NEC aims for growth from key areas, acquisitions

Admitting his company cannot be everything to everyone, NEC president Koji Nishigaki said yesterday he plans to focus the full resources of his company into six key business areas in an attempt to achieve global leadership in the areas.

Nishigaki, speaking at a Tokyo press conference to unveil the company's mid-term business plan, said NEC will no longer spread its resources through research and development in a diverse range of fields.

Instead, it will work on the areas it considers key to the future of the information society and areas in which it already has significant expertise. It will also create a large investment fund through which to invest in and acquire companies to further its goal to be the leader in the key areas.

Through this new focus, he said the company hopes to achieve 10 per cent sales growth per year over the next three years as a result of implementing the plan. Sales are expected to jump 34 per cent from 5 trillion yen ($US47.2 billion) in the year ended March 2000 to 6.7 trillion yen in the year to March 31, 2003. Net income is expected to rise sharply from 10 billion yen in the year just ended to 200 billion yen in the year ending March 2003.

The areas identified as core competencies fall evenly into the three business areas that NEC formed itself around earlier this year when it created three internal companies as part of a corporate-wide restructuring. Each of the three units, NEC Networks, NEC Electron Devices and NEC Solutions, has two areas in which it will focus.

These include WDM (wavelength division multiplexing) systems that allow telecommunications carriers to send more data down fibre-optic cables, third-generation cellular network and terminal equipment, component technology for mobile internet, component technology for broadband internet, internet and e-commerce services and large-scale mission-critical computer systems.

Specifically, Nishigaki said NEC hopes to grab a 20 per cent share of the worldwide WDM market, up from its current 8 per cent share, and take a 30 per cent share in the market for components for next generation W-CDMA (wideband code division multiple access) cellular handsets. Biglobe, the company's internet service provider unit, is targeting annual growth of 40 per cent in the network services business.

Nishigaki also outlined a new 600 billion yen investment fund the company will establish over the coming weeks to invest in companies working in the six fields NEC has outlined as strategic business areas. The money will be used for direct investment, mergers and acquisitions. A second fund of 40 billion yen will be used to invest in other funds external to the company.

To get the substantial amount of money it needs to fund these activities, NEC said it will sell additional shares to the markets, lease equipment rather than purchase it and work towards initial public offerings (IPOs) and the sale of group subsidiaries.

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