Sept. 19 (Bloomberg) -- Toshiba Corp., Japan's biggest chipmaker, cut its full-year profit forecast 46 percent, citing larger-than-estimated declines in prices of memory chips used to store songs and pictures in consumer electronics.

Net income will probably tumble to a four-year low of 70 billion yen ($651 million) in the 12 months ending March 31, Toshiba said today, abandoning its previous projection that profit would rise this fiscal year. The company also lowered its forecasts for operating profit and revenue.

Toshiba, the second-largest producer in the $15 billion NAND flash-memory market, said the semiconductor division will post losses of 65 billion yen this fiscal year as ``weak'' demand for chips persists through the second half. Prices of the components, used in products such as Apple Inc.'s iPod music players, have slumped 52 percent this year amid faltering demand for electronics.

``Greater-than-expected price declines were the main reason behind the cut in the full-year outlook,'' Corporate Executive Vice President Fumio Muraoka said at a briefing in Tokyo today. ``The memory business should improve in the fiscal second half to about breakeven, while losses in the LSI business are likely to persist.''

Toshiba cut its operating profit forecast 48 percent to 150 billion yen this fiscal year as it lowered its sales projection 3.8 percent to 7.7 trillion yen. In April it forecast 290 billion yen in operating income, or sales minus the cost of goods sold and administrative expenses, on 8 trillion yen in revenue.

JP Morgan Forecast

Still, the company's profit projection exceeded the 60.7 billion yen net income and 125.5 billion yen operating profit estimates by Yoshiharu Izumi, a Tokyo-based analyst at JPMorgan Chase & Co. in a note dated yesterday. Izumi also forecast 7.9 trillion yen in revenue.

Prices of the benchmark NAND flash memory chip fell 52 percent this year after plummeting 58 percent in 2007, according to Taipei-based DRAMexchange Technology Inc., operator of Asia's biggest spot market for chips. Samsung Electronics Co., the industry's leader, in July said the NAND flash market will remain in oversupply in the second half of the year.

The projected loss in the chip business this year will follow an 89 billion yen profit a year earlier, as sales decline 8 percent to 1.28 trillion yen, Toshiba said. The company in April forecast 90 billion yen profit on 1.5 trillion yen in revenue.

JPMorgan's Izumi yesterday lowered his rating on Toshiba to ``underweight'' from ``neutral,'' citing sluggish semiconductor earnings. He reduced his 12-month share price estimate on the company to 370 yen from 520 yen.

Toshiba gained 4.7 percent to 487 yen on the Tokyo Stock Exchange today before the company announced the change to its forecasts. The stock has lost 42 percent this year, compared with a 22 percent decline in the Nikkei 225 Stock Average.

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net.

Last Updated: September 19, 2008 05:12 EDT