May 11, 2007 / 7:23 AM / 13 years ago

Casio shares crumble on weak forecast, downgrades

TOKYO (Reuters) - Shares of Japanese electronics makers Casio Computer Co. (6952.T) registered their biggest daily percentage loss in more than two decades on Friday after an unexpectedly weak growth forecast by the company triggered a wave of downgrades among brokerage firms.

The Casio Hitachi G’zOne TYPE-V mobile phone in an undated photo courtesy of Casio. Shares of Casio registered their biggest daily percentage loss in more than two decades on Friday after an unexpectedly weak growth forecast by the company triggered a wave of downgrades among brokerage firms. REUTERS/Handout

Casio, the world’s ninth-largest digital camera maker, plunged by the daily limit of 400 yen or 16.5 percent to close at 2,025 yen, becoming the biggest percentage loser on the Tokyo bourse’s first section.

The loss, which shaved $931 million from its market value, was the biggest at least since 1984, according to Reuters data.

Another electronics maker with a bearish earnings outlook, Funai Electric Co. (6839.T), followed Casio lower, also falling by its daily limit.

The heavy sell-off in Casio shares came after the Tokyo-based company on Thursday forecast an operating profit of 53 billion yen ($440 million) for the business year to March 2008, well below a consensus of 62 billion yen in a poll of 16 analysts by Reuters Estimates, citing costs to develop W-CDMA mobile phones.

“Despite the favorable foreign exchange levels, the forecast is not something reassuring and investors are not keen to buy the stock,” said Masaki Iso, head of Japanese equities at Yasuda Asset Management.

Casio now makes CDMA-based phones, but it is planning to launch competing W-CDMA handsets, raising investor worries about its growing exposure to the mobile phone market, which is dominated by global giants such as Nokia NOK1V.HE, Motorola Inc. MOT.N and Samsung Electronics Co. (005930.KS).

Major Japanese mobile phone suppliers including NEC Corp. (6701.T) pioneered the third-generation (3G) mobile phone technology and had high hopes that the advanced devices would help them expand their global presence.

But most of them were forced to withdraw from overseas markets in recent years after failing to compete effectively with the leading manufacturers.

JP Morgan called Casio’s results a “negative surprise” and downgraded Casio’s shares to “neutral” from “overweight”, lowering its price target to 2,425 yen from 2,500 yen.

Other brokerage firms including Mizuho Securities also downgraded Casio.

Shares in TV and DVD recorder maker Funai Electric closed down 1,000 yen, or 10.7 percent, at 8,330 yen. On Thursday it reported an 11 percent drop in annual operating profit to 20.8 billion yen, hit by steep price falls, and forecast weaker-than-expected 5.9 percent growth this year.

Goldman Sachs cut its price target on Funai to 9,600 yen from 10,900 yen to reflect a tougher earnings outlook.

Funai’s liquid crystal display (LCD) TV operations, its major growth driver, needs to be watched carefully, given a halt in 32-inch panel price declines and an increase in procurement costs, Goldman said in a research note.

Unlike larger rival Sharp Corp. (6753.T), Funai buys LCD panels from outside suppliers and assembles them into finished products.

In an effort to focus resources on the key area of LCD TVs, Funai said it has withdrawn from its plasma TV business, a potential blow to Matsushita Electric Industrial Co. (6752.T) and other panel and TV makers in the plasma camp, which is already outnumbered by LCD panel and LCD TV manufacturers.

“Price declines (of plasma TVs) in major markets have been extremely fierce and we see few incentives to maintain our production,” Funai Electric Executive Vice President Yoshio Nakajima told an analysts’ meeting.

Plasma TV sales at Funai, which procured plasma panels from South Korea’s LG Electronics Inc. (066570.KS), came to 9.2 billion yen in the year ended March 31, or 5 percent of its total TV sales.

Funai also said it does not see its digital camera operations as its core unit any more and plans to let the business shrink gradually.

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