NEC to Cut 10,000 Jobs on Forecast of Third Loss in 4 Years

NEC to Cut 10,000 Jobs After Forecasting Full-Year Loss
The computer maker forecast a 100 billion yen annual loss, compared with a previous outlook for a 15 billion yen profit, as slower growth globally and in Japan trimmed demand. Photographer: Haruyoshi Yamaguchi/Bloomberg

NEC Corp., forecasting its third annual loss in four years, will cut 10,000 jobs as slower global growth reduces demand for its mobile phones, computers and wireless gear.

“As macroeconomic concerns about Europe and developing countries increase, we decided to invest limited resources in lesser business segments,” President Nobuhiro Endo said today in Tokyo.

NEC forecast a 100 billion-yen loss ($1.3 billion) for the year ending March 31, abandoning a previous outlook for a 15 billion-yen profit, the Tokyo-based company said in a statement today. The job cuts equal about 8.6 percent of NEC’s workforce.

About 7,000 of those jobs will be eliminated in Japan, and NEC will take a 40 billion-yen charge for the restructuring, according to the statement. NEC also won’t pay a year-end dividend.

“The job cuts announced today are bigger than expected,” said Yuichi Ishida, an analyst at Mizuho Investors Securities Co. in Tokyo. “This will probably help the company reduce expenses, and we’ll probably see some improvements immediately from next fiscal year.”

Previous Cuts

The computer maker’s shares were unchanged at 168 yen as of the 3 p.m. close of trading in Tokyo, before the statement was released. NEC has lost 31 percent of market value in the past 12 months, compared with a 23 percent drop for Japanese computer maker Fujitsu Ltd. and a 17 percent decline for the broader Topix index.

Most of the job cuts will come from NEC’s mobile-phone handset business and may begin March 31, Endo said. The reduction is split between full- and part-time jobs, Endo said.

In 2009, the company said it was cutting more than 20,000 employees, mostly in the semiconductor and electronic-component businesses.

NEC, which formed a venture with Lenovo Group Ltd. last year, had 115,840 employees at the end of March, compared with 154,786 in fiscal year 2007, according to data compiled by Bloomberg. Lenovo, China’s biggest personal-computer maker, agreed to invest $175 million in the venture to expand in Japan.

NEC’s net loss widened to 86.5 billion yen in the three months ended Dec. 31 from 26.5 billion yen a year earlier, according to the statement today. Sales fell 6.7 percent to 672 billion yen.

“NEC has to focus on its strengths and cut the rest,” said Mitsushige Akino, who oversees about $600 million at Ichiyoshi Investment Management Co. in Tokyo.

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