Restructuring puts Hitachi back in black

Sayonara fiscal 2009, growth in 2010

Japanese conglomerate Hitachi, which has a fairly substantial IT and electronics business, is saying sayonara today to the economic meltdown as it moves back into the black at the close of its fiscal 2009 year.

The latest quarterly figures show restructuring maneuvers at the company last year more than paid off.

A recovery in consumer electronics and automotive systems helped buoy up Hitachi, with both units starting to stand back up last fall after stumbling in mid-2008 when the global economy went on the skids. For its fiscal fourth quarter ended in March, Hitachi's revenues came in at ¥2,686bn, up 10.6 per cent from the year-ago quarter ($28.9bn). Hitachi's operating profit swung into the black to the tune of ¥160.6bn, much better than the ¥55.4bn operating loss a year ago. Net income for the March quarter was a much skinnier ¥4.38bn, but it sure beat the ¥430.4bn loss a year ago.

For the full fiscal 2009 year ended in March, Hitachi booked ¥8,968bn in revenues across its many operating groups ($96.4bn at the exchange rates used in the financials), a decline of 10 per cent compared to fiscal 2008 (which wasn't too great, either).

Operating income, bolstered by cost cutting, was up 59 per cent, to ¥202.1bn ($2.12bn), and net losses for the year only stacked up to ¥84.3bn ($907m). Hitachi said that stimulus spending in the United States and Europe, as well as a Chinese economy that only missed a step instead of falling down, helped Hitachi get back on track quicker than it had anticipated last year when it was making job cuts and restructuring.

Last May, Hitachi posted the largest loss in the history of manufacturing in Japan, ¥787.3bn ($8.03bn).

Within the conglomerate, Hitachi's Information & Telecommunications Systems group had sales of ¥1,705.5bn ($18.3bn), down 12 per cent, and an operating income of ¥94.5bn ($1bn), down 32 per cent. Hitachi said that currency exchange rates impacted storage revenues and demand was off across all IT systems.

Hardware sales in this group accounted for ¥565.8bn, down 14.1 per cent, with storage sales of ¥194.4bn (down 10.3 per cent), servers comprising ¥57bn (down 21.4 per cent), and PCs at ¥37bn. Telecommunications gear made up ¥141.4bn in sales and other hardware accounted for ¥144.1bn.

Software and services made up ¥1.139bn in revenues in fiscal 2009 within the Information & Telecommunications Systems group, down 11.4 per cent. All told, software and services posted an operating income of ¥77.1bn, down 27.7 per cent, and hardware operating income was down 45.4 per cent, to ¥17.3.

The Components & Devices group, which is where Hitachi's disk drive business is parked, had a 23 per cent decline, to ¥754.8bn for the year ($8.1bn), and operating income shrank by 80 per cent to ¥1.1bn (a mere $12m). This unit not only saw sluggish demand for disks in fiscal 2009, but also for screens for mobile phones and game consoles.

Hitachi GST, the disk drive unit of the conglomerate, reports its numbers on a calendar basis, and in calendar 2009 the division shipped 91.4 million disk drives and brought in ¥1,026bn with an operating loss of ¥5.7bn.

Looking ahead to fiscal 2010, Hitachi is projecting revenues of ¥9,200 ($108.2bn), up three per cent, and that operating income across all its units will rise by 68 per cent, to ¥340bn ($4bn). As best Hitachi can project, net income this year should hit ¥130bn ($1.53bn).

The company is projecting that its Information & Telecommunications Systems biz will see a meager 1.4 per cent growth this year, to ¥1,730bn, with maybe a ¥100bn operating income. Hardware sales are expected to be ¥570bn (with no further granularity on what products would do what sales), and software and services are expected to account for ¥1,160. That's pretty meager growth.

Hitachi expects that its Components & Devices group will see a 15.3 per cent bounce back to ¥870bn in sales in fiscal 2010, with operating income of ¥54bn. However, sales in this part of the company are still well short of the ¥978.2bn level set in fiscal 2008, when Hitachi's disk drive business was roaring in the face of global recession. ®

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