SONY NET PROFIT DROPS 40%; NEC EXPECTS US$1.25 BLN NET LOSS.

TOKYO, Oct 1 Asia Pulse - Sony Corp. (TSE:6758) said that it now projects group net profit to fall 40 per cent to 10 billion yen (US$83.6 million) in fiscal 2001, while NEC Corp. (TSE:6701) announced that it expects to report a group net loss of 150 billion yen (US$1.25 billion), a reversal from the 65 billion yen group net profit projected earlier.

This marks the first time that major Japanese technology firms have lowered their earnings forecasts since the Sept. 11 terrorist attacks on the U.S. The slump in the information-technology sector and sluggish consumer spending in the U.S., which has worsened since the attacks, have begun to erode the earnings of Japanese firms. Shrinking demand for personal computers has hit their semiconductor businesses hard.

Sony's operating profit is now seen plunging 47 per cent on the year to 120 billion yen, a deterioration from the 11 per cent increase to 250 billion yen forecast in late July. Group sales are expected to edge up 3 per cent to 7.5 trillion yen, hurt by a sharp drop in sales of televisions and other electronics products, especially in the U.S. Sales declines at the electronics division are expected to account for at least 110 billion yen of the 130 billion yen difference between the earlier and current projections for operating profit.

The sudden plunge in profit will prompt the firm to implement a restructuring program during the current fiscal year, including 5,000 job cuts through an early retirement program. The company is expected to book an extraordinary charge of about 50 billion yen as a restructuring cost.

At a press conference, Sony Chairman Nobuyuki Idei said the firm was forced to revise its earnings projection for the second time in the current year because "the business environment in the age of digital networks is changing much faster than expected."

He ...