UPDATE 2-Hitachi to pursue M&A, focus investments

May 31, 2010 By Leave a Comment

Aims for Y525 bln op profit in 2012/13 vs Y202 bln in ’09/10

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* Sees sales of Y10.5 trln in 2012/13 vs Y8.97 trln in ’09/10

* Plans Y1.4 trln in capital investment, strategic spending

* 70 pct of spending will go to “social innovation” business

* To use M&A aggressively to drive growth-president (Recasts, adds president comment)

By Sachi Izumi

TOKYO, May 31 (Reuters) – Hitachi Ltd (6501.T), Japan’s largest electronics maker, said it would pursue acquisitions and focus spending on a group of key businesses, seeking to more than double its profit over the next three years.

Hitachi, a sprawling conglomerate of 900 group firms, has been trying to narrow its focus to give it a better chance of competing globally with more profitable rivals such as Germany’s Siemens (SIEGn.DE) and General Electric Co (GE.N).

Over the next three years, Hitachi will allocate 70 percent of its 1.4 trillion yen ($15.4 billion) budget for capital spending and strategic investments to its “social innovation” segment, a group of businesses that includes data centres, power plants, construction machinery, batteries and railway systems.

Hitachi would look to buy companies to bolster these operations, President Hiroaki Nakanishi said, in a sign the company is becoming more aggressive after years of cost-cutting.

“We turn 100 years old this year. It will be a turning point for us to change to offense from defense,” Nakanishi told a news conference.

Hitachi said it would aim for an operating profit margin of more than 5 percent in the financial year to March 2013 on sales of 10.5 trillion yen. That would come to profit of at least 525 billion yen, up from 202 billion yen in the year just ended.

The company said it would aim to boost the ratio of sales generated in overseas markets to more than half the total, up from 41 percent in the year ended in March 2010, as it makes a push into emerging markets.

Hitachi said it would also aim to lower its debt-to-equity ratio to 0.8 times or below, from 1.04 times at the end of the past financial year.

Shares of Hitachi were up 0.5 percent at 372 yen. The benchmark Nikkei average .N225 was down 0.2 percent. (Reporting by Sachi Izumi; Editing by Edwina Gibbs)

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UPDATE 1-Toyota 09/10 output seen -12% at 6.2 mln cars-media

April 24, 2009 By Leave a Comment

Toyota 09/10 domestic output seen 2.8 mln cars-media

* Shares fall 4.4 pct vs 4.2 pct drop in transport subindex

By Sachi Izumi

TOKYO, April 21 (Reuters) – Toyota Motor Corp (7203.T) will likely produce about 6.2 million vehicles globally in the business year to March 2010, a newspaper reported, down more than 12 percent amid a global sales slump and helping send its shares skidding over 4 percent.

Automakers around the world have been grappling with a sudden drop in demand since late last year, but the pain is especially pronounced at Toyota, which is saddled with too much capacity after years of building new plants to keep up with demand.

Toyota, the world’s largest automaker, has been lowering output in the face of mounting inventories and had said production levels would hit bottom in January-March 2009.

But the Yomiuri newspaper said Toyota’s daily production in Japan was unlikely to return to 12,000 vehicles, the minimum needed for a profit, until after October.

The paper said Toyota’s domestic production for the current business year would be around 2.8 million vehicles, a fall of more than 30 percent since its peak two years ago and slipping below 3 million for the first time in 31 years.

“The reported (global) production plan seems to be largely in line with market expectations … I think the output of 2.8 million units in Japan would exceed demand,” said analyst Yoshihiko Tabei at Kazaka Securities.

“The stock market’s focus now is not so much on how many cars Toyota plans to roll out but on how Toyota, as well as other carmakers, would rationalise production facilities by such measures as early depreciation and plant closures.”

Carmakers’ shares will likely remain top-heavy until the companies announce plans to book costs on their manufacturing facilities, he said.

A Toyota spokesman could not immediately confirm the Yomiuri report.

