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December 18, 2007 |
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OKI ELECTRIC: Poor Performance Cues R&I to Affirm BB+ Rating Rating and Investment Information, Inc. affirmed Oki Electric Industry Co., Ltd.'s issuer rating at BB+. According to R&I, little has improved in the performance of Oki Electric Industry's mainstay info-telecom system business. This is due to the sluggishness in products for communication carriers despite the recovery in products for financial institutions, which had been stagnant after the special demand caused by the introduction of new bank notes in 2004. Oki made upfront investment for next-generation networks (NGNs) in anticipation of the growing demand; however, this has failed since the communication carriers shifted their investment priority. Furthermore, Oki was late in releasing new products. Consequently, its total sales are expected to decline significantly from the initial expectation, exposing its sales and marketing weaknesses. Delay in cost-cutting measures is also dragging on its performance amid increasing competition. On the other hand, its semiconductor business remains profitable despite sluggish sales of LCD drivers. In the printer business, the earnings base of color printers, which have been posting red, is being established due to a shift in demands for mid- and high range models. Equity capital improved by exercising convertible bonds Oki issued in June 2006, however, it declined again with the huge net loss posted in fiscal 2006 with the reversal of deferred tax assets. Net debt has not declined in real terms, and its financials remain vulnerable. Although underperformance risks have receded than before, unless Oki regains product competitiveness and sales primarily for communication carriers, the weakness in the overall profitability and cash flow will persist and its financial base may further deteriorate. Consequently, R&I has remained the Issuer Rating at BB+, but changed the Rating Outlook to Negative. R&I will pay attention to Oki's medium management plan, which will end in fiscal 2010. Oki Electric Industry Co., Ltd. -- http://www.oki.com/jp/ -- is a Japan-based manufacturing company. The Company operates mainly in three business segments. The Info-Telecom Systems segment is engaged in the manufacture and sale of finance systems, automated equipment systems, enterprise resource planning (ERP) systems, Internet protocol (IP) telephone systems and computer telephony integration (CTI) systems, as well as the building of systems, the provision of solutions and services including construction and maintenance. The Semiconductor segment manufactures and sells system, logic and memory large- scale integrations (LSIs), optical modules and optical devices, among others. The Printer segment offers color non-impact printers (NIPs), monochrome NIPs and multifunctional products (MFPs), among others. The Company is also engaged in the delivery and management of products, in addition to the manufacturing and sale of other machinery products. |
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