NEC plans $1.5 billion share sale after losses

TOKYO (Reuters) - NEC Corp (6701.T), Japan's biggest PC maker, plans to sell up to 133.9 billion yen ($1.5 billion) of shares to restore its battered capital base as it scrambles to cut costs and shift focus to cloud computing and lithium-ion batteries.

The capital raising, tipped by sources on Thursday, sent the firm's shares up 10.5 percent. It is NEC's first new share issue in six years.

NEC, which cut its full-year operating profit outlook by 40 percent last week, is hurrying to shore up its capital, which was weakened by losses at semiconductor unit NEC Electronics (6723.T) and sluggish sales of network systems.

Once the world's largest chipmaker, NEC faces large restructuring costs as it hurries to cut 290 billion yen in fixed costs in the year to March, which some analysts say is inadequate, and prepare for its chip unit merger with Renesas Technology (6501.T) (6503.T).

"NEC needs to raise 400 billion yen to 500 billion yen to truly put it on a growth path," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co.

"But that kind of money isn't possible unless Japanese electronics firms band together."

NEC reported a net loss of about $3 billion in the past year to March, driving its shareholder equity ratio to just under 21 percent -- roughly half that of peers Sharp Corp (6753.T) and Panasonic Corp (6752.T).

The company said it would issue 575 million new shares, boosting its shares outstanding by 26 percent.

NEC, which competes with Fujitsu Ltd (6702.T) in telecoms and IT equipment, said it would use some of the funds raised to develop the next generation of communication networks and cloud computing.

Cloud computing delivers computing power as a service over the Web, instead of in computers that customers buy. Users would instead access their data via network computers housed in centralized data centres.

The company, which has a battery joint venture with Nissan Motor Co (7201.T), said it would also use some of the money in lithium-ion battery production.

Lithium-ion batteries for hybrid and electric cars requires long-term investment, and to secure automakers' business, NEC needs to demonstrate it has a strong balance sheet, said one source who asked not to be named as he was not authorized to talk to the media.

Before the news sent its stock up, shares of NEC hit an eight-month low the previous day, having shed 60 percent since a peak in June.

Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities said that NEC's plans to raise funds had been factored in since news of a potential share issue first broke in July.

The shares jumped 26 yen to 274 yen before easing back to 270 yen, a gain of 8.9 percent. It was the biggest percentage gainer on the benchmark Nikkei average .N225.

($1=90.74 Yen)

(Reporting by Mayumi Negishi, Taiga Uranaka and Elaine Lies; Editing by Rodney Joyce and Joseph Radford)