Toyota shares fell 4.4 percent to 3,700 yen, also pushed down by a stronger yen. The transport equipment subindex .ITEQP.T fell 4.2 percent.

The Yomiuri said the expected slide in production could make it hard for Toyota to keep its work force at current levels.

The Nikkei business daily reported this month Toyota’s sales could tumbled to about 6.5 million vehicles in the current financial year, falling below 7 million for the first time in six years. [ID:nT20591]

The Nikkei also said Toyota’s operating loss could balloon to over 500 billion yen ($5.10 billion) in the year to March 2010.

Toyota forecast it would make 3.4 million vehicles in Japan and 3.68 million overseas on a parent-only basis in the financial year that ended on March 31, which would be down 20 percent and 17 percent from the previous year, respectively. ($1=98.04 Yen) (Additional reporting by Yumiko Nishitani; Editing by Michael Watson)

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UPDATE 2-Toshiba sees smaller 08/09 loss, but tax costs hurt

April 18, 2009 By Leave a Comment

Toshiba estimates oper loss $2.5 bln vs prior view $2.8 bln

* Flash memory, system chip, TV sales help reduce loss

* $855 mln in tax credit costs drag down bottom line

* Toshiba shares up 4.4 pct on earlier report

By Sachi Izumi

TOKYO, April 17 (Reuters) – Toshiba Corp (6502.T) said on Friday it expected to post a smaller operating loss than it had previously forecast for the year that ended last month, as prices of flash memory stabilised, with earlier reports of the smaller loss helping its shares rise 4 percent.

But Toshiba, the world’s No. 2 maker of NAND-type flash memory behind Samsung Electronics Co (005930.KS), revised down its net earnings estimate to a bigger loss on tax credit costs, after grappling with sharp declines in chip demand.

“A smaller operating loss is positive, but we can’t really say this is significant enough to trigger a big change in the company’s financial strength,” Goldman Sachs analyst Ikuo Matsuhashi said in a note to clients prior to the announcement.

Toshiba said it now expects an operating loss of 250 billion yen ($2.52 billion), less than its previous forecast for a 280 billion yen loss, on better-than-expected sales of its NAND chips, used in mobile phones and portable music players like Apple Inc’s (AAPL.O) iPod.

Analysts on average see a loss of 283.2 billion yen, according to a poll of 15 brokerages by Reuters Estimates.

For the current financial year, the Nikkei business daily earlier said Toshiba will likely forecast an operating profit of about 100 billion yen. Analysts expect a loss of 110.8 billion yen.

“That figure sounds rather ambitious,” said Masaharu Sato, analyst at Daiwa Institute of Research. “Even if NAND prices stabilise, the tough outlook for system chips will continue.”

“Strengthening Toshiba’s capital has become an urgent issue.” Toshiba said it expected its net loss for the year ended last month to widen by 25 percent from its previous forecast to 350 billion yen, after writing down a hefty 85 billion yen in deferred tax assets.

The new net loss estimate compares with a consensus of a 269 billion yen loss from 15 analysts polled.

Shares in Toshiba closed the morning session up 4.4 percent to 332 yen, outperforming a 2.2 percent rise in the benchmark Nikkei average .N225. ($1=99.37 Yen) (Reporting by Sachi Izumi and Mayumi Negishi; Editing by Edwina Gibbs)

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UPDATE 4-Japan’s NEC Elec, Renesas in merger talks -sources

April 17, 2009 By Leave a Comment

Merger would create world’s No.3 chipmaker

* NEC Electronics to stay listed – media

* Aim to merge in early 2010

* NEC Elec shares bid up 12 pct or daily limit of 100 yen

By Kentaro Hamada and Sachi Izumi

TOKYO, April 16 (Reuters) – Japanese chipmakers NEC Electronics (6723.T) and Renesas Technology are in the final stage of merger talks, four sources said, the latest shakeout in an industry wracked by a huge chip glut and a slump in prices.

