Hitachi takes losses, chops jobs
Conglomerate hit on 910 fronts
Japanese conglomerate Hitachi reported its financial results for its 2008 fiscal third quarter today and swapped some execs in its Americas unit and disk array and disk drive businesses.
Because Hitachi's shares are traded on Wall Street, the company reports its financials in both Japanese yen and U.S. dollars. Sales across the company fell by 16.5 per cent to 2.71 trillion yen ($24.8bn), and the conglomerate posted a 14.5bn yen operating loss ($160m). That translates to a net loss of 371.1bn yen ($4.1bn). In the year ago quarter, Hitachi had barely eked out some earnings, and now, it has swung heavily into the red.
Sales in Hitachi's Information and Telecommunication Systems group fell by four per cent in the third fiscal quarter, to 600.9bn yen ($6.6bn). But operating income skyrocketed by 169 per cent to 38.3bn yen ($422m). The company said that sales for software dropped and services showed "firm growth" but the combined units were flat year-on-year. It added that hardware sales declined, thanks in large part to unfavorable currency exchange rates for storage and telecom product sales. Hitachi's disk drive business helped boost profits in this unit (profits have been growing for four quarters) as did telecom products.
Hitachi's Electronic Devices group, which makes semiconductor manufacturing equipment as well as displays, took it on the chin in fiscal Q3, with sales down 13 per cent to 258.2bn yen ($2.84bn). Operating income fell by 60 per cent to 4bn yen ($45m). Display sales were flat, so the declines were mainly due to semiconductor weakness.
Hitachi's Power Systems group, which has no bearing on IT, is no less affected by the economic downturn than its IT group. It posted a decline of 15 per cent to 702.5bn yen ($7.72bn) and had an operating loss of 25.4bn yen ($280m). Hitachi's Digital Media and Consumer Products group sold 309.3bn yen worth of products ($3.4bn), down 25 per cent.
The High Functional Materials and Components group (which has some sales in cables and metals used in IT) saw sales drop by 22 per cent to 376.5bn yen ($4.13bn). The Financial Services group posted sales of 84.3bn yen, down 21 per cent ($927m). And the Logistics, Services, and Others group accounted for 246.5bn yen in sales ($2.71bn), down 26 per cent.
For the fiscal year ending March 31, Hitachi is projecting just a tad over 10 trillion yen in sales, down 11 per cent ($101.2bn), and operating income of a miniscule 40 billion yen, down 88 per cent ($404m). The company is projecting a net loss for the year in the order of 700bn yen ($7.07bn).
"The overall business environment going forward is filled with increasing uncertainty, with financial markets remaining volatile in the wake of the collapse of Lehman Brothers and as economic conditions worsen in the U.S. and other industrialized nations," Hitachi said in a statement. "The economic outlook also remains unpredictable against a backdrop of concerns about slowing economic growth in China and emerging economies, the yen's run-up and falling share prices."
In the wake of the financial report for Q3, Hitachi announced that it has promoted Naoya Takahashi, an executive VP in its Information and Telecommunications group to be the executive in charge of its information infrastructure (meaning servers mostly) business and chief technology officer for the Hitachi groups. His predecessors in those two jobs, Junzo Kawakami and Manabu Shinomoto, have resigned those positions, with the former being an adviser now and the latter being appointed as president and CEO of Hitachi Kokusai Electric.
Masao Hisada, who headed up Hitachi's corporate marketing, is now the CEO in charge of Hitachi America, the unit of the company that peddles products in North America. Steven Milligan, a long-time Western Digital and Dell executive who came to Hitachi in the wake of the Japanese giant's acquisition of Big Blue's disk business, was named president of that Hitachi Global Storage Technologies disk making subsidiary.
His former boss, Hiroaki Nakanishi, remains chairman of Hitachi GST but is heading up the corporate ladder to work on global strategy. Hitachi Data Systems, yet another storage subsidiary - but this one OEMing and directly selling midrange and high-end disk arrays - added a bunch of new marketing executives to help it better peddle its products.
Late last week, as Hitachi was going over its numbers for the last time before taking them public this week, the conglomerate said that it would have to cut expenses by 200bn yen by the end of fiscal 2009 and that it would do so by exiting unprofitable businesses and shutting down product lines that had "no hope for earnings improvement." The cost cutting also includes consolidating factories and cutting about 8,000 jobs in its automotive and consumer business groups. The company is also hoping to shave 300bn yen in procurement costs in fiscal 2009 and to increase efficiencies by dropping the number of subsidiaries from 910 to fewer than 800. ®