The Wall Street Journal-20080129-Business Technology- NEC Electronics Pares Loss on Reduced Costs

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Business Technology: NEC Electronics Pares Loss on Reduced Costs

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TOKYO -- NEC Electronics Corp. said cost cuts helped curb fiscal third quarter losses, but future results may suffer from the downturn in the chip market.

The group net loss narrowed to 936 million yen ($8.8 million) in the quarter ended Dec. 31 from 5.75 billion yen a year earlier, the chip- making unit of NEC said. Revenue fell 4% to 170.78 billion yen from 177.88 billion yen.

The results show NEC, which has been slashing costs and closing production lines, is making slow, steady progress in its recovery efforts.

It is trying to restore profit amid the shaky global economy. Chief Financial Officer Hiroshi Sato said falling chip orders and the rising yen may hurt the company's bottom line this quarter. "It will be very tough to make an operating profit" in the fiscal fourth quarter, he said.

He said NEC Electronics would break even over the second half and reach its goal of an operating profit "at the bare minimum" this fiscal year, which ends in March.

NEC Electronics posted an operating profit of three billion yen for the fiscal third quarter, reversing course from a 3.83 billion yen loss a year earlier.

The Japanese chip maker is being pressured by shareholders led by Perry Capital LLC, saying its ties to NEC have made it difficult to exit unprofitable businesses, such as some mobile-phone components.

NEC, which took the unit public in 2003, still has about a 70% stake in it.

The third-quarter results showed progress, but Mr. Sato, the finance chief, said it was "difficult to evaluate" the global economic scene and what effect it would have on the company.

For the fiscal year, NEC Electronics maintained its earnings outlook, predicting a net loss of 15 billion yen on sales of 690 billion yen. An operating profit posted this fiscal year would be its first in three years.

The company's earnings figures are based on U.S. accounting standards.