Sharp Q3 in red, sees first ever annual loss

TOKYO Fri Feb 6, 2009 5:12pm EST

A worker prepares a display of Sharp flat panel televisions for the 2009 International Consumer Electronics Show (CES) at the Las Vegas Convention Center in Las Vegas, Nevada, January 7, 2009. REUTERS/Steve Marcus

A worker prepares a display of Sharp flat panel televisions for the 2009 International Consumer Electronics Show (CES) at the Las Vegas Convention Center in Las Vegas, Nevada, January 7, 2009.

Credit: Reuters/Steve Marcus

TOKYO (Reuters) - Japanese electronics maker Sharp Corp swung to a quarterly loss, battered by steep price falls for flat panel TVs and a firmer yen, and warned on Friday it would post its first ever annual operating loss.

Sharp cut its annual dividend outlook by a quarter to 21 yen per share and said it planned to cut 1,500 non-regular workers and reduce costs by 200 billion yen ($2.20 billion).

The maker of Aquos brand LCD TVs became the latest technology firm to fall victim to a deepening global recession, after Sony Corp, Panasonic Corp and Hitachi Ltd all warned of deep losses.

Sharp, the world's No.3 LCD TV maker, also competes with South Korea's Samsung Electronics Co Ltd and LG Electronics Inc, which are benefiting from a softer won.

It slashed its outlook and warned of an operating loss of 30 billion yen for the year to March 31 against its previous forecast for a 130 billion yen profit and a consensus of a 45.4 billion yen profit from 21 analysts polled by Reuters Estimates.

It reported a 183.69 billion yen profit the previous year.

"The real impact of the weak market and the strong currency was felt only for the last four months. So because of that four months Sharp's guidance has gone from plus 130 to minus 30, a swing of 160 billion yen," said a Tokyo-based electronics analyst who declined to be named.

"These losses are tiny compared to what it could suffer next year."

OVERSEAS ALLIANCES

In a bid claw its way back to profitability in the year starting on April 1 despite tough conditions, Sharp plans to fortify its sales network and seek alliances with overseas business partners, as well as cutting jobs and reducing costs.

In one example of such cross-border business pacts, Sharp said in November it and Italy's largest power company Enel planned to spend about 100 billion yen to set up solar power generating plants in Italy. Sharp is the world's No.2 solar cell maker behind Germany's Q-Cells.

Sharp's earnings were also hit by valuation losses on its securities holdings and a $120 million fine for participating in a price-fixing cartel for LCD panels.

It holds a 14.3 percent stake in struggling home electronics maker Pioneer Corp, whose shares dived 76 percent in October-December.

Sharp cut its LCD TV sales forecast for the current business year by 9.1 percent to 10 million units, while lowering its mobile phone sales target by 8.5 percent to 10.7 million units, underscoring anemic demand in the overall electronics sector.

Taiwanese smartphone maker HTC on Friday forecast a weak January-March quarter as customers sell down inventory, but said momentum would pick up by April-June on new products.

It expects quarterly revenue to be about T$33 billion ($980 million) in the current quarter, slightly higher than T$32.7 billion a year before, and its operating profit margin to fall to about 15 percent from around 20 percent a year earlier, as more players pile into the smartphone sector.

Sharp's operating loss was 15.86 billion yen in October-December against a 51.99 billion yen profit a year earlier. Sales fell about 20 percent to 735 billion yen.

The company is building a cost-efficient display panel plant in western Japan to fortify its LCD TV operations.

The new factory, due to come onstream by March 2010, will be the world's first using so-called 10th-generation glass substrates, which can yield more panels than earlier versions, helping Sharp offer attractively priced LCD TVs.

"That is going to be an overwhelmingly cost-competitive plant. It is crucial for us to start up the plant as quickly as possible to improve our cost structure," Sharp Executive Vice President Toshishige Hamano told a news conference in Osaka.

Shares in Sharp closed up 4.5 percent at 742 yen, outperforming the Tokyo market's electrical machinery index, which gained 1.8 percent.

($1=90.83 Yen)

(Additional reporting by Yumi Horie, Kelvin Soh in Taipei; Editing by Michael Watson)

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