From: Reuters
Published May 15, 2008 04:06 AM

NEC profit climbs on cost cuts, sees growth

By Mayumi Negishi

TOKYO (Reuters) - NEC Corp, Japan's biggest maker of telecoms network equipment, doubled its quarterly profit, helped by cost cuts and a healthy IT services business, but its outlook for the current year missed expectations.

NEC, which also makes supercomputers and mobile phones, has swallowed massive restructuring costs this year in a bid to revive growth, but its outlook on Thursday was dragged down by a stronger yen and pension related costs.

NEC said it expects a net profit of 35 billion yen ($333 million) in the year that began in April, up 54 percent from the previous year, due to further cost cuts and investment by Nippon Telegraph and Telephone Corp in high-speed networks.

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That outlook missed a consensus forecast for a net profit of 56.6 billion yen by eight analysts polled by Reuters.

Pension-related costs are projected to drag down profit by 12 billion yen and a strong yen would likely add 15 billion yen to that bill, while research and development costs would grow by 23 billion yen, it said.

NEC, which supplies its handsets solely to NTT DoCoMo Inc T> , has been stepping up efforts to ship handsets to fast-growing upstart carrier Softbank Corp, NEC executives have said.

Those first shipments will arrive this year, Senior Vice President Takao Ono indicated on Thursday, raising its handset shipments 45 percent to 7 million units.

Chip unit NEC Electronics Corp forecast on Wednesday that its group operating profit would double to 10 billion yen this year by cost-cutting to fight a strong yen and high materials prices.

NEC, once the dominant handset maker in Japan, has lost ground in the market as NTT DoCoMo shed users. It fell to No.5 last year from No.4.

It aims to regain share in Japan while expanding abroad via a partnership with French-American company Alcatel-Lucent, announced in February, to develop super fast wireless technology known as Long Term Evolution (LTE).

The two firms are also part of another group led by handset maker Nokia and top mobile network gear maker Ericsson, aiming to boost the take-up of LTE technology.

NEC posted a 32.66 billion yen net profit for the quarter ended March 31, against 16.44 billion yen a year earlier and beating the average estimate of 28.3 billion yen from seven analysts polled by Reuters.

Prior to the announcement, shares of NEC closed up 5 percent, against a 1.9 percent rise in Tokyo's electric machinery index IELEC.

Shares of NEC fell 26 percent in the year to March, while rival Fujitsu Ltd fell 13 percent and the electric machinery index fell 21 percent.

(Editing by Brent Kininmont)

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