Pioneer Corp. announced that it expected to take over NEC Corp.'s plasma display panel (PDP) operations in October with an earnings forecast revision to follow after the transfer.
The two companies announced in February they had agreed to transfer NEC's PDP operations to Pioneer for about 40 billion yen (approx. U.S. $363 million), but the two sides have not yet sealed a final pact.
"This has taken a lot longer than we had expected, but we are on the verge of reaching a final agreement," Pioneer President Kaneo Ito told a briefing, targeting July for completion of the deal.
The purchase of NEC's PDP operations is expected almost to double Pioneer's plasma panel output, but the company said it would have to revise its revenues and profit forecasts for this business year to factor in earnings from the new business.
In the current business year to March 31, Pioneer forecasts a group operating profit of 50 billion yen on sales of 800 billion yen. Analysts have said NEC's PDP business is in the red.
Pioneer also said it expected a fourth PDP factory to begin output in September, earlier than a targeted January start.
The new plant, located in Yamanashi prefecture near Tokyo, and NEC's facilities would raise Pioneer's annual output capacity to about 1.1 million panels in 2005 from 250,000 panels now, the company said.
Aggressive expansion plans in recent months from market leader Matsushita Electric Industrial Co. Ltd. and a joint venture between Fujitsu Ltd. and Hitachi Ltd. have fueled concerns about a PDP supply glut. (Reuters)
Ito said the market was growing fast enough that a supply glut was not a concern, adding that the NEC purchase and the new plant did not signal an end to Pioneer's expansion plans.
"First we want to take care of the NEC project before we think about the next step, but I don't see production capacity topping out at 1.1 million panels," Ito said.
Pioneer said it aimed to use its PDP, car navigation and DVD recorder drive business to propel sales to above one trillion yen in the coming business year starting April 1, 2005. The company has targeted an operating profit of 75 billion yen in 2005/06.
Asked by reporters how confident he felt about the profit and revenue forecasts, Ito joked: "I haven't misled you very often in the past, have I?" Shares of Pioneer closed down 1.11 percent at 2,670 yen versus a 0.31 percent fall in the Nikkei 225 average
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