Hitachi losses grow, hope on hard drive turnaround

Hitachi HD TVs are displayed at an electric home appliances shop in Tokyo May 16, 2007. (REUTERS/Kim Kyung-Hoon)

TOKYO (Reuters) - Japan's Hitachi Ltd tumbled to a quarterly loss on slow TV sales and a tax writedown but said on Tuesday it would rebound to a profit this year on a recovery in hard drives, pushing its shares up 6 percent.

Japan's biggest industrial electronics company aims to outrun a stronger yen and price falls this year by focusing resources on high-capacity hard drives and cost cuts, as demand for its power systems plateaus.

For the financial year to next March, Hitachi expects a net profit of 40 billion yen ($386 million). That would compare with a net loss of 58.13 billion yen the previous year, but misses the mean estimate of a 64.5 billion yen profit from 10 analysts surveyed by Reuters.

For a graphic on Hitachi's results, click: http://int1.fp.sandpiper.net/reuters/editorial/images/20080513/J PHTCHI1.gif

On an operating basis, Hitachi said it expects profit to rise 10 percent to 380 billion yen this year.

After the announcement, shares of Hitachi held earlier gains and closed up 5.9 percent at 719 yen, against a 2.1 percent rise in Tokyo's electric machinery subindex IELEC.

"A 10 percent rise -- if they can achieve this, it's not bad at all. There was some talk that they'd be much more conservative," said Tomomi Yamashita, a fund manager at Shinkin Asset Management Co.

FINGERS CROSSED

Hitachi, the world's No.3 maker of hard disk drives after Seagate Technology and Western Digital Corp, posted its second straight quarterly profit on hard drives in January-March.

Hard drive makers have been helped by booming demand for PC storage, but that is seen unlikely to last.

Steeper-than-expected price cuts caused the quarterly outlook at both Seagate and Western Digital to miss estimates.

"We were able to put products onto market in a timely way, while prices are still strong for cutting-edge products," Hitachi Senior Vice President Toyoaki Nakamura told a news conference. "We hope to stay somehow in the black in April-June as well."

Hitachi swallowed massive appraisal losses and a tax writedown in January-March in a bid to spring back to profit. causing it to fall to a quarterly net loss of 57.6 billion yen, compared with a 44 billion yen profit a year earlier.

But the firm, whose many subsidiaries have sparked interest among bankers and investors searching for a deal in Japan, said losses would continue in its digital media segment, weighed down by its flat TV operations.

"Price competition will intensify and our struggles in North America will continue," Nakamura said. "While internally we aim for a return to profitability in flat TVs in October-March, we are including all risks in our outlook."

Hitachi, the world's No.4 maker of plasma TVs, faces a tough year as bigger rivals such as Panasonic maker Matsushita Electric Industrial Co Ltd churn out cheaper products.

It said it expects to ship 900,000 plasma TVs in the year to March 2009, up from 850,000 units last year, withdrawing from some costly distribution channels in the United States and Europe, and expanding instead in China and Japan.

Turning around sluggish operations is imperative for Hitachi, which faces a cyclical lull in demand for equipment from utilities, which helped Hitachi in the year ended March 31.

Profit in its power systems and industrial systems segment last business year jumped four-fold to 138.4 billion yen. Profit in that segment is likely to grow just 1 percent this year, Hitachi said.

Shares of Hitachi, which has its roots in 1910 as a repair factory for mining equipment, lost 35 percent last business year, while those of closest rival Toshiba Corp fell 15 percent and the electric machinery subindex fell 28 percent.

($1=103.76 Yen)

(Additional reporting by Elaine Lies; Editing by Michael Watson)