NEC establishes "Mid-term Management Plan 2015"

*** For immediate use April 26, 2013


Tokyo, April 26, 2013 - NEC Corporation (NEC; TSE: 6701) has established a new mid-term management plan, the "Mid-term Management Plan 2015," for a three year period through the fiscal year ending March 31, 2016.

The NEC Group aims "to be a leading global company leveraging the power of innovation to realize an information society friendly to humans and the earth" as part of the "NEC Group Vision 2017."

NEC's newly established "Mid-term Management Plan 2015" focuses on "Solutions for Society," which leverage Information and Communications Technologies (ICT) in order to advance social infrastructure, contribute to the resolution of a variety of social issues, expand business over the medium to long-term and to improve profitability as part of realizing a society that is safe, secure, efficient and fair.

1. Mid-term management goals

1. Focus on Solutions for Society: Becoming a "Social value innovator"
   
   • Focus management resources on advancing social infrastructure with ICT
   • Seize growth opportunities that help resolve social issues. Establish new business models



2. Focus on Asia, promotion of "locally-led" businesses: Establish a growth base for global competitiveness
   
   • Concentrate mostly on emerging and developing markets in Asia
   • Increase the Group's awareness of local market needs. Accelerate the speed of business



3. Stabilize the financial foundation
   
   • Strengthen cost competitiveness
   • Establish a profit structure that creates operating income of 150.0 billion yen and FCF of 100 billion yen
   • Ensure financial capacity through hybrid-finance

2. Management Strategy

1. Focus on Solutions for Society
   
   • In response to the increasing demand for resources such as energy and food that accompany the world's growing population, as well as the increasing rate of urbanization, the NEC Group is focusing on its Social Solutions business, consisting of the public, telecom carrier, enterprise and smart energy business units, and leveraging its ICT strengths to provide new social infrastructure in order to realize a society that is safe, secure, efficient and fair. The Group is particularly focused on reinforcing contributions to emerging markets where economic growth is underscoring the need for infrastructure development
   • As part of implementing the Social Solutions business, the NEC Group carried out organizational restructuring in April 2013 that aims to establish a framework that is more responsive to market and customer needs
   • Emphasize investment in next generation virtual network, smart energy and security related solutions that support the Social Solutions business
   • Capitalize on the NEC Group's core competencies in next generation network technologies, high-performance, highly-reliable IT infrastructure technologies, as well as sensor and human interface technologies, in addition to leveraging the Group's competitive advantages in of its distinctive ICT assets, strengthening service areas and expanding business domains
   • Seize growth opportunities that help resolve social issues. Pursue the potential needs of customers and society. Enhance competitiveness and increase the means of "value creation" through the promotion of "open innovation"
   • Aim to expeditiously realize 70% of NEC Group sales and an 8% profit margin (NEC Group-wide profit margin of 5%) from the Social Solutions business by implementing the above measures



2. Focus on Asia, promotion of "locally-led" businesses
   
   • Focus on the Social Solutions business to expeditiously realize an international sales ratio of 25%
     (targeting an international sales ratio of 23% for the 2015 fiscal year)
   • Focus on Asian markets where there is heavy demand for social infrastructure advancement. Proactively expand business segments such as the safety and smart energy domains
   • Promote the 5 international headquarter framework and accelerate the development of locally-driven business
     
     • As a part of increasing responsiveness to local needs, in April 2013, the NEC Group established a "Global Safety Division" in Singapore as a base for the strategic planning and implementation of the Safety business. The division will strengthen regional marketing functions as well as development functions for shared solutions that can be applied throughout multiple regions, while also supporting business development in different regions



3. Stabilize the financial foundation
   
   • Realize across-the-board cost reductions by expanding global supply chain management (SCM), the use of offshore resources and further streamlining quality costs
   • Ensure net income and establish a profit structure that enables continued dividends by reducing non-operating loss and extraordinary loss
   • Generate stable annual FCF of more than 100 billion yen by the 2015 fiscal year by steadily accumulating profits and taking measures to reduce the Cash Conversion Cycle (CCC)
   • Strengthen financial foundations through measures that include the implementation of hybrid finance (130 billion yen procurement), while strengthening the Social Solutions business through advanced investment

Presentation

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