Japanese electronics group NEC Corp posted a smaller first-half loss on Wednesday as sales of its IT systems outweighed scaled-back overseas operations, and it stuck to its full-year forecast.

NEC, which also makes servers, computers and telecom equipment, has been trimming costs to make cellphones and microchips, even as it eyes demand at home for new networks from financial institutions, government and phone operators.

The company was helped by cost cuts and better sales of chips for game consoles and cars at 70 percent-owned microchip unit NEC Electronics Corp, which reported a net loss of 3.03 billion yen from a 7.39 billion yen loss the previous year.

But NEC, which has confounded analysts' forecasts with accounting problems, kept its full-year outlook for a profit of 30 billion yen, below a consensus forecast for a 32.5 billion yen profit, amid a weak yen and concerns about year-end consumer demand for electronics in the United States.

For the six months ended Sept. 30, NEC reported a net loss of 4.75 billion yen ($42.8 million) against a 9.93 billion yen loss the previous year.

Sales fell 3.6 percent to 2.14 trillion yen from 2.22 trillion yen the previous year.

NEC, which pulled out of its overseas handset business last year, said it expected its handset sales to stand at around 4.5 million, down from a previous forecast of about 5 million. Its handset business would swing to a profit of 3 billion yen for the year to March, it said.

Carrier NTT DoCoMo Inc plans to cut subsidies it pays to handset vendors, which could mean higher handset prices on the rack. That could hurt handset sales, said Takao Ono, senior vice president.

NEC, which also sold its optical disk drive business in Europe, is counting on continued sales of its IT networks and consulting services. But Ono said it was concerned about exchange rates and uncertainty in its microchip and cellphone businesses.

The market conditions (for chips) are unclear, he said at a news conference. We need to be cautious, because we don't know in which direction markets are going.

The firm's American Depositary Receipts were delisted from Nasdaq after NEC missed a twice-extended deadline to file an auditor-approved earnings results under U.S. accounting rules for the year to March 2006.

NEC switched last year to Japanese accounting rules.

Prior to the announcement, shares of NEC closed up 3.4 percent against a 2.5 percent rise in the benchmark Nikkei average.

Shares of NEC have lost about 8 percent since January, while the Nikkei fell 10 percent.

Electronics Nikkei 225