NEC to lay off 20,000 as economy bites

NEC will close factories and withdraw from some business areas as a result of the poor economic conditions

NEC plans to lay off 20,000 workers, close factories, and withdraw from some business areas as a result of the poor economic conditions, it said Friday.

The NEC group, one of Japan's biggest electrical and electronics groups, will lay off 8,000 staff in Japan and cut 12,000 workers overseas.

[ What technologies can you not afford to cut in the current recession? InfoWorld reveals the top 5 spending priorities you can't compromise on. ]

NEC did not announce details of where the layoffs will hit and which divisions will be closed, but it said it will pursue "substantial reform" at its chipmaking subsidiary NEC Electronics.

NEC had been hoping to make a ¥15 billion ($166 million) net profit in its current financial year, which runs until March, but is now expecting a net loss of ¥290 billion due to poorer than expected business, writedowns on investments, and the restructuring. It expects sales for the full year of ¥4.2 trillion, which if realized would be a 9 percent drop on actual sales in the previous year.

In the last three months of 2008, NEC's fiscal third quarter, the company recorded a loss of ¥131 billion on sales of ¥948 billion. In the same period a year earlier, it lost just ¥5 billion on sales of ¥1.1 trillion.

Results in its information technology and network systems business were mostly in line with expectations, but the cell phone handset and semiconductor units suffered due to a drop in demand. The strong Japanese yen also hurt profits from overseas business.