NEC heads for huge losses

NEC has seen its traditional growth areas shudder to a halt in 2001

NEC, the Japanese electronic giant, added its own confirmation of the depth to which its sector has sunk by warning that 2001 will produce its first ever annual loss.

The company, which last year entered an alliance with rival Hitachi to try to save money on chip and software development, slumped to a 155bn yen ($1.2bn; £800mn) net loss for the final three months of 2001.

The reasons it gave have become a refrain in the business. Mobile phone sales have fallen off sharply from the breakneck pace of the late 90s, while computer demand too is well off its peak.

NEC's chipmaking operations were deeply in the red, a situation reflected in other earnings news this week.

On 29 January, both Fujitsu and Toshiba reported their own heavy losses.

The total deficit for the big five chipmakers for 2001 now looks likely to reach 1.17 trillion yen.

Cuts continue

For the full financial year, which in Japan ends in March, the company is expecting to record a loss of almost double that, or 300bn yen.

As recently as September, the company was expecting a full year deficit of 150bn yen, while in April 2001 it was confident of clearing a 65bn yen profit.

And more job losses are on the way as well.

NEC has already said it will cut 4,000 jobs by March. Of these, 1,800 or 1.2% of its global workforce come from its own staff, while 2,200 will be drawn from subcontractors.

But now it has admitted that another 10,000 jobs are on the line in the next three months.

Harsh comparison

As has become the rule in the electronics business, there is a stark contrast between the 2001 performance and that of the year before.

In the same three months of 2000, NEC managed a 8.3bn yen profit, while its sales were down year on year to 1.13 trillion yen from 1.24 trillion yen.