Fujitsu and NEC profits slide

Fujitsu: Too optimistic, analysts said

Two Japanese hi-tech giants have joined in the latest round of corporate bloodletting, announcing sharply lower profits and thousands of job losses.

Fujitsu, the chip and PC giant, said it was forecasting a 220bn yen ($1.78bn; £1.25bn) net loss for its business year and considering thousands of job cuts after achieving a 55bn yen loss for the April-June quarter.

NEC, Japan's number two chip maker, reported a steep slide in quarterly profit and slashed by 80% its net profit forecast for the first half of its business year.

The company will next week announce turnaround plans that are expected to include the closure or sale of plants in Japan and abroad and thousands of job losses.

A plant in Livingston, Scotland, employing 1,600 people is thought to be among those at risk.

Too optimistic

The grim news took its toll on share prices - Fujitsu closed another 3.6% down, having earlier touched a four-and-a-half-year low - but was not unexpected.

Earlier this month, Fujitsu had finally warned it might have to cut expectations for annual profit because of falling semiconductor sales.

Flash memory for mobile phones has been an area of business particularly hard hit amid the sharp slowdown in handset demand.

Analysts had long criticised Fujitsu for maintaining what they saw as too optimistic an outlook.

Some analysts drew positives from Friday's announcement, saying Fujitsu was now adopting a realistic view of the tech slump and concrete steps to reform.

The company said it was taking a one-off 280bn yen charge for the first half to pay for the restructuring.

Software strengthening

Takashi Takaya, executive vice-president, said Fujitsu was considering ending chip production in the United States.

"We will put more focus on profitable core businesses by backing away from unprofitable operations such as small hard-disk drives for personal computers and strengthen our software business."

He said there would be no sign of recovery until next year at the earliest.

NEC achieved a 834m yen profit in the April-June quarter, down from 3.02bn yen in the same period last year.

It slashed its net profit forecast for the first half to 3bn yen from a previous 15bn yen.

Operating profit targets were halved to 30bn yen.