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September 20, 1998

NEC OUTLINES GROUP RECOVERY PLAN; CUTS 6,000 STAFF

By CBR Staff Writer

NEC Corp said yesterday that net losses for its first six months would be more than double the figure estimated last week in Japanese media reports. The electronics giant told Reuters it expects the group to lose $151m in the six months to September, not $75m as reported. This compares with a $265m profit in the same period last year. The electronics giant, the biggest semiconductor manufacturer in Japan, blames semiconductor (notably DRAM) prices and slowing sales of communications equipment as reasons for its poor performance; the group’s first loss in five years. Earlier this week, ComputerWire quoted (CI No 3,495) Japanese news stories reporting that group sales for the six-month period are expected to fall about 7% to $16.5bn (2.2 trillion yen). Net profit for the full year is also expected to fall despite continued strong sales of computer systems in the corporate market. Speaking to a Japanese news conference yesterday, NEC’s managing director Shigeo Matsumoto said the company aims to return to profitability in the second half of 1998 through a series of restructuring steps. He said NEC will cut its staff, through natural attrition, by 5%, or 6,000 employees, over the next three years; reduce R&D spending and cut the pay of its executive board directors by six to 10%. He added that the company will consolidate its global semiconductor assembly and packaging operations, moving the latter facility in Malaysia to an existing plant in Singapore and moving those in Ireland to Britain. The managing director also attributed blame to the company’s market-share losing US PC making arm, Packard-Bell NEC, whom he said had dragged down overall half-year profits by $74m. A spokesperson from NEC was not available for comment as we went to press.

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