Japanese Tech Stock Weekly Summary (Feb. 2 - Feb. 8, 2009)

by: IRG Ltd

The following is excerpted from IRG's weekly stock report:

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Panasonic Corp. (PC) tumbled to a quarterly loss on slow sales and a firmer yen, and cut its annual outlook to a US$4.2 billion net loss, its first loss in six years. Like many Japanese high-tech manufacturers, Panasonic is struggling with a steep rise in the yen, low demand and growing costs of an aggressive restructuring as the global recession spreads. Rival consumer electronics maker Sony Corp. (NYSE:SNE) has also projected a big full-year loss. Panasonic, which ranks ahead of Samsung Electronics (OTC:SSNLF) in the plasma TV market, posted an October-December net loss of 63.1 billion yen (US$704 million) versus a profit of 115.2 billion yen (US$1.3 billion) in the same period a year earlier. For the business year to March 31, Panasonic revised its net forecast to a loss of 380 billion yen (US$4.24 billion) from its previous guidance for a 30 billion yen (US$326 million) profit. That would be way below last year's 281.9 billion yen (US$3.1 billion) profit, and compares with a consensus for a 23.2 billion yen (US$252 million) loss in a poll of 13 analysts by Reuters Estimates.

Sharp Corp. (OTCPK:SHCAY) will post its first loss in more than five decades and cut 1,500 temporary jobs because of falling sales of the devices. The net loss will probably be 100 billion yen (US$1.1 billion). Sharp joins Sony Corp., Panasonic Corp. and NEC Corp. (OTC:NIPNF) in forecasting losses and cutting jobs as the global recession curbs demand for consumer electronics. Global LCD-TV sales will fall 16 percent this year to US$64 billion, the first drop in the industry’s history. The company projected 60 billion yen (US$652 million) net income and posted profit of 101.9 billion yen (US$1.1 billion) in the year-earlier period. Sharp forecasts sales of LCD TVs will fall 10 percent this fiscal year to 730 billion yen (US$7.9 billion) even as the number of sets sold increases 21 percent to 10 million.

Nikon Corp. (OTC:NINOF) cut its full-year profit forecasts because of lower digital camera sales and the stronger yen. Net income is expected to drop 68 percent to 24 billion yen (US$267 million) in the 12 months ending March 31, 2009 from a year earlier. Sales may fall 10 percent. Nikon joins its larger rival Canon Inc. (NYSE:CAJ) in forecasting worsening earnings because of falling digital camera sales amid the global recession. Canon said its net income will probably fall to the lowest in a decade.

Fujitsu Ltd. (OTCPK:FJTSY) expects to post a group net loss of 20 billion yen (US$222.6 million) for the year ending in March, its first loss in six years. After racking up a 48.1 billion yen (US$523 million) net profit in fiscal 2007, the major electronics manufacturer had forecast a net profit of 60 billion yen for the current fiscal year. Sales are seen falling 12 percent. Shrinking demand for semiconductors and electronic parts will lead to a 70 billion yen (US$761 million) loss at its electronic device division. And hard-drive operations are likely to sink around 25 billion yen (US$272 million) in the red on depressed sales of computers. Since the second half of the fiscal year, sales of PCs and cellular phones have been in the doldrums. Although Fujitsu's mainstay system platforms and services business is likely to post a 190 billion yen (US$2.1 million) profit, a gain of 5 percent, it will not be enough to offset the downturn at other operations.

NEC Corp. has decided to cut more than 20,000 jobs at group companies around the world by the end of the fiscal year through March 31, 2010. About 8,000 jobs will be eliminated in Japan, while around 12,000 will be shed overseas. NEC Tokin Corp. had already announced plans to lay off 9,450 full-timers around the world. This downsizing at the electronics parts unit is included in the 10,000 or so full-time positions to be axed at the NEC group firms. As for non-full-time jobs, 1,200 will be eliminated at NEC Electronics Corp. (OTC:NELTY). The remaining 9,000 job losses are expected to come at subcontractors. This outsourced work will be done by the group firms themselves. With the global economic slump deepening, NEC now forecasts a group net loss of 290 billion yen (US$3.227 billion) for fiscal 2008. NEC's most recent full-year net loss was for fiscal 2005. The firm has decided to forego dividend payouts for fiscal 2008 in order to preserve shareholders' equity.


