NEC To Cut 20,000 Workers; Eyeing Toshiba Agreement?

NEC Friday said it would cut 20,000 jobs from its global workforce and look to divest itself completely from the industrial LCD side of its business. In addition, Reuters cited a report in Japan's Nikkei daily that NEC is in talks with Toshiba to merge part of Toshiba's chip operations with NEC Electronics, the company's semiconductor unit.

According to Reuters, NEC's reduction will be complete by March 2010 and includes previously announced 1,200 layoffs from NEC Electronics. News reports indicated the cuts would be divided equally between NEC units in Japan and abroad and at least half would be full-time positions. NEC employs more than 150,000 worldwide. According to NEC President Kaoru Yano, who spoke at a briefing in Tokyo, most of the cuts will be in the chip, electronic-component and LCD divisions.

NEC reported a loss of $1.46 billion (130 billion yen) for its October-December quarter and said it expects a loss of about $3.21 billion (290 billion yen) by the end of its fiscal year on March 31. NEC had previously forecast a profit of $165.9 million (15 billion yen) for the year.

Japanese analysts said a Toshiba/NEC chip merger isn't necessarily a good idea, Reuters reported. One analyst from SMBC Friend Securities called it a "losers' union" and said it's "doubtful they can beat their international rivals even as a team."

Following Toshiba's announcement on Thursday that it would post its first annual operating loss in seven years, Goldman Sachs changed its rating on Toshiba from "sell" to "neutral" and suggested Toshiba consider equity financing.

"Recovery in chip market demand is not likely until at least October, which means our semiconductor business will probably turn profitable in the second half of the next fiscal year," said Toshiba President Atsutoshi Nishida on Thursday.

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