Company should act now, say analysts.
The hard disk drive manufacturing division of Japanese electronics giant, Hitachi, has reported an operating loss of more than [$177m] in its most recent quarter, according to analysts. Losses are expected to continue this year, even as Hitachi examines cost cutting options.
The shortfall at Hitachi Global Storage Technologies (Hitachi GST) was $26m worse than the unit's loss in the first three months of 2007, but was still broadly line with earlier estimates from the company and analysts.
Market watchers believe that the pain is by no means over for Hitachi GST, the former IBM hard disk drive division that Hitachi purchased from the US computer firm in 2003.
Further losses of $50m to $60m in the next quarter are described as “inevitable” by Tokyo-based industry analyst Masaya Yamasaki, of the Nomura Financial and Economic Research Center.
“Hitachi [GST] has been mulling additional measures to consolidate bases and concentrate development resources with the aim of turning a profit in [the fourth quarter of 2007],” wrote Yamasaki in a recent investment report. “While this target seems feasible in our opinion, we think Hitachi needs to take additional measures to ensure stable profitability.”
Despite the losses at the storage division and weaker than expected shipments at the display panel division, Hitachi reported overall operating profits of [Yen 24.5bn]. However, a weaker yen contributed half of this, analysts say.
“In the HDD, flat-panel TV and other businesses where there are currently issues with profitability, Hitachi is implementing wide-ranging countermeasures to improve its development capabilities, cost competitiveness, and marketing activities and other areas of its operations,” Hitachi announced in a statement.
The company should act quickly to address challenges in displays and storage, says Yamasaki: “We think an urgent response is needed because prices fall and technology changes quickly for these products.”