NEC Reports Plunge in Annual Profit

Thursday May 11, 6:35 am ET

By Yuri Kageyama, AP Business Writer

NEC Reports 84 Percent Plunge in Annual Profit on Lower Chip, Mobile Phone Prices

TOKYO (AP) -- Japanese electronics maker NEC reported an 84 percent plunge in fiscal year profit on Thursday due to a drop in prices for computer chips, computers and mobile phones.

Group net profit at NEC Corp. totaled 12.1 billion yen ($109 million), down from 77.2 billion yen the previous fiscal year. Fiscal 2005 sales were flat at 4.82 trillion yen ($43.5 billion), up 0.5 percent from 4.8 trillion yen. The company didn`t break down quarterly numbers.

Like other Japanese electronics makers, NEC Corp. has been struggling to boost profits as its slumping computer chip business and the continuing price declines in the electronic sector weigh on its earnings.

Tokyo-based NEC had forecast a group net profit of 13 billion yen ($117.4 million) for the fiscal year ended March 31. It had initially forecast a bigger profit but revised it downward, citing a decline in its broadband and software solution businesses.

NEC said it`s also setting aside some costs expected in anti-monopoly damage lawsuits it faces in the United States filed by companies that bought its dynamic random access memory, or DRAM, chips, widely used to store data in personal computers.

NEC is forecasting a 50 billion yen ($451 million) profit on 4.9 trillion yen ($44.2 billion) sales for the fiscal year ending March 31, 2007.

In the fiscal year through March, NEC said the results were hurt by the poor performance at its subsidiary that makes chips other than DRAM, called NEC Electronics Corp., which was battered by falling demand and prices for its products.

Sales improved in fiscal 2005 because of better personal computer sales that also boosted results in its monitor business, the company said in a statement.

The results also got a boost from NEC`s infrastructure business in digital broadcast, which began in some parts of Japan in 2003 and is gradually catching on.

NEC shares, which have gradually gained nearly 30 percent over the past year, closed down 1.6 percent to 779 yen ($7) in Tokyo trading shortly before earnings were disclosed.

Other Japanese electronics makers have also been struggling amid competition from Samsung and other Asian rivals, and have racked up massive restructuring costs, as well as research and development costs, to turn around its business in recent years.

But their earnings announced in recent weeks are also showing signs of recovery.

Matsushita Electric Industrial Co., which makes Panasonic products, got a big lift from plasma display panel TVs and swung to a profit of 40.7 billion yen ($367 million) in the latest quarter and saw its profit for the fiscal year more than double on healthy sales of flat-panel TVs, digital cameras and other gadgets. It had lost 33.2 billion yen during the same period the previous year.

Toshiba Corp., Canon and Fujitsu also reported better profits for the latest quarter, but Sony Corp. saw its profit for the January-March period widen to 66.5 billion yen ($600 million) for the January-March quarter versus the loss of 56.5 billion yen a year earlier.

Sharp Corp., which didn`t break down quarterly numbers, also reported robust results for fiscal 2005, thanks to brisk sales of flat-screen televisions, mobile phones and solar batteries.