Loss-making NEC to Cut 10,000 Jobs

Jan. 26, 2012
Japanese electronics manufacturer posts a $1.25 billion net loss for the nine months to December.

Japanese electronics giant NEC said Thursday it would axe 10,000 jobs worldwide, as it announced it had already lost more than a billion dollars so far this fiscal year.

In a presentation accompanying its third-quarter results the firm said it would reduce its headcount by 7,000 in Japan and 3,000 overseas.

Several Japanese technology companies are facing business pressures ranging from overcapacity and competition to the strong yen, and announcements of job losses, once unthinkable in a "job for life" culture, are becoming increasingly common.

Dow Jones Newswires said about half the 10,000 posts involved were full time, permanent NEC positions.

The company said the job losses would cost it 40 billion yen ($510 million) this financial year, but were expected to generate savings of well over that amount in the following two years.

It would open a new capacitor factory in Thailand after its current plant suffered "serious damage" in last year's floods, it added.

NEC, which provides technology services and makes computers and electronic devices, said its mobile phone business had suffered from "drastic changes in [the] Japanese market," with foreign vendors' market share increasing.

The changes were to bring about "restructuring in businesses that require immediate reform," it said, and would give it a "business structure with high profitability."

"Immediate improvement of market environment cannot be expected," it said. "We will shift to conduct efficient business operations to generate constant profit based on current sales level."

NEC posted a net loss of 97.5 billion yen ($1.25 billion) for the nine months to December, compared with a 53.6 billion yen loss in the corresponding period a year previously.

Turnover for the nine months was 2.11 trillion yen, down 3.5% on the previous year, although it did reduce operating losses.

It projected a loss of 100 billion yen for the financial year ending in March 2012 and said would not be paying a dividend.

The company had previously projected a 15 billion yen net profit for the financial year but revised that down, even though it said it would make an operating profit of 70 billion yen.

It made a net loss of 12.5 billion yen in the year to March 2011.

NEC revised its sales forecast for the full year downward to 3.1 trillion yen, a 0.5% drop on the year ending March 2011, as "challenging business conditions continue."

It specifically cited global reductions in investment spending, reduced mobile phone shipments, and the impact of last year's floods in Thailand.

Much of the losses in the current year would be due to a recalculation of deferred tax assets after a rule change, it said, blaming "business restructuring costs for the reform of cost structure, and an increase in income taxes".

Before the results were released NEC shares closed unchanged at 168 yen on the Tokyo stock exchange.

Including its subsidiaries, NEC had about 116,000 employees in total as of March last year. In 2009, in the depths of the global financial crisis, its subsidiary NEC Tokin announced it would cut almost 10,000 jobs, the vast majority of them outside Japan.

Copyright Agence France-Presse, 2011

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