UPDATE 2-Konica Minolta to cut workforce by 12 pct by 2006
August 28, 2003 04:39:00 AM ET

(Recasts with analyst comments, closing share price)

By Kiyoshi Takenaka

TOKYO, Aug 28 (Reuters) - Japanese camera and copier maker Konica Minolta Holdings Inc said on Thursday it would slash its workforce by 12 percent, or 4,500 jobs, by 2006 rather than by 4,000 as originally planned in order to drive down costs.

Its announcement came three weeks after the company was created through the merger of camera and office gear makers Konica Corp and Minolta Co and demonstrates its resolve to boost earnings nearer to those of bigger rivals like Canon Inc .

The company said it expected an operating profit of 145 billion yen ($1.23 billion) in the year from April 2005, down from a prior estimate of 150 billion yen due to annual goodwill amortisation of five billion yen that resulted from the merger.

The reduced figure is still up 88 percent from the combined operating profit of Konica and Minolta in the last business year, and comes with an estimated operating margin of 11.2 percent, compared to last year's 7.1 percent.

Group interest-bearing debt was forecast to fall to 250 billion yen in 2005/06 versus the 310 billion yen estimated for this year.

Analysts said the tweaking in the business plan was within expectations and that the upside for Konica Minolta's share price was limited unless the company put in a strong business performance.

Konica Minolta shares, succeeding those of Konica after the merger, have gained 77 percent since the start of the year, outperforming the Nikkei average's 19 percent gain.

The shares rose 1.47 percent on Thursday to 1,522 yen.

"For more upside, they will have to pull rabbits out of a hat," Merrill Lynch analyst Richard Kaye said.

The company may have pulled out one potential rabbit on Wednesday when it announced a tie-up with U.S. computer and printer maker Hewlett-Packard Co (HPQ) for the development of multi-function digital copiers. Under the agreement, Konica Minolta will make the core parts of the advanced machines and supply them to HP, which will sell the products through its sales network under its own brand after adding its own electronic control mechanisms and software.

Analysts said HP's strong brand name and top-notch customer base can help Konica Minolta boost production, just as a similar deal between Canon, the world's largest office equipment maker, and HP in laser beam printers helped boost Canon's revenue.

Konica and Minolta, known for their cameras and photographic film, are eager to emulate the success of Canon and Ricoh Co Ltd , which have scored record profits by shifting to the bigger, more lucrative market for office equipment. ($1=117.49 Yen) REUTERS
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