NEC to cut 10,000 jobs amid handset struggles
Japanese firm will report first annual loss for four years, and refocus on growth businesses like 4G infrastructure
Published: 27 January, 2012
READ MORE: Financial | Japan | NEC | Infrastructure | Handset | LTE
NEC blamed problems in its handset business, as well as a string of natural disasters, for an expected $1.3bn loss for its current fiscal year. The Japanese company plans to slash almost 10,000 workers, including 3,000 outside its home country.
Only three months ago, NEC had forecast a net profit of about $200m for the fiscal year ending in March. But the recent huge floods in Thailand forced it to close two factories, hitting its supply of hard disk drives.
Its more endemic problem lies in its handset division, which has always struggled - like most Japanese phonemakers - to succeed outside its own country. There, the native OEMs were, until recently, protected by their close relationships with the cellcos, which virtually commissioned their own handsets. However, over the past few years, Japanese consumers have turned to international smartphone brands, squeezing their homegrown brands, which have been redoubling their efforts to gain share abroad. But this has proved an uphill battle for all the manufacturers except Sony, which is taking full control of its Sony Ericsson joint venture.
As well as making swingeing cuts, NEC will also refocus its efforts on higher growth elements of its business such as IT and cellular infrastructure. The company was sidelined in 3G networks after its joint venture partner Siemens turned to Nokia, but it is attempting a comeback in LTE with a heavy focus on small cells, a strategy that is being driven from Europe. NEC plays in many elements of the new wireless network - it is a backhaul giant, is prominent in indoor femtocells and has an alliance with Cisco.
"As macroeconomic concerns about Europe and developing countries increase, we decided to invest limited resources in lesser business segments," president Nobuhiro Endo said.
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