NEC Corp has blamed the record annual loss it reported last Friday on the poor performance of its US-based Packard Bell NEC subsidiary and higher-than-expected restructuring costs. Japan’s largest manufacturer of semiconductors and PCs recorded a group net loss of $1.3bn compared with last year’s net profit of $340m. However, the firm is still planning to invest $330.6m in increasing and upgrading its memory chip products over the few years.
Packard Bell was the chief drain on NEC’s figures, posting a loss of $500m for 1998. The company blamed intense competition, particularly in the sub-$1000 dollar PC market, for the sluggish performance of the Sacramento, California-based division. Restructuring costs also hit the firm hard, after the firm announced in February that it would cut 15,000 jobs worldwide in an effort to become more competitive. In addition, telecommunications sales were hit because NTT, one of NEC’s major customers, cut its orders last year, a situation that will continue until March 2000
The company lost $429.8m on its chip business in 1998, a fall it said was caused by continuing oversupply in the DRAM market. However, the company has announced that it will be spending $330.6m on upgrading memory production plants to make the transition from producing 64Mb to 128Mb DRAM chips. The investment will be spent on plants in Hiroshima, Japan and Livingstone, Scotland. The firm expects to realize higher margins on the 128Mb components. The company expects to be producing 10 million 64Mb and 10 million 128Mb DRAM chips by the summer of 2000.
