Toshiba reports first half weakness, worse to come

Toshiba announced its first-half financial results Friday and said the few bright spots it found in the first half are likely to dull in the coming six months.

Group net income for the half year sank to a loss of 123.1 billion yen (US$1.03 billion as of Sept. 30, the last day of the period being reported), from a profit of 53.9 billion yen a year earlier. The group reported half-year net sales of 2.51 trillion yen, down 11.2 percent from the same period a year earlier on "major falls in demand" in many of the company's main business sectors.

Toshiba blamed the poor results on falls in two main areas: electronic devices, including semiconductors and liquid crystal displays (LCDs); and digital consumer products, including overseas sales of personal computers.

Of the two areas, it was electronic devices that was easily the worst performing. Sales sank 33 percent to 546.7 billion yen and operating losses totaled 93.6 billion yen, accounting for the majority of Toshiba's total operating loss in the six-month period. Sluggish demand and continuing price declines in the DRAM (dynamic random access memory), system LSI (large scale integrated circuit), discrete device and LCD sectors -- almost all of the main sectors that Toshiba operates in -- were down on the back of a heavy fall in demand for consumer electronics, it said.

That fall showed through in Toshiba's digital media sector, which saw a 6.6 percent fall in net sales to 675.5 billion yen, and operating losses of 11.2 billion yen. The company said sales of personal computers fell overseas, demand for DVD (digital versatile disc) players slowed and sales of cellular telephones dropped in the U.S. On the bright side, PC peripheral sales recorded growth, said Toshiba, and demand for color TVs overseas and cellular telephones in Japan also increased.

Looking ahead, Toshiba forecast some of those growth areas would become weak in the second half of this year, the period from October to the end of March. It said it expects "unfavorable overseas markets" during the period on the back of weak demand for IT equipment and continuing global uncertainty in the wake of the September terrorist attacks in the U.S. At home, it expects demand to slow for digital consumer electronics and cellular telephones and the spending in the private sector to remain low.

As a result, Toshiba revised down its full year financial forecast for the second time this year. Consolidated group net sales are now expected to be 5.46 trillion yen, a cut from the previous forecast made in August of 5.75 trillion yen, and the company is now predicting a net loss for the year of 200 billion yen.

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