Caution with NEC Corp... but Goldman Sees Potential Upside (NIPNY)

Apr.21.06 | About: NEC Corp. (NIPNF)

NEC Corp. (NIPNY) announced even lower financial estimates than the Nikkei Shimbun published this past Wednesday and shed light on its expected net income. NEC is expecting full fiscal year (ended March 31st) net income to decrease by 47 billion yen (US$400m) compared to its prior forecast on October 27, 2005. The new figure for net income is 13 billion yen (US$111m), a decline of more than 78% from its October estimate.

On top of that, an NEC subsidiary was recently busted over falsifying transactions during the most recent five-year period. In its announcement NEC said that although the financial effects of this are not yet available it will be disclosing the information as soon as possible. It's unclear whether it will be ready for NEC's earnings release scheduled for May 11.

Believe it or not there is positive news out there for NEC, a brief discussion of which follows below. The market by the way seems to be mostly ignoring the above mess or is truly bullish on NEC's future.

In spite of the above, two days ago Goldman Sachs (NYSE:GS) recommended NEC over rival Fujitsu Ltd. (OTCPK:FJTSY) because the momentum behind Fujitsu's expected earnings could mean more room for an upward evaluation of NEC.

Today, Goldman Sachs reaffirmed its "outperform" rating on NEC, stating that if Softbank (OTCPK:SFTBF) follows through with its plans to aggressively invest in handsets then there are grounds for a positive revaluation of NEC's share price. Softbank remember, reached an agreement to buy Vodafone's (NASDAQ:VOD) Japan operations, the number three player in mobile phone services in Japan.

Links to NEC's announcement made today, Bloomberg coverage, and two recent upgrades of NEC:

    • NEC Announcement [April 21]

    • NEC Profit Falls 78% on Chipmaking Unit's Wider Loss [Bloomberg, April 21]

    • NEC Upgraded Again, Credit Suisse Boosts Target Share Price (NIPNY) [April 10]

    • NEC Upgraded by GS from “In-line