NEC Said to Win 30 Billion Yen Undersea Cable Order

NEC Corp., Japan’s largest maker of phone-network equipment, won an order valued at about 30 billion yen ($362 million) from a group led by Nippon Telegraph & Telephone Corp. to supply undersea cables, two people familiar with the matter said.

The fiber-optic cables will connect Japan with Southeast Asia, said the people, who asked not to be identified because the deal hasn’t been made public. NEC is also in talks with a separate group on an order valued at about 20 billion yen that may be decided as early as next month, the people said.

Video downloads from Google Inc.’s Youtube and the popularity of smartphones have increased Internet traffic and revived a market for undersea cables that collapsed at the beginning of the decade. NEC is vying with Alcatel-Lucent SA and Tyco Electronics Ltd. for contracts in a $2.6 billion market that researcher Frost & Sullivan Inc. estimates will grow as much as 9 percent a year through 2015.

“There’s still a lot of potential business out there,” said Marc Einstein, a Tokyo-based analyst at Frost & Sullivan. “Given that there’s only three major players, it’s a pretty lucrative business.”

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Akiko Suzaki, a spokeswoman for NTT Communications, and Kosuke Yamauchi, a spokesman for NEC, declined to comment.

Photographer: Kiyoshi Ota/Bloomberg

Pedestrians walk past a sign for NEC Corp. outside the company's group building in Tokyo. Close

Pedestrians walk past a sign for NEC Corp. outside the company's group building in Tokyo.

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Photographer: Kiyoshi Ota/Bloomberg

Pedestrians walk past a sign for NEC Corp. outside the company's group building in Tokyo.

Shares of NEC, which makes personal computers, mobile phones and networking equipment, rose 2.1 percent to 244 yen at the 3 p.m. close on the Tokyo Stock Exchange. NEC advanced as much 5 percent earlier today after the Nikkei newspaper said the Tokyo-based company may sell a majority stake of its personal- computer business to China’s Lenovo Group Ltd.

NEC forecasts operating profit, or sales minus the cost of goods sold and administrative expenses, of 100 billion yen on sales of 3.3 trillion yen this fiscal year. The company’s carrier-network unit, which supplies undersea transmission cables along with wireless equipment, is forecast to post 40 billion yen in operating profit on revenue of 660 billion yen.

Sales of submarine fiber-optic cables that carry voice and data traffic between land masses reached $10 billion in 2000 before tumbling to $100 million two years later, according to Frost & Sullivan.

“We’re seeing a rebirth,” said Frost & Sullivan’s Einstein. “It’s being driven by massive data volumes that are coming out of China and these emerging markets.”

To contact the reporters on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net; Maki Shiraki in Tokyo at Mshiraki1@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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