NEC Returns to the Black in Fiscal '99

BOSTON (05/12/2000) - Strong sales of semiconductors, LCD (liquid-crystal display) panels, personal computers and cellular telephones helped major Japanese electronics and semiconductor maker NEC Corp. return to net profitability last fiscal year, which ended March 31, 2000, the company announced today.

The company reported a group operating profit of 110.4 billion yen (US$1 billion), up from 3.1 billion yen in the previous year, on the back of 4.8 percent higher net sales of 4.99 trillion yen. Group pretax profit bounced back into the black at 30.2 billion yen from a loss of 224.7 billion yen, and group net profit was 10.4 billion yen from a loss of 151.3 billion yen.

The company's solutions business, which includes its computer hardware and software units and Internet service provider business, represented 45 percent of all sales. Operating income at the unit increased 78 percent to 84.4 billion yen on growth and profitability in PC and software operations.

The networks division saw operating income fall 30 percent to 57.1 billion yen on weakness in orders for equipment from Japanese telecommunications carriers as they continued a freeze on network investment. Sales represented 31 percent of total group sales. The sector was helped by stronger sales of cellular telephones.

NEC's semiconductor manufacturing division bounced positively back into profit in the year, the company said, posting an operating income of 49.4 billion yen against a loss of almost the same amount in the preceding year. A recovery in the semiconductor market and strong demand for LCD panels helped push sales up 7 percent to represent 24 percent of total sales.

NEC saw net profitability crash deep into the red in fiscal 1999, the year to March 31, 1999, as the company reeled from a prolonged slump in DRAM (dynamic random access memory) chip prices and a scandal over Japanese Defense Agency contracts which, coupled with the net loss, ultimately led to the resignation of the company's then president and chairman.

Throughout the past year, NEC has been formulating a restructuring of the company. The reorganization took place on April 3, the first business day of the current financial year, when the company's operations were split into three internal divisions, each of which was given more independence than in the past.

[See "NEC's New Structure Ready for Monday Start," Mar. 29]For the current year, the company said it expects to see a continued recovery in demand for Internet-related integration services, cellular telephones and some semiconductor products. As a result, it forecast group net sales of 5.3 trillion yen, an increase of 6 percent on last year. Operating income is expected to reach 210 billion yen, and net income is predicted to be 75 billion yen.

NEC Corp., based in Tokyo, can be found online at http://www.nec.co.jp/.

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