Mobile phone giant goes into the red

Makers of 3G phones are facing doubts and delays

Matsushita Communication Industrial (MCI), Japan's biggest manufacturer of mobile phones, posted its first quarterly loss since listing 33 years ago, and forecast even worse figures to come.

MCI reported an operating loss of 6bn yen (£34m; $48.5m) for the April-June quarter, compared with a profit of 15.3bn yen a year earlier, and way below market expectations of a 5bn yen profit.

The firm's shares plunged by more than 9% in early trading on Thursday.

MCI blamed slack demand for mobile handsets in Japan and abroad, and delays in new product development.

3G woes

MCI, which plans to sell 22 million handsets globally this year, has budgeted 142.1bn yen for research and development as it tries to stake out a leadership position in third-generation (3G) mobile services.

The company's president, Yasuo Katsura, said MCI was unlikely to turn a profit from 3G phones before the end of 2003.

MCI is manufacturing 3G phones for Japanese telehpone company NTT DoCoMo, which is running trials of the world's first 3G network in Tokyo.

Now, MCI says it may have to retrench.

"We have tried to expand all of our businesses, but we've come to a point where we have to review that stance," said Mitsuo Hashimoto, an MCI director.

Cutting costs

Asked whether there is a possibility that a plant will be closed, Mr Hashimoto said: "There may be a possibility after the review, but we are not thinking about that at this point."

Mr Hashimoto said forming a partnership to share the steep development costs was a possibility, but he gave no details.

MCI revised down its earnings forecast for the April-September period, projecting a net loss of 18.5bn yen against a profit of 5bn yen. The figure compared with a 21.4bn yen net profit for the same period a year ago.