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Hitachi Expects More Losses

Posted by: Kenji Hall on May 13, 2009

Hitachi is one troubled company. The Japanese tech conglomerate’s shares dropped 11% today—its biggest decline since early February, according to financial wire reports—after it said yesterday that it now expects its annual earnings for the current year to be dismal. (In contrast, the benchmark Nikkei stock index edged up 0.5% on the day.)

Hitachi’s latest forecast: a $2.8 billion net loss in the fiscal year through March 2010. It won’t be the tech company’s biggest loss; the previous year’s result was the worst in the company’s 99-year history and is one of the biggest losses reported by a Japanese manufacturer. (This year’s operating profit is expected to drop 76% and sales by 11%, with gains will be wiped out by restructuring costs and write-offs.)

But it will be the company’s fifth straight net loss for the year. And this comes with 10 months remaining in the fiscal year (and scant signs of a global economic comeback). Things have got to be pretty bad for the company to be predicting such huge losses this early in the year.

Hitachi was founded as an electrical repair shop but it has since become an all-purpose tech house. Its 390,000 employees design and produce everything from hard-disk drives, flat liquid-crystal-display panels for TVs and air conditioners to finger-vein authentication security systems and nuclear reactors. And that’s its problem, analysts say. While the company has loads of cutting-edge technologies, it has far too many divisions—and too few that are making money. It’s a company that lacks focus and has lost its way, clinging to legacy units as its more nimble rivals shift to outsourcing and dump money-losing businesses.

Last month, the company’s Chairman and CEO Takashi Kawamura told journalists that he’s reinventing the company and reorganizing to make eco-friendly technologies and other growth areas a priority. He’s also cutting 7,000 jobs, an unpalatable choice in a country where companies try to avoid layoffs at all costs. But even after the big write-downs and the layoffs, it’s hard to imagine that Kawamura will suddenly turn things around for this struggling tech behemoth.

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