NEC cuts mobile losses

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NEC cuts mobile losses

Sale of European PC division hits revenues.

Japanese electronics giant NEC Corp today reported a 47 percent rise in operating profit to US$289m in its most recent financial quarter. 

The figure represents a partial turnaround for the company, following cutbacks in some ailing mobile and overseas business divisions.

Quarterly sales fell more than seven per cent year on year as the company cut loss-making lines and sold its Packard Bell European PC business.

Despite the cost cutting, NEC recorded only US$21.7m in net profit, a 77 percent fall from the same quarter a year ago. NEC expects to log sales of US$39bn for the fiscal year ending in March.

The worsening losses in the mobile phone business, which followed intense price competition, had forced NEC to reduce its exposure in this market towards the end of last year.

NEC has long struggled to establish the mobile brand internationally, and the company's handsets are now facing increasing challenges in Japan.

As the company culled unprofitable products, mobile shipments plunged 55 percent. The handset division broke even, following a loss in the previous quarter.

"Management has said that it will work to reach its targets, and appears to be looking at ways to improve earnings while keeping an eye on risks at the semiconductor business," said Tokyo-based Nomura Securities analysts in a first reaction to NEC's latest financial data.

Semiconductor chip manufacturing subsidiary, NEC Electronics, again failed to turn a quarterly profit, bringing it close to two years of continuous quarterly losses.

As cash continued to leak from the chip division, sales were up 9.3 percent thanks to increased business in automotive electronics and chips for Nintendo's game consoles.

Executives at the unit promised to announce details on 22 February of a new plan to restore it to profitability.
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