Toshiba to cut 3,900 jobs as big loss looms

Toshiba Corp. yesterday announced 3,900 more job cuts and predicted a record annual loss as the economic downturn continues to take a heavy toll on Japan's high-tech giants.

The recession has slashed demand for semiconductors used in electronic gadgets, hitting the earnings of Toshiba and its rivals.

The company said the price of flash memory chips used in portable music players and mobile telephones was improving because producers have cut production, but at the same time demand remained weak.

The electronics and engineering group estimated its net loss hit 350 billion yen (€2.6 billion) in the financial year that ended last month, even worse than the 280-billion-yen shortfall it had predicted in January.

It would be Toshiba's biggest ever loss.

The company, which owns US nuclear plant maker Westinghouse and is increasingly focusing on the energy industry, had booked 127.4 billion yen in net profit the previous year.

Toshiba said it would reduce capital investment to 250 billion yen in the current fiscal year, down 42 per cent from the previous year.

"While it's not impossible that the overall earnings may return to the black in fiscal year 2009, its semiconductor business remains under severe strain and is unlikely to improve for a while", said Mizuho Investors Securities analyst Yuichi Ishida.

The worse-than-expected performance was also partly caused by a one-time loss of 85 billion yen related to taxes, the company said.

At the same time Toshiba expects a smaller operating loss of 250 billion yen, against 280 billion yen projected earlier, because the yen has weakened and shares have rebounded recently, vice-president Fumio Muraoka said.

Operating losses also declined due to an improvement in the price of flash memory chips, he said.

But "we cannot be optimistic that the business environment is improving," he warned.

Toshiba had already laid off 4,500 temporary workers in the last financial year to March as Japan's recession deepened and exports slumped.

Last month it named a new president - the latest in a series of Japanese boardroom shake-ups prompted by a deepening economic downturn.

The company said it would maintain production cutbacks that have already slashed its NAND flash memory output by 30 per cent.

"The rising prices in flash memory chips are favourable," said Mr Muraoka.

Japan's chip industry is being forced to consolidate to cope with a steep global economic downturn as well as fierce competition from foreign companies that specialise exclusively in chips. Renesas Technology Corp. and NEC Electronics Corp. reportedly are in merger talks to create the country's top chipmaker.