Tech slump spreads to Japan

Big in Japan: NTT DoCoMo I-mode mobile phones

Further evidence has emerged that the profit slump which has hit US technology firms is spreading to the Far East, with profits warnings from two of Japan's largest electronics companies.

Matsushita Electric Industrial, the world's largest consumer electronics maker and chip giant NEC, blamed slowing demand for personal computers in reducing forecasts of operating profits by 15% and 24% respectively.

While PC demand was rising by about one quarter between April and September last year, "circumstances clearly changed" in the autumn, said NEC vice president Shigeo Matsumoto.

The revisions followed a series of earnings downgrades towards the end of last year by major US electronics firms, many of which also cited weak computer sales.

Gateway, the world's second biggest PC seller, in January warned of weak sales for six months as the slowdown in economic growth took hold.

Warnings from Toshiba two weeks ago, and Fujitsu in the autumn, indicated that Japanese electronics firms are also feeling the affects of the economic downturn.

Bucking the trend

But Japanese investors gained solace on Tuesday from NTT, Japan's dominant telecoms carrier, and high-tech components maker Kyocera, both of which raised profits forecasts.

And NEC's announcement, the subject of market rumour well ahead of its release after the close of the Tokyo stock market, failed to prevent a rally in the firm's shares, which ended 2.17% up on the day.

Matsushita stock closed 3.17% higher, ahead of the issue of the company's profits warning.

Matsushita, owner of consumer electronics brands including Panasonic, also blamed slower sales of mobile phones in revising profits down to 220bn yen (£1.32bn).

NEC, the world's third ranking chipmaker and Japan's largest PC supplier, said lower chip prices had contributed to its decision to trim profits forecasts to 190bn yen (£1.14).

Flotation gains

But Kyocera raised its forecast for operating income by 4% on strong demand for fibre-optic networks.

NTT credited windfall gains from an issue of shares in its mobile phone subsidiary, NTT DoCoMo, for a decision to raise its profits outlook almost threefold to 503bn yen.

DoCoMo raised 950bn yen from its latest offer of 460,000 new shares.

The firm has also chosen systems developed by Irish software firm Baltimore Technologies to protect e-commerce on the latest phone in DoCoMo's popular i-mode series, it said on Tuesday.

"This agreement ensures mobile phone users have advanced levels of security to communicate and transact with the same confidence as the wired world," Baltimore vice president Paddy Holahan said.

Games tie-up

And NTT DoCoMo also revealed it has arranged a tie-up which will see the launch of a service allowing i-mode phones, which can access the internet, to connect to Sega video games.

"Both firms intend to realise a new 'home', 'street' (game arcades) and 'mobile' network service that can be enjoyed anywhere and anytime," a DoCoMo statement said.

The tie-up is the latest announced by Sega since the struggling video games specialist announced last month that is was scrapping the loss-making Dreamcast console to concentrate on software development.

Sega is now to make games for Sony's PlayStation 2 console, a bitter Dreamcast rival.

DoCoMo itself in August announced a link-up between its i-mode phones and PlayStation consoles.