NEC Corp, the third-biggest chipmaker, is likely to cut its first-half profit forecast and announce more job reductions as business slows after the Sept. 11 terrorist attacks on New York and Washington, investors said.
The Tokyo-based company at the end of July cut its group net income forecast for the six months ending tomorrow to 3 billion yen (US$25 million) and said it will cut 4,000 workers worldwide at its chip business by March 2002.
Investors are concerned that with the expected slowdown in economic growth following the attacks in the US, corporations and consumers are spending less on personal computers, creating less demand for NEC's chips. Slower growth may also mean further job cuts at NEC because the original target may not be enough to adjust for the new economic conditions, investors said.
"NEC will probably eliminate more workers because the job cuts it already announced are much smaller than those of its rivals," said Yukio Takahashi, manager of the equity dealing department at Shinko Securities Co. "The announcement will be simultaneous with any earnings revision so I expect it sometime soon."
NEC President Koji Nishigaki said last month the company may increase the number of job cuts if economic conditions worsen.
Since then, consumer confidence in the US has plunged, falling in September to the lowest level in more than 5.5 years, the Conference Board said Tuesday. In Japan, the Nikkei 225 stock average has slumped about 6 percent since Sept. 11.
The attacks on the World Trade Center and the Pentagon will have a "slight impact" on earnings at Japan's biggest PC maker, spokesman Daniel Mathieson said.
Fujitsu Ltd, Japan's biggest business computer maker, last month said it will eliminate 16,400 workers worldwide by March 2002. Kyocera Corp, the largest maker of ceramic casings to protect semiconductors, is getting rid of 10,000 jobs, or 20 percent of its workforce, by March 2002, mostly at operations in the US. By comparison, NEC is eliminating almost 3 percent of its group workforce of 149,931 as of March.
NEC's chip business will likely be hardest hit by the slowdown in spending in the US, investors and analysts said.
North America accounts for 9 percent of NEC's overall revenue, a figure that underestimates the company's reliance on the US, investors said.
The company sells most of its semiconductors to makers of game consoles and other consumer electronics such as Sony Corp, Nintendo Co and Matsushita Electric Industrial Co, companies that count on US sales for the majority of their revenue.
Underscoring concerns US consumers will curtail spending, Fujitsu says it's seeing less demand for parts while Sharp Corp.
President Katsuhiko Machida said last week the attacks in the US may affect second-half earnings.
Since Sept. 11, Nintendo Co shares have fallen about 10 percent. The Japanese game maker began selling its GameCube video-game console this month in Japan and will release the new game box to US stores in November.
Since NEC's first round of job cuts on July 31, its shares have slumped 35 percent.
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