ?15 billion (US$121 million), the Nihon Keizai newspaper said yesterday, without citing sources. The company's semiconductor division will probably lose money in the first half, the paper said. NEC spokesman Shinichi Kaede declined to comment on the media report. The company previously said it would post a profit of ?21 billion in its chip business.
* Analysts predict that NEC will miss an earlier profit forecast of ?15 billion for six months ending Sept. 30.
* The company previously said it would post a profit of ?21 billion in its chip business.
* A global slowdown of PC sales and dropping DRAM prices are hurting Japan's top PC maker.
Today the company will disclose earnings for the first quarter ended June 30, its first time to report earnings on a quarterly basis. NEC is trying to adhere closer to US accounting standards ahead of its planned offering of shares on the New York Stock Exchange later this year. NEC will also announce a mid-term business strategy on Tuesday. Such plans typically cover a three-year period.
The chipmaker said in May it will stop making computer-memory chips overseas to focus on production of faster chips in Japan.
NEC will halve production of its chip plant in Scotland and fire half the 1,600 employees there, the Nihon Keizai newspaper said. In addition, the company may combine its eight chip assembly units into one subsidiary so that NEC can relocate workers within the chip assembly business more easily, the paper said.
NEC spokesman Kaede declined to comment on the report.
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