The move would create the world’s No.3 chipmaker after Intel (INTC.O) and Samsung Electronics (005930.KS) and could trigger more realignment in a sector where nearly all players are losing money. NEC Electronics shares were bid up by their 12 percent daily limit after the news.

Prospects for a quick recovery in chip demand are dim amid global economic turmoil, and Germany’s Qimonda (QMNDQ.PK) has already filed for insolvency while Spansion (SPSN.O) has filed for bankruptcy protection.

Japanese PC memory maker Elpida Memory (6665.T) is also working with Taiwanese peers to survive, with the governments of both countries looking at providing support. [ID:nT162497]

Analysts say a merger of Renesas and NEC Electronics, the world’s seventh- and 10th-biggest chipmakers, would be positive if they can restructure sufficiently to improve earnings. Both are expected to be deep in the red for the year ended last month.

It may also help their parent companies’ bottom lines, they say. The focus will be on the stock holding ratio and the next move by Toshiba (6502.T) and Fujitsu (6702.T), which had reportedly discussed joint chip operations with NEC Electronics.

“News of the merger between NEC Electronics and Renesas is positive for share prices as this will help ensure their survival, but in the mid- to long term it just suggests their operating environment is really that bad,” said Fumiyuki Nakanishi, a manager at SMBC Friend Securities.

The firms aim to merge in early 2010, said sources with direct knowledge of the matter, who declined to be identified as the information is not yet public. The Nikkei business daily said they aim to close the deal by the end of this month.

NEC Electronics, 65 percent owned by NEC Corp (6701.T), said in a statement no decisions have been made on reorganising operations. Spokesman Shinichi Kaede declined further comment.

Makie Uehara, a spokeswoman for Renesas, a venture between Hitachi Ltd (6501.T) and Mitsubishi Electric (6503.T), said nothing had been decided.

TOP IN MICROCONTROLLERS

Both specialise in microcontrollers and system semiconductors, and the combined company would have annual sales of nearly $13 billion, surpassing Toshiba to become Japan’s biggest chipmaker, data from market research firm Gartner shows.

Renesas is the world’s biggest microcontroller maker, and the union with NEC Electronics would give them about 28 percent of global market share, much bigger than the 10.6 percent share of No.2 maker Freescale Semiconductor [FSLSM.UL], according to research firm iSuppli.

For market share graphics click:

here

Microcontroller chips are often used in automatically controlled devices such as car engine control systems and power tools, and are able to control several processes while minimising power consumption.

System chips control multiple functions in electronics or cars and look like a maze of circuits on a single sliver of silicon.

Analysts say the companies face hurdles in making a possible merger successful.

“NEC Electronics and Renesas are both strong in microcontroller and system LSIs, but many of their businesses overlap and they have too much production capacity,” Nomura Securities analyst Masaya Yamasaki said in a note to clients.

He said they would have to focus on reducing capacity and balancing oversupply for some time to make a merger work.

The Nikkei said NEC Electronics will be the surviving entity and will likely remain listed, and a merger would allow the companies to scrap old production lines.

NEC Electronics had been widely reported to be in separate talks with Toshiba and Fujitsu on merging some chip operations, but the Nikkei said they failed to agree on management issues.

NEC Electronics’ shares were awash with buy orders at 930 yen, up 12 percent from Wednesday’s close, or by their daily limit of 100 yen.

By 0418 GMT, NEC’s shares gained 2.7 percent to 304 yen, Mitsubishi Electric’s shares climbed 0.6 percent to 506 yen. Hitachi’s stock rose as much as 3.8 percent in the morning, but gave up on gains and fell 2.2 percent to 306 yen. (Additional reporting by Reiji Murai, Aiko Hayashi and Mayumi Negishi; Editing by Michael Watson)

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UPDATE 3-Japan prepares support for Elpida, eyes public funds

April 15, 2009 By Leave a Comment

Tokyo, Taipei agree to support Taiwan Memory-Elpida tie-up

* Japan Elpida debate includes talk of public money-sources

* Analysts say Elpida would use money to lift DRAM output

* Elpida’s shares initially jump but then fall 6 pct

By Mayumi Negishi and Sachi Izumi

TOKYO, April 15 (Reuters) – Japan is looking at providing support to loss-making chipmaker Elpida Memory (6665.T), including possibly injecting public money but is still far from making a decision, government sources said on Wednesday.

