Sharp Corp said sales and operating profit may lag forecasts in the first half because of the slump in chip and flat-screen prices after demand for mobile phones and personal computers slowed.
Revenue at Japan's biggest maker of LCDs may miss estimates by about 10 percent, with operating profit of ?50 billion (US$401 million) for the six months ending Sept. 30, chief financial officer Hiroshi Saji said in an interview.
"Prices for LCDs and flash memory chips will keep falling in the July-September period, sapping our sales and profit," Saji said. "Prices are likely to fall 20 percent in the first half," double Sharp's earlier expectations, he said.
Sharp joins other Japanese electronics makers hurt by declining sales and profits as consumers buy fewer mobile phones, PCs and other electronics. Even so, investors and analysts cheered the company, praising the forecast of an operating profit in light of the deteriorating performance of other consumer-electronics makers posting losses because of slack global demand.
"The stock market had worried [Sharp's] earnings may really deteriorate," said Mamoru Takagi, a senior analyst at Societe Generale Securities [North Pacific] Ltd.
Sony Corp and Fujitsu Ltd last month said they posted losses in the first quarter, prompting cuts in their full-year forecasts. Fujitsu and Matsushita Electric Industrial Co also forecast losses for the first half.
In Sony's case, the No. 2 consumer-electronics maker's first-quarter operating profit -- sales minus administrative, marketing and sales costs -- plummeted 90 percent.
The electronics division at the maker of the Vaio computer was the most severely affected, posted an operating loss of ?807 million compared with profit of ?53.4 billion in the year- ago period.
Sharp's shares extended their gains in the afternoon, rising as much as 5.4 percent to ?1,496. The shares have risen almost 7 percent since the start of this year, compared with a 17 percent slide for the 152-member Topix Electric Appliances Index.
Sharp's earnings may be protected, in part, by the company's lesser dependence on mobile phones than Matsushita Electric and other companies, Takagi said. Sharp could also cover the loss of revenue from declining LCD prices by using its own parts in LCD TVs, which few other rivals make, he said.
Matsushita Communication Industrial Co, which generates about one-seventh of Matsushita Electric's sales, last week forecast a group loss of ?18.5 billion in the first half. The parent company cited the subsidiary's loss as a reason for expecting a first-half loss of ?45 billion compared with its earlier ?9 billion profit forecast. LCD sales are likely to miss the company's full-year target of ?440 billion by more than 10 percent, he said.
Flat-panel display prices have fallen for more than a year after South Korean and Taiwanese makers boosted production. Adding to the price pressure is the global slowdown in demand for PCs and mobile phones, primary users of flat-panel displays.
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