Friday, February 03, 2012

Japan's Hitachi to reorganize business structure

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Hitachi Ltd said on Friday it would reorganize its operational structure in April by setting up five new groups as the Japanese conglomerate continues to overhaul its sprawling operations to boost profitability.

The nation's biggest industrial electronics company has been revamping its empire of some 900 firms after it reported one of the biggest losses in Japanese corporate history only three years ago under the weight of a high-cost structure and lack of operational focus.

Hitachi bounced back from those losses and has been a rare bright spot among its peers during the current earnings season, with its shares jumping more than 7 percent on Friday after it maintained its full-year profit outlook, in contrast to other electronics makers that have forecast massive annual losses.

The firm, whose products range from excavators to microwave ovens to thermal power plants, is looking to accelerate growth in its social infrastructure business while shedding unprofitable businesses.

Hitachi, which employs about 360,000 people globally, announced it would reorganize its business areas into five groups: infrastructure, information technology, power systems, construction machinery and high-functional materials.

"In an environment with a strong yen and a lot of competition from other Asian companies, restructuring is important and you can see that all the techs are seriously taking this on now," said Hajime Nakajima, a sales trader at Cosmo Securities.

Several major Japanese manufacturers are in the midst of shake-ups, including Panasonic Corp, which is in the process of shedding 17,000 jobs by the end of next month, and Sony Corp, which announced a new chief executive on Thursday.

For the infrastructure business, Hitachi will bring together its rail systems, urban planning and defense systems divisions under the new group.

Hitachi will also set up a new management position in Beijing to oversee businesses in China and Asia as it seeks to continue expanding in China, which accounts for 13 percent of its sales, and boost its revenue from emerging markets.

The firm has been weighed down for years by high cost structures, which peaked with a 787 billion yen ($10.33 billion)net loss in its business year that ended in March 2009.

But the firm has been slowing shedding unprofitable businesses, including offloading its hard drive operations to Western Digital Corp in a $4.3 billion deal last March.

On Thursday, Hitachi, grappling with a strong yen, a global economic downturn and damages from natural disasters, reported a 21 percent fall in quarterly operating profit, but kept its full-year outlook unchanged for a 400 billion yen ($5.25 billion) profit.

That stands in contrast to rival Toshiba Corp, which cut its annual operating profit forecast by a third on Tuesday, after booking a 72 percent drop in quarterly operating profit.

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