July 20 (Bloomberg) -- NEC Corp. had its credit-rating outlook cut to negative by Moody’s Investors Service, which cited a delayed earnings recovery at the Japanese electronics maker. The stock fell to the lowest in more than 37 years.
The outlook for NEC’s Baa2 long-term senior unsecured ratings and issuer rating was lowered from stable, Moody’s said in a statement today.
NEC, which is cutting 10,000 jobs, or about 8.6 percent of its workforce, posted a third annual loss in four years on slumping demand for its smartphones and notebook computers. Renesas Electronics Corp., the unprofitable Japanese chipmaker seeking financial aid, may be a risk for NEC as it may need to provide support, Moody’s said. Tokyo-based NEC owns about 35 percent of Kawasaki, Japan-based Renesas.
“The outlook reflects the slower-than-anticipated pace of recovery in NEC’s profitability and financial strength,” Moody’s said in the statement. “In the near future, the operational environment for NEC remains unfavorable.”
The company gets more than 80 percent of sales from Japan, focusing on the carrier-network business and cloud computing. NEC is also expanding abroad through acquisitions. In May, the company, Japan’s biggest telecommunications equipment maker, completed the purchase of the information-management business of Convergys Corp. for $449 million.
NEC fell 3.9 percent to 99 yen at the close in Tokyo trading, the lowest level since at least September 1974, according to data compiled by Bloomberg.
Baa2 is the second-lowest of 10 investment-level grades in Moody’s ratings scale.
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