TOKYO - Toshiba Corp, Japan's biggest chipmaker, kept its outlook far below market estimates and flagged belt-tightening measures ahead after a stronger yen and sliding PC prices hurt quarterly profit.

Its caution contrasts with rival Samsung Electronics, the world's top maker of memory chips, which said on Friday it was considering ramping up capacity on brisk growth in memory chip and TV demand.

Toshiba, which trails Samsung as the world's No.2 maker of NAND flash memory chips, kept its annual operating profit outlook at 100 billion yen, far below a consensus average of 136 billion yen from 21 analysts polled by Thomson Reuters I/B/E/S.

It revised down its sales forecast by 400 billion yen to 6.4 trillion yen on a stronger Japanese currency, and it said it would cut 420 billion yen in fixed costs this year, up almost 30 percent from a previous plan, to keep its profit outlook.

Toshiba said it now expects its mainstay chip operations to break even in the year to March, instead of earning a previously forecast 50 billion yen profit. Its system chips remain in the red, although prices for its NAND flash memory chips rose 10 percent in October-December from the previous quarter.

The recovery has turned out to be slower than we first expected, senior Executive Vice President Fumio Muraoka told reporters.

Some analysts said the new target might still be ambitious.

It's going to be tough to make Toshiba's chip operations break even for the full year, given the seasonal slowdown in January-March, said Shigeo Sugawara, senior investment manager at Sompo Japan Asset Management. I want to see if they can cut costs in time.

Toshiba's Muraoka also signalled toned down capital spending, saying he has no immediate plans to invest in additional plants or factory lines beyond migrating to advanced chip equipment that will churn out a bigger number of smaller and powerful chips.
Recent media reports have said that Toshiba was planning on significant hikes to capacity from April.

For the third quarter, Toshiba, which supplies chips to Apple Inc and also owns U.S. nuclear firm Westinghouse, earned an operating profit of 10.2 billion yen, up from a loss of 157.7 billion yen a year ago but missing a market consensus of 25.7 billion yen.

Its quarterly net loss came to 10.6 billion yen, compared with a 121.1 billion yen loss the previous year on a 6 percent rise in sales.

For a graphic on Toshiba's earnings, click:

link.reuters.com/xav56h

Toshiba is fighting to clinch nuclear power plant orders, while it tries to expand in lithium-ion batteries and power grids to counter chip price volatility.

Rival Fujitsu Ltd, which competes with Toshiba in PCs and system chips, posted a bigger-than-expected quarterly operating profit of 33.6 billion yen, up from a loss of 25.2 billion yen a year ago, as outsourcing and hefty cost cuts helped it bring its chips to profit.
But Fujitsu, Japan's biggest IT service provider, kept its outlook in line with analyst estimates at 90 billion yen on a weaker performance from its consulting services.

Ahead of the news, shares in Toshiba fell 2.9 percent and Fujitsu fell 2.8 percent, both underperforming a 1.9 percent fall in Tokyo's index of electrical machinery stocks .

(Additional reporting by Aiko Hayashi; Editing by Edwina Gibbs)

Japan Electronics Fujitsu Apple inc.