TOKYO -- NEC, Japan's biggest computer chipmaker, said Friday it will slash 15,000 jobs from its work force and shore up its faltering US personal computer subsidiary after announcing the biggest loss in its history.
One of the first employees to go will be NEC's president, Hisashi Kaneko, who said he would resign effective 26 March to take responsibility for the company's expected ¥150 billion (US$1.25 billion) consolidated net loss in the business year ending 31 March.
"With our restructuring efforts and the reshuffling of top management, we hope to create a revitalized NEC," Kaneko told a news conference. Koji Nishigaki, NEC's executive vice president, will replace Kaneko, who will stay on as an adviser to the company with a seat on the board of directors.
NEC's dismal performance was due in large part to a special loss of about ¥75 billion ($625 million) to pay for restructuring at its Packard Bell-NEC unit, a money-losing PC maker in the United States.
Last year, NEC cut Packard Bell's work force in half -- to around 3,000 -- and reduced the number of its PC models and distribution channels in an attempt to reverse its fortunes. NEC will also purchase the subsidiary's European operation for about $450 million, Kaneko said.
Packard Bell was too slow to develop low-priced personal computers that could keep up with the industry's cutthroat price competition, but NEC said operations have been improving since a management change last year.
On Friday, NEC also announced a sweeping restructuring plan, including cuts in capital spending, the scrapping of unprofitable businesses, and the elimination of 15,000 jobs over a three-year period. More than 10,000 of those job cuts have already been made.
Kaneko said declining demand for telecommunications equipment at home, sagging prices of semiconductors, and a stronger yen were also to blame for NEC's woes.
The industry's harsh conditions also battered Toshiba, which on Friday said that its consolidated operating profit this business year would fall far short of its previous forecasts.
The company said slow demand for cellular phones and personal computers, along with the strong yen, forced it to cut its consolidated operating profit forecast for the year to ¥25 billion ($200 million) from an earlier estimate of ¥70 billion ($583 million).
A strong yen makes Japanese products more expensive in overseas markets, while reducing the yen value of profits repatriated from abroad.
Toshiba said profits in the PC segment, traditionally a stronghold, were forecast at ¥58 billion ($483 million) for the year, down from a prior forecast of ¥70 billion ($583 million).
The company said an extraordinary profit from the sale of land and shares would allow it to break even on a consolidated basis in the current year.
Both Toshiba and NEC also cut their dividend payments for the current business year.
Copyright© 1999 Reuters Limited.
