NEC Corporation

To Our Shareholders


Results for the Year:

In fiscal 1995, ended March 31, 1995, NEC posted a 5 percent increase in net sales from the previous fiscal year, to 3,769.4 billion yen ($43,326 million). Net income soared 435 percent, to 35.3 billion yen ($406 million).

Domestic sales rose 2 percent, to 2,763.9 billion yen ($31,769 million), and accounted for 73 percent of net sales. Overseas sales grew 15 percent, to 1,005.4 billion yen ($11,557 million).

The increase in net sales was chiefly attributable to higher sales of semiconductors overseas, particularly 4Mbit dynamic random access memories (DRAMs) in the U.S. personal computer (PC) market. Factors that contributed to the sharp rise in net income included the strong performances of domestic and overseas semiconductor subsidiaries, reflecting healthy demand for and stable prices of 4Mbit DRAMs, improved operating efficiency, and overall cost reductions.

Net income per share of common stock was 22.92 yen ($0.263), compared with 4.29 yen per share in the previous fiscal year. NEC maintained cash dividends per share of common stock at 10.00 yen ($0.115), including a 5.00 yen ($0.057) interim dividend paid in December 1994.

The Operating Environment:

Although the Japanese economy finally began to emerge from its prolonged slump in fiscal 1995, the recovery was moderate at best. While healthy overseas demand and improved domestic consumer spending supported the upturn, private-sector capital investment remained at relatively low levels, and the rapid appreciation of the yen toward the end of the period cast doubt on Japan's economic prospects. Overseas, the U.S. economy continued to expand unhampered by inflationary pressures, and Asian economies maintained their high growth rates. In Europe, most countries enjoyed moderate economic recoveries.

The domestic electronics industry was generally sluggish, posting only slightly higher growth than the Japanese economy. Although companies continued to restrain investment in information-related equipment, the PC and mobile communications terminal markets expanded considerably. Also, the electron devices market grew sharply, largely due to strong overseas demand for memory devices and other semiconductors.

Investment and Financing:

Capital expenditures totaled 300.2 billion yen ($3,451 million) in fiscal 1995, up 30 percent from the previous fiscal year. Most investments were directed toward high-growth products, such as very large-scale integrated circuits (VLSIs) and color liquid crystal displays (LCDs).

We invested 266.0 billion yen ($3,058 million), or 7 percent of net sales, in research and development to ensure our future competitiveness. This represented an increase of 2 percent from the previous year's figure.

During the period under review, we issued 70.0 billion yen ($805 million) in Japan and SFr500.0 million ($445 million) overseas in convertible bonds to finance capital investment and repay long-term debt.

Strategies for Future Growth:

Today's rapidly changing business environment is characterized by intense competition and the advance of information technology worldwide. To maintain growth in our C&C business, we must capitalize on opportunities in such high-growth markets as multimedia, networking, and open systems. In our hardware businesses, these markets include equipment based on asynchronous transfer mode (ATM) technology; the Personal Handyphone System (PHS) service, which is scheduled to begin commercial operations in Japan in July 1995; and computers and network servers designed for smooth integration from proprietary systems to open application environments. In our software and service businesses, we will strengthen our development of networking software products and multimedia compact disc-read only memory (CD-ROM) titles and concentrate on offering systems integration and multimedia-related services.

Further, in our semiconductor business, we will make every effort to pursue opportunities created by rising demand for memory devices, microcomputers, and other key components of products with multimedia applications. We will also work to expand our flat panel display business, focusing on thin-film transistor (TFT) color LCDs and color plasma displays.

To enhance our international competitiveness, we will step up our globalization efforts. More specifically, we will expand overseas production, enhance our R&D operations around the world, promote alliances on a global level, and assume a leadership role in setting and promoting international technology standards.

Outlook for Fiscal 1996:

In fiscal 1996, the Japanese economy is expected to show modest growth, despite such uncertain factors as the possible continued strengthening of the yen, and the global economy is likely to remain generally healthy.

In the Japanese electronics industry, the electron devices market will likely continue to expand. Although demand for mobile communications terminals and PCs is expected to remain high, competition in these markets will continue to intensify.

Amid this environment, we will concentrate on developing innovative products and technologies through the previously mentioned strategies. We will also continue to reduce costs and implement procedures to enhance management efficiency.

As we undertake these efforts, we sincerely thank our shareholders, customers, and employees for their continued support.

June 29, 1995

Tadahiro Sekimoto
Chairman of the Board

Hisashi Kaneko

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