NEC Drops Most in 10 Months on Loss Forecast, 10,000 Job Cuts: Tokyo Mover

NEC Corp. (6701) fell the most in 10 months in Tokyo trading after forecasting its third annual loss in four years and announcing 10,000 job cuts.

NEC dropped as much as 8.9 percent, the largest intraday decline since March 15, and traded 7.1 percent lower at 156 yen at the 11:30 a.m. break on the Tokyo Stock Exchange. It was the biggest percentage loser on Japan’s Nikkei 225 (NKY) Stock Average, which climbed 0.4 percent.

Consumers flocking to Apple Inc.’s iPhones and Samsung Electronics Co.’s Galaxy smartphones dented demand at NEC’s handset division, which will bear the brunt of the job cuts. NEC joined Nintendo Co. yesterday in forecasting a loss for the year ending March 31, of 100 billion yen ($1.3 billion), abandoning a previous outlook for profit of 15 billion yen.

“The restructuring plan appears to lack business strategies,” Takeo Miyamoto, a Tokyo-based analyst at Deutsche Bank AG with a “hold” rating on NEC, said by telephone today. “I got the impression that management simply drew up the job- cut figure without thinking carefully about what needs to be reduced or kept. Investors are betting its earnings may not improve.”

NEC will take a charge of 40 billion yen for the job cuts and also won’t pay a dividend for the year, the Tokyo-based maker of mobile phones, computers and wireless gear said yesterday after the market’s close.

The cuts, equivalent to about 8.6 percent of NEC’s workforce, may begin March 31 and will be split between full-and part-time jobs, the company said. About 7,000 of the jobs will be eliminated in Japan, mainly at the mobile-phone unit.

Employee Reductions

The company had 115,840 employees at the end of March last year, according to data compiled by Bloomberg. NEC last announced a major job reduction in 2009, when it said it was cutting more than 20,000 workers, mostly in the semiconductor and electronic-component businesses.

NEC has decided to invest its “limited resources” in fewer business segments because of macroeconomic concerns about Europe and developing countries, President Nobuhiro Endo said yesterday.

The stock has lost 37 percent of its market value in the past 12 months, compared with a 15 percent decline for the benchmark Nikkei.

The company’s net loss widened to 86.5 billion yen in the three months ended Dec. 31 from 26.5 billion yen a year earlier, and sales fell 6.7 percent to 672 billion yen.

Apple, Samsung Profits

Samsung posted a 17 percent gain in fourth-quarter profit to 4 trillion won ($3.6 billion) today, helped by sales of Galaxy models. Apple’s quarterly profit more than doubled to $13.1 billion after selling 37 million iPhones in the period, the company reported Jan. 24.

Osaka, Japan-based Nintendo widened its full-year loss forecast threefold yesterday as the popularity of the iPhone and iPad eroded demand for its 3DS handheld game player.

“NEC needs to show how it will drive its growth,” said Yuichi Ishida, an analyst at Mizuho Investors Securities Co. in Tokyo, who rates the stock “neutral.” It’s unclear how NEC can achieve the targets outlined in its medium-term plan for the mobile-phone, computer and car-battery businesses, he said.

To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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