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September 26, 2007 5:25 pm

NEC to be suspended by Nasdaq

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NEC will be suspended from Nasdaq on Thursday after Japan’s leading PC maker failed to submit an annual report to the US Securities and Exchange Commission.

Nasdaq will halt trade in NEC’s American Depositary Receipts (ADRs), pending a full delisting, after the PC maker missed a twice-extended deadline to file an auditor-approved earnings report for the year to the end of March 2006.

The move is a blow for the corporate prestige of NEC, which has raised eyebrows over its accounting issues.

Last year, the electronics conglomerate restated earnings three times after it discovered an employee at a subsidiary had inflated sales figures. It later switched to Japanese accounting standards from US GAAP.

The company’s shares have shed 20 per cent since it switched to Japanese GAAP in October last year.

Standard & Poor’s, the ratings agency, said it would not change its rating on NEC in spite of its delisting.

NEC’s ADRs account for 2.9 per cent of the company’s total issued shares, so it is unlikely to have a big financial impact.

NEC missed a deadline this week to submit a report with the analysis of software, maintenance and service sales required under US accounting standards.

The restatement of results for the fiscal year to March 2006 was needed for the company to comply with tighter accounting rules on revenues from software and maintenance and support services.

“The data requested was too extensive, old and detailed for us to comply,” said Takao Ono, NEC’s chief financial officer, at a press conference last week.

NEC this year slashed its annual net profit estimate by nearly 80 per cent, due in part to the removal of Y23bn ($198m) of deferred tax assets from its balance sheet.

It expects to report net income of Y9bn in the year ending March 31, sharply down from a forecast of Y40bn. Its operating profit is expected to total Y70bn, down 18 per cent from an earlier forecast of Y85bn.

NEC said the revision was due to weaker-than-expected sales of IT-related products such as servers, software and storage systems.

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