Japanese electronics giant NEC expects to lose almost US$250m at its chip making division for the fiscal year ending March 31, much worse than analysts' predictions.
The loss comes despite stronger than expected sales of Nintendo's Wii games console, which uses NEC memory chips.
This and other bad news forced the company to slash its own operating profit forecast by 15 percent to US$125m.
"This decrease is mainly due to a downturn in the semiconductor business, falling IT equipment prices and increased cost of sales in the IT and Network Solutions business, and the impact of shipments of network systems and equipment being shifted to the next fiscal year," NEC announced.
The company has also announced cost cutting and restructuring plans, including transferring US$912m from a company pension fund into its own coffers.
NEC stated that the fund has "an excess of funding" owing to successful investment management decisions.
Analysts told local media in Japan that NEC has been relatively reluctant to reform and still has more work to do.
The huge manufacturer anticipates better results from its struggling mobile phone business, where it has already made sweeping cutbacks.
"We think there is much less risk of major losses in mobile phones with the company focusing on business development in Japan," said Nomura Securities analyst Masaya Yamasaki.
"From [the next fiscal year] we look for the mobile phone business to break even or turn a little profit. However, we do not expect much growth in the future."
NEC has already endured several earlier rounds of cost cutting. Most recently it sold its European PC business and cut back its mobile phone range.
NEC chip unit losses near US$250m
By Simon Burns on Feb 27, 2007 7:54AM