Toshiba slashes full-year profit target

Toshiba Corp, Japan's largest chipmaker, cut its full-year profit target by 31 percent because of falling prices for flash memory and costs to withdraw from the HD DVD business.

Net income is expected to decline 9 percent to ¥125 billion (US$1.3 billion) in the 12 months ending on March 31, the company said in a statement yesterday. Tokyo-based Toshiba in October forecast net income of ¥180 billion.

Toshiba, the leading promoter of HD DVD technology, on Feb. 19 abandoned the next-generation home-video standard after Warner Bros Entertainment said in January it would side with the Blu-ray format backed by Sony Corp. Warner's decision prompted US retailers to stop sales of HD DVD products.

Toshiba expects sales of ¥7.7 trillion, 1.3 percent less than previously forecast and 8.2 percent higher than a year earlier. Operating profit, or sales minus the cost of goods sold and administrative expenses, is likely to drop 11 percent from a year earlier to ¥230 billion, compared with its earlier projection of an increase to ¥290 billion.

Toshiba climbed 3.3 percent to close at ¥690 on the Tokyo Stock Exchange before the forecast announcement. The stock has lost 18 percent this year, compared with a 20 percent drop by the benchmark Nikkei 225 Stock Average.

Toshiba also said it would book ¥45 billion in non-operating losses in the HD DVD business this fiscal year. Lehman Brothers Holdings Inc estimated the exit would cost as much as ¥51 billion.

The operating loss at the HD DVD division is estimated to widen to ¥65 billion this fiscal year, from ¥34 billion in the previous 12-month period and ¥50 billion forecast earlier. Sales at the business will likely climb 86 percent to ¥26 billion, missing the previous goal of ¥65 billion.

Toshiba also cut its operating profit projection for its semiconductor business by 43 percent to ¥85 billion, because of greater-than-expected price declines. The division posted operating income of ¥128.3 billion last fiscal year.

Prices of the benchmark NAND flash memory chip, used to store songs and video in cameras and mobile phones, have declined 22 percent this year.