NEC has issued a profits warnings for its current fiscal year and outlined sweeping restructuring plans to try and position itself as a serious Internet player to boost performance.
The move follows announcements earlier this year that it would slash its workforce by 15,000 and restructure its Packard Bell NEC PC business (see VNU Newswire, 19 February, 1999).
But the Japanese computer giant has now speeded up its reorganisation plans, after saying that, although it expects sales to rise five per cent to five trillion yen, net income will fall to 10 billion yen for the year ending 31 March, 2000.
This compares with forecasts it made in May of revenue increases of 5.05 trillion yen and net earnings of 25 billion yen. A year ago, the company generated turnover of 3.8 trillion yen, on profits of 30 billion yen.
NEC blamed the shortfall on significantly lower than expected sales of memory devices and communications equipment to overseas customers. However, it said that demand for colour liquid crystal display panels, logic integrated circuits, cellular phones for NTT's mobile phone services and personal computers in the domestic Japanese market, was still healthy.
In a bid to revitalise itself, the firm plans to base its Internet offerings around its mobile communications, digital broadcasting and home networking products and said it expects to see more than 20 per cent or 1.1 trillion yen come from Internet related sales this fiscal year. It anticipates this figure will jump to 3 trillion yen for the next fiscal year.
To set this goal in motion, NEC intends to set up three new business units from April 2000 to try and increase its global competitiveness and focus on catering to specialised customer needs. These will assume the management of human and capital resources and 900 of the firm's existing 2,2000 working at headquarters will be transferred over to them.
Headquarters will now be staffed by only 300 people to support top executives, but about 1,000 employees will be moved to a new specialised Business Service unit to provide the new divisions with fee based services.
The board of directors will also be halved in number from the current 37 executives to speed up decision making and a Management Strategy Committee, consisting of the president and inhouse company presidents will undertake decision making on a company wide basis.
The new divisions comprise NEC Solutions, which will provide Internet based offerings to corporations, individuals, government bodies and the public sector. NEC Networks will supply network operators and NEC Electron Devices hopes to sell electron device based products to the Internet industry as a whole.
The firm also plans to establish an Internet Business Development Office on 1 October to come up with Internet related strategies and identify areas of possible cooperation with its Biglobe Internet Services business and other NEC units.
It will likewise reorganise its research and development group to concentrate efforts on building Internet related products and will set up a Venture Development Centre in San Jose, California, to promote new offerings to venture capitalists.
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