Japanese electronics giant NEC Corp. stunned the Japanese markets Thursday, announcing it expected to lose ¥100 billion ($1.3 billion) and lay off 10,000 employees globally next year. The view -- announced during the company's quarterly earnings release conference call -- was a wild swing from previous statements, where the company had set positive 2012 earnings guidance of ¥15 billion.
The number of jobs to be shed, 7,000 of which will be in Japan, was also surprising. While the company had previously laid off 20,000 during the worst of the 2009 financial crisis, the Japanese corporate ethos place higher emphasis on job stability for full-time employees than the workplace culture in other developed countries. The country's official unemployment rate, at 4.5 percent, would be seen as enviable in the United States.
The job cuts announced today are bigger than expected, said Yuichi Ishida, an analyst at Mizuho Investors Securities Co. in Tokyo, was quoted in Bloomberg, noting the aggressiveness of the action will probably yield quick results for the company.
NEC explained many of the cuts would be in its mobile-phone handset segment, which had lost ground due to the huge popularity of Apple Inc.'s (NASDAQ:AAPL) iPhone in Japan. The company said it sees a drop of 25 percent in handset sales for the current year. For the quarter, sales in that company segment dropped 15.2 percent, when compared to the year-ago period.
As macroeconomic concerns about Europe and developing countries increase, we decided to invest limited resources in lesser business segments, President Nobuhiro Endo said in Tokyo.
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Endo said most of the company's 2012 loss would come from a ¥40 billion yen re-structuring charge. He also noted NEC would not be paying a year-end dividend, the first time the company has missed that payment since 2009.
NEC's announcement was made after the Japanese equity markets had ceased activity Thursday. Shares of NEC Corporation closed the day unchanged at ¥168, following choppy trading on the Tokyo Stock Exchange. European depositary shares were down 6.32 percent in the Frankfurt Stock Exchange.