Bloomberg News

Renesas Shares Climb on Report It May Cut Jobs, Add Cash

May 22, 2012

Renesas Electronics Corp. (6723), the world’s biggest automotive microcontroller maker, rose the most in three months in Tokyo trading after the Yomiuri newspaper said it plans to raise capital and cut about 6,000 jobs.

Renesas jumped 7.4 percent, the the biggest gain since Feb. 8, to 289 yen at the close on the Tokyo Stock Exchange. The benchmark Nikkei 225 Stock Average added 1.1 percent.

The company will probably ask its majority owners Hitachi Ltd. (6501), Mitsubishi Electric Corp. (6503) and NEC Corp. (6701) to buy shares to raise 50 billion yen ($630 million), the newspaper reported today, without saying where it got the information. Renesas isn’t the source of the report and nothing has been decided about cutting jobs or raising capital, the Kawasaki city, Japan- based company said in a statement to the stock exchange.

“The report eased some concerns,” Mitsuo Shimizu, an analyst at Iwai Cosmo Securities Co. in Tokyo, said by phone. “The shareholders must do something to help Renesas turn profitable.”

The chipmaker has lost about 31 percent of its market value since May 9, when the company said it couldn’t provide an earnings outlook because of uncertainty in the chip market. Renesas, 91 percent owned by NEC, Hitachi and Mitsubishi Electric, posted a net loss of 62.6 billion yen in the year ended March 31.

Demand for chips used in consumer electronics and personal computers has slumped, Renesas said May 9. Sharp Corp., Sony (6758) Corp., Panasonic Corp. (6752), Japan’s three biggest television makers, posted a combined 1.6 trillion yen loss last fiscal year, as prices declined for televisions and a stronger yen reduced overseas earnings and competitiveness.

‘Some Kind of Action’

Renesas may cut about 15 percent of its workforce through buyouts and attrition, Yomiuri said. The company may consolidate or sell some of its 19 factories in Japan, according to the report.

The major shareholders of Renesas may consider taking “some kind of action” to support the chipmaker if asked, Kenichiro Yamanishi, president of Tokyo-based Mitsubishi Electric, said yesterday. The companies haven’t received a request from Renesas, he said.

Hitachi hasn’t received a request from Renesas and nothing has been decided on support, spokesman Hirotaka Ohno said by telephone. NEC has no plan to make additional investment in Renesas, spokesman Takehiko Kato said by phone. Mitsubishi Electric declined to comment beyond its president’s remarks.

NEC owns about 3 percent of Renesas after transferring most of its 35 percent stake in the chipmaker to its pension trust.

The additional investment “may not be enough” because of costs to pay employees to leave, Yuichi Ishida, an analyst at Mizuho Investors Securities Co. in Tokyo, said by telephone.

Elpida

Renesas yesterday fell to the lowest on record since its predecessor went public in 2003. The company was formed in 2010 after the merger of money-losing chipmakers Renesas Technology Corp., a venture between Hitachi and Mitsubishi Electric, and NEC Electronics Corp.

Elpida Memory Inc., which shares the same origin as Renesas, filed for bankruptcy in February after posting losses for five straight quarters because of falling prices of the main memory used in personal computers. The Tokyo-based company was formed in 1999 after merging Hitachi and NEC’s dynamic random- access memory business. Mitsubishi Electric later separated its DRAM unit and combined it with Elpida.

Renesas makes microcontrollers, a type of semiconductor that acts as a mini-computer dedicated to specific tasks such as triggering air bags in cars and controlling a DVD player. The chips are used in products ranging from automobiles to consumer electronics. The company supplies customers including Apple Inc. (AAPL:US), Sony and Nintendo Co., according to data compiled by Bloomberg.

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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