Electronics giant Toshiba Corp. is expected to report its first profit fall in three years i n the fiscal year ended in March, hit hard by unabated declines in semiconductor chip prices and withdrawal costs related to its HD-DVD business.

Analysts polled by Thomson Financial have forecast an operating profit of 230 billion ($2.2 billion) for the company, in line with the company's revised forecast.

The company is due to scheduled to release its results on Apr. 25.

The maker of Dynabook and Qosmio notebook PCs, NAND flash memory chips, home electronics products and power generators slashed in March its operating profit forecast to that level from 290 billion yen previously.

When the company issued the profit-warning, it also reduced its operating profit forecast for its semiconductor division to 85 billion yen from 150 billion yen.

"We now expect the selling price of NAND flash memory chips to fall by 50 percent in the current fiscal year from a year earlier, whereas we had earlier projected a 40 percent drop," Toshiba director Fumio Muraoka told a news conference in March.

"The selling price of NAND flash memory chips is likely to continue to fall by 40-50 percent beyond the current fiscal year," Muraoka said.

The market price for an 8-gigabit NAND-type flash memory chip has continued to drop after hitting a high of 9 dollars in August 2007.

Flash memory chips are widely used in digital music players such as iPods, as well as in other digital consumer products.

Toshiba is also expecting to incur an operating loss of 65 billion yen in its HD-DVD business, more than the loss of 50 billion yen it forecast previously after it decided to withdraw from the business after its own format lost out to Sony Corp.'s rival Blu-ray format.

Including losses that the company will incur in this fiscal year, accumulated losses from the HD-DVD business will amount to 160 billion yen.

"The withdrawal itself was positive, because this division could have continued to incur a loss of around 50 billion yen each year," Nomura Securities analyst Masaya Yamasaki said in a note to clients.

Analysts expect some turnaround in profit at Toshiba in the current fiscal year ending March 2009, but their short-term view on the company is now divided.

JP Morgan Securities analyst Kazuharu Izumi said in a note to clients that the operating profit of Toshiba's NAND flash memory business appeared to have broke even in the fourth quarter to March due to the selling price decline.

But he said the NAND flash memory business is expected to start recovering after June this year, which combined with a turnaround in the HD-DVD business would contribute to a growth in profit.

He expects Toshiba to book an operating profit of 306.3 billion yen in the year to March 2009.

Izumi, also citing the growth potential of its nuclear power business and prospects for a bigger slice of the global NAND flash memory chip market, has an "overweight" rating on Toshiba.

But Nomura's Yamasaki has assigned a "3" rating to Toshiba, which means that its share price is expected to fluctuate less than 5 percent in either direction against the expected movement of the Topix index.

"Although the company's operating profit is expected to recover to 260 billion yen, the rebound is due mostly to a smaller loss at the HD-DVD division," Yamasaki said.

"On the other hand, the profitability of other divisions, its semiconductor chip division in particular, will continue to drop," he said.

By: DocMemory
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