NEC Electronics Corp., the semiconductor subsidiary of NEC Corp., posted lower sales and significantly lower net income in its fiscal Q3, which ended in December.
The Tokyo-based company blamed the revenue shortfall on weakness in a key market – consumer electronics – and cut its forecast for the full year.
NEC Electronics’ net income for the quarter came in at $5 million (500,000 Japanese yen), a 94 percent drop from the same period a year ago. Net sales for NEC were $1.6 billion (165.3 billion Japanese yen), a 5.7 percent decline from last year’s Q3.
Sales were lower due to a decrease in NEC Electronics’ consignment business, including the resale of LCDs, as well as a “substantial decrease in sales of LCD driver ICs for mobile phones and personal computers,” the company said in a statement. In addition, NEC said sales of LSIs for general-purpose devices also declined in line with lower market demand, but sales of devices to the automotive market were strong.
To counter lower net income, NEC Electronics implemented cost efficiency, productivity and cost reduction measures during the quarter. In October, NEC Electronics initiated these measures and also announced a lower forecast for its fiscal year.
“However, since October 2004, the global economy declined further than the company anticipated,” NEC Electronics said in a statement. “Although the temporary adjustment phase is leveling off, recovery of semiconductor demand is taking longer than expected. In particular, the adjustment of inventory (including distributors’ inventory) for end products manufactured for the Olympics is coming to an end, but adjustments during the third quarter were larger than anticipated.”
NEC Electronics, which had originally expected a recovery in the semiconductor market at the beginning of 2005, now believes that won’t happen until the middle of the year.
With that in mind, the company has revised its full year forecast again. Net sales are now expected at just $6.9 billion (710 billion Japanese yen), nearly flat from the previous fiscal year, and about 35 billion Japanese yen lower than NEC Electronics’ forecast issued in October. Net sales from the company’s core semiconductor business are expected to increase 1.8 percent.
Net income is now forecast to reach $179.7 million (18.5 billion Japanese yen), a 34 percent drop year over year.