Elpida Memory (OTC:ELPDF) may seek government funds under a new scheme aimed at supporting non-financial firms hit by the economic crisis. Elpida has been battered as the sector goes through its worst-ever downturn due to a chronic supply glut coupled with a slump in demand. The company has enough cash for daily operations but it still needs funds for future investment after being forced last year to redeem most of a 50 billion yen (US$559 million) convertible bond due to a slide in its share price. The Japanese cabinet approved a bill aimed at shoring up struggling firms outside the financial sector. The government aims to pass the bill in the current parliament session and could begin accepting applications this spring. Elpida may seek tens of billions of yen from the government. In exchange for funding, Elpida would issue preferred stock to the Development Bank of Japan. The DRAM industry woes forced Elpida's smaller rival Germany's Qimonda to file for insolvency, and Elpida itself has been discussing a possible merger with Taiwanese DRAM makers Powerchip and ProMOS Technologies.

Toshiba Corp. (OTCPK:TOSBF) and NEC Corp. have begun talks to integrate their troubling semiconductor operations to combat plummeting chip prices and dwindling global demand. Fujitsu may also participate in the deal in the future since it is also looking for a tie-up partner for its semiconductor unit. Industry insiders believe if the three-way integration realized, it is likely to trigger a major realignment in the semiconductor industry. The talks between Toshiba and NEC are also likely to involve integrating Toshiba's system LSI operations with NEC Electronics Corp., a major chip-making subsidiary of NEC. Toshiba and NEC have already formed an alliance to jointly develop a cutting-edge system LSI. Toshiba, the world's No. 2 maker of NAND flash memory, and other major chip-making companies throughout the industry have been reeling under a global industry-wide slump caused mainly by the spreading global recession.

Tokyo Electron Ltd. (OTCPK:TOELF) said profit will almost be wiped out this year after the worsening recession forced chip producers to delay spending. Net income will plunge 99 percent to 800 million yen (US$8.9 million) in the year ending March 31. That is less than the 8 billion yen it forecast in October and the 3.5 billion yen (US$38 million) projected by analysts. President Kiyoshi Sato will step down from April 1. The company turned to a loss in the third quarter, joining Applied Materials Inc. (NASDAQ:AMAT), the largest maker of chip-production machinery, in posting weaker results as earnings at customers such as Intel Corp. (NASDAQ:INTC) deteriorate. Operating profit, or sales minus the cost of goods sold and administrative expenses, is expected to fall 96 percent, while revenue will drop 44 percent. The company in October forecast operating income of 12 billion yen (US$130.4 million) on sales of 540 billion yen (US$5.8 billion). Sato, who will be replaced by Senior Vice President Hiroshi Takenaka, will become vice chairman and also be responsible for the flat-panel display and solar- power businesses.

Media, Entertainment and Gaming

Nintendo Co. (OTCPK:NTDOY) has sold more than 2 million units of its "DS Lite" portable gaming device in South Korea. Launched two years ago along with Nintendo's official operations in Korea, the DS Lite has appealed to a wide range of gamers in South Korea, especially men and women in their 20s and 30s. The product's allure to a wide consumer base helped it hit the sales milestone in such a short period of time, Nintendo Korea said in a press release. The palm-sized device is regarded by many local tech experts as a noteworthy success in South Korea, where on-line computer games are generally more popular than console gaming.


Softbank Corp. (OTCPK:SFTBF) said its group operating profit for the April-December period rose 5.6 percent from a year earlier to an all-time high of 274.7 billion yen (US$3 billion) thanks to continued growth in mobile phone subscriptions. For the first nine months of fiscal 2008 through March, its group net profit dropped 37.6 percent due largely to the absence of special profits from sales of shares in Alibaba.com Ltd. (OTC:ALBCF) logged the previous year. Sales also declined 3.7 percent. The company also maintained its October projection of a year-on-year 4.8 percent growth in operating profit to 340 billion yen (US$3.7 billion) for the whole of the current business year.

NTT (NYSE:DCM) reported consolidated operating revenues of 7.7 trillion yen (US$86.2 billion) for the nine-month period ending 31 December 2008, down 1.4 percent year-on-year and consolidated net income increased 68.9 percent from last year. NTT made significant gains in subscribers for its IP-based phone services and its fiber-optic internet business. It also cut costs and increased profitability at its mobile phone unit. Revenue from regional fixed-line businesses continued to decline as more subscribers shifted from fixed- and dedicated-line services to the cheaper Internet-based services, but profit in this business segment increased thanks to lower operating costs.