Elpida and Taiwanese chipmakers such as Powerchip (5346.TWO) have been bleeding losses as prices slump amid chronic oversupply. The downturn has already led Germany’s Qimonda (QMNDQ.PK) to file for insolvency.

Japan’s trade ministry told Taiwanese authorities on Tuesday it will support Elpida and welcomed the recent partnership between Elpida and state-backed Taiwan Memory — a company set up by the Taiwanese government to rescue Taiwan’s chip sector.

Japan is preparing legislation to allow companies hit by the global economic crisis to apply for public funds, but any capital injection could easily anger rival chipmakers as well as crush prospects of a recovery in chip prices this year.

The trade ministry just this week scrapped tariffs on South Korea’s Hynix Semiconductor Inc (000660.KS), a maker of DRAM or dynamic random access memory chips, following a ruling by the World Trade Organisation and an investigation that said it was no longer receiving government aid.

“Say we want to inject public money. How can we do that in a way that would be palatable for investors without antagonising overseas regulators?” said one trade ministry source, speaking on condition on anonymity.

Elpida, the world’s No.3 maker of DRAM chips, is likely to invest new capital to boost output of smaller chips and grab more market share, analysts said.

Chipmakers, eager to undercut rivals, have repeatedly overinvested in boom cycles in the past, only to ask governments, suppliers and even customers to foot the bill when prices drop too quickly.

“The DRAM market may then have to deal with increased output from Elpida and Taiwan Memory, which is not a positive for other DRAM companies,” said Lee Min-hee, an analyst at Dongbu Securities.

“In any case, I don’t see any significant recovery for the DRAM market this year. Inventory was huge to begin with, and demand has fallen too much.”

Analysts note the PC memory market faces a revolutionary shift with demand unlikely recover as it has done in the past, as users increasingly turn to web-based services like Google Inc’s (GOOG.O) Gmail to store information, instead of using memory on their own computers.

Spot prices of DRAM, used mainly in computers, rose 2.4 percent on Wednesday according to DRAMeXchange, as piles of inventory fell to more manageable levels, but are still lower than the cost of making the chip for smaller chip makers.

Desperate to catch up with industry leader Samsung Electronics Co (005930.KS) and No. 2 Hynix Semiconductor, Elpida and its Taiwanese production partner Powerchip have invested heavily in new capacity despite the downturn. [ID:nTP104915]

And while the companies need more capital for long-term survival, policy makers also worry that public money for Elpida could face opposition in Japan, as it could be seen as bolstering Taiwan memory makers.

“You should view TMC and Elpida as one group. If Elpida can get money from its government, it is positive for TMC,” said Kenneth Lee, head of the research department of Taiwan’s Fubon Securities Investment Services.

Shares in Elpida initially surged as much as 8 percent on a report by public broadcaster NHK that it would receive public funds but later dropped 6 percent to 915 yen.

Elpida spokesman Michinari Tsurumaki said the company would consider applying for government funds once the scheme is in place, repeating earlier comments from the company. [ID:nT98046]

It is already raising 46 billion yen ($467 million) by issuing mainly preferred shares to suppliers that include Shin-Etsu Chemical Co (4063.T), Taiwan’s Powertech Technology Inc (6239.TW), Advantest Corp (6857.T) and U.S. DRAM module supplier Kingston Technology, sources have said. [ID:nT371734]

Elpida has also said that it is open to the idea of Taiwan Memory taking a stake of about 10 percent in Elpida.

In February Elpida reported its fifth straight quarterly loss and is expected to have fallen deep into the red for the full year ended last month. (Additional reporting by Marie-France Han in Seoul, Baker Li in Taipei, Yumiko Nishitani in Tokyo; Editing by Edwina Gibbs)

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