NEC cuts 10K jobs in restructuring

Japanese IT vendor says move will cut costs and lower forecasted losses as company battles competition from Apple and in local IT infrastructure business.

NEC says it will will slash 10,000 jobs, a tenth of its global workforce, in a bid to cut costs amid increasing market competition and reduce forecasted losses in the next quarter.

The Japanese IT vendor blamed its poor performance on low demand for its smartphones, compared to the popularity of Apple's iPhone in Japan, foreign rivals in local IT infraustructure business, and challenges in overseas expansion, according to a Reuters report Friday

Headcount will be slashed by the end of September and approximately 7,000 layoffs will be in Japan, Nobuhiro Endo, president of NEC, said at a press conference in Tokyo. He added that NEC would miss its target to raise overall sales to 4 trillion yen (US$57.7 billion) in the next business year, but would still aim to reach the goal of improving its operating profit margin of 5 percent.

The restructuring would cost the company 40 billion yen (US$516.9 million) for the current financial year, but would also add the same amount to its income in the next financial year, Endo   said.

NEC also slashed projections for annual mobile phone sales by nearly a quarter to 5 million units. Most of the job cuts would also be in its mobile phone business.

The Japanese IT vendor on Thursday reported a net loss of 87 billion yen (US$1.12 billion) for the last quarter, ended Dec. 11, 2011. It further warned that it would post a net loss of 100 billion yen (US$1.3 billion) for the year to Mar. 31, much larger than its previous forecast of 15 billion yen (US$193.8 million) profit.