NEC to spin off its ISP unit

NEC Corp. said it will spin off its Internet service provider unit, Biglobe, as a separate company it seeks to improve profitability, according to an Associated Press report.

NEC spokeswoman Akiko Shikimori reportedly said that the operations will be spun off as a wholly owned subsidiary on July 1, but over the course of the month, shares worth a total of Rs.461.53 crore ($104.3 million) will be sold to Sumitomo Corp., Daiwa Securities Group Inc., and other investors.

After the spin-off, NEC will hold a 78 per cent stake in the Internet service, while Sumitomo will have a seven per cent stake and Daiwa Securities will have five per cent, the report said. Sumitomo Mitsui Banking Corp. will have another five per cent stake, and Dentsu Inc. and Hakuhodo Inc. will each hold 2.5 per cent.

Proceeds from the sales of the new shares will be used to boost the company's capital to Rs.393.38 crore ($88.9 million) from initial capital of Rs.151.34 crore ($34.2 million), according to Shikimori.

Shikimori declined to provide the number of Internet service subscribers, but according to press reports, Biglobe is Japan's fourth-biggest with about 44 lakh (4.4 million) subscribers, behind Nifty Corp., Softbank BB Corp. and NTT Communications Corp.

NEC continues to restructure amidst falling earnings in its chip and mobile phone operations. After posting a Rs.101.78 crore ($23 million) net loss in its most recent quarter, the company said it would merge its semiconductor compound business NEC Compound Semiconductor Devices Ltd back into the main company. The company also announced in February that it would close its Ballivor, Ireland IC assembly and test plant and transfer the workload to lower-wage operations in Asia.

More bad news for NEC came out last week, when the company announced it was internally probing allegations an employee faked business deals and inflated sales by Rs.351.79 crore ($79.5 million) in operating profits over five years.

- Spencer Chin
EE Times