Toshiba tumbles to Q1 loss, outlook hazy

TOKYO Tue Jul 29, 2008 8:38am EDT

TOKYO (Reuters) - Japanese electronics maker Toshiba (6502.T) made its first quarterly loss in three years as memory chip prices fell and sales of chips used by Sony (6758.T) slowed, but it kept its year outlook above market expectations.

Toshiba Corp, the world's No. 2 maker of NAND flash memory chips behind South Korea's Samsung Electronics (005930.KS), said on Tuesday it aimed to hit its full-year operating profit target of 290 billion yen ($2.70 billion) by pushing its power systems, PCs, elevators, and other products in the following quarters.

The consensus estimate from 15 analysts polled by Reuters Estimates prior to the earnings results is for a full-year figure of 274 billion yen.

"Toshiba's full-year targets are too ambitious," said an analyst at a Japanese asset management firm who asked not to be named because he was not authorized to speak to the media. "Its chips will probably post a loss in April-September, and I am betting it's going to have to revise down its outlook -- maybe in September or October."

Toshiba, which also makes nuclear reactors and LCD TVs, was hit by high start-up costs on new system chip lines it bought from Sony and sluggish sales of chips used to control the PlayStation 3 game console, flat TVs and digital cameras.

Those hits came just as Toshiba battles chronic price falls in NAND memory -- used to store data in digital music players, digital cameras and mobile phones -- that have taken its share price down 29 percent since a peak in early June.

"It's true that our forecast -- as a target -- has become harder to reach," Corporate Executive Vice President Fumio Muraoka said at a news conference.

But Muraoka said he expected NAND price falls to ease to a 15 percent decline in July-September from the previous quarter, against a 20 percent quarterly fall in April-June.

For April-June, Toshiba, which last week announced plans to sell off its real estate unit, said it slipped to an operating loss of 24.18 billion yen ($225 million) against an operating profit of 21.18 billion in the same period the previous year.

It posted a quarterly net loss of 11.61 billion yen, reversing from a 20.63 billion profit. Sales nudged down 2.8 percent from the same period a year earlier to 1.62 trillion yen.

BREAD AND BUTTER

Toshiba shouldered a 30.2 billion yen quarterly loss on its bread-and-butter semiconductor operations. That business earned 23.5 billion yen in the same quarter last year, more than the whole electronics group put together.

System chips made up three-quarters of the loss.

Toshiba said it aimed to make a profit of more than 30 billion yen on its semiconductors in July-September to cancel out the first quarter microchip loss.

The semiconductor losses are putting pressure on plans to nearly double NAND chip production capacity at a plant run with partner SanDisk Corp (SNDK.O) to 210,000 wafers per month by March 2010 from a planned 110,000 wafers per month this December. In 2010 Toshiba also plans to build two more factories.

SanDisk has said it was delaying the first expansion until April 2009 and that it was pushing out a decision to invest in one of the two new plants until market conditions improve.

Capital spending plans at Toshiba, which still targets a 90 billion yen profit in its chip business for the full year, remain unchanged for now, Muraoka said.

"Things change rapidly in this market," said Muraoka, adding that price falls could slow. "To tell the truth, I can't read how supply and demand is going to look."

Prior to the announcement, shares in Toshiba closed down 1.5 percent at 719 yen, while Tokyo bourse's electrical machinery index fell 2.1 percent.

(Reporting by Mayumi Negishi; Editing by Chris Gallagher/Andy Bruce)

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