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  • [Industry Forecast ’99] NEC Seeks to Boost Sales by 8 Pct. in 1999: Exec. Vice Pres.
  • January 8, 1999 (TOKYO) — NEC Corp.’s consolidated sales for the six months ended September 1998 declined 11 percent year on year to 2.113 trillion yen (US$18.85 billion), and it posted a consolidated net loss for the same term totaling 19.7 billion yen (US$175.78 billion), yet the electronics company now seeks to boost its sales.
    BizTech interviewed Koji Nishigaki, an NEC executive vice president who manages its information system business, on the corporate outlook for 1999.

    Nishigaki predicts that the government’s implementation of tax cuts on investment in information systems and the corporate demand for sales force automation (SFA) will help boost the information industry. He said that the industry is expected to grow 7 percent-8 percent annually from a year earlier, and his company’s sales also will grow at a similar pace.

    BizTech: What will 1999 be like for the entire information industry?

    Nishigaki: Prospects are better than in 1998.

    BizTech: What makes you say that?

    Nishigaki: There are at least three reasons. First, businesses related to the Year 2000 compliance will thrive. Second, the government will cut taxes for companies that purchase personal computers. And lastly, we can expect larger demand for SFA from corporate users.

    BizTech: Are Japanese companies making good progress in addressing the Y2K compliance issue?

    Nishigaki: Most corporate users of mainframe systems have adopted some measures to comply. Mainframe computer systems, however, are closed systems. As for external systems, companies are still at the stage of verifying how their systems will operate when 2000 arrives.

    Corporate customers using small business computers (or office computers) are not fully addressing the issue yet. Our main products — hardware, operating systems and package software — have all completed the year 2000 compliance. However, we assume that most of our third-party products used by smaller companies and proprietary applications of our users are not yet Y2K-compliant. We will likely have a sudden surge in demand for compliance involving such products in the coming year.

    BizTech: Will the economic stimulus measures introduced by the government be effective?

    Nishigaki: Yes, I think they will be effective. If companies are allowed, upon the introduction of the tax cuts, to write off at one time all investments in information systems priced at 1 million yen or less purchased in the same fiscal year, corporate users, which are hoping to replace their old information-related equipment, will go ahead with purchases.

    If the tax cuts are implemented in April, however, we are likely to see only minimum orders for replacement PCs in February and March, shortly before the implementation.

    Although it is often said that every employee should have their own PC, in reality, we have not yet reached that level in Japan. Even at large corporations, such as Toyota Motor Corp. and Nippon Steel Corp., not every staff member has their own PC.

    However, the trend is that companies are expanding their use of information systems. When the tax cuts are implemented, corporate investment in information systems will surely grow.

    An increase in investment in network infrastructures by educational institutions will also promote the information industry. Investment in infrastructures will stimulate the market, and will expand the range of end users.

    If children can use a PC and the Internet at school, they are likely to utilize a PC at home, which already is the case in the United States. In the United States, kids even do their homework with help of a PC and the Internet. In Japan, too, the user range will gradually expand.

    BizTech: The concept of SFA has been proposed for some ten years. Why does the industry suddenly expect demand to rise for such systems?

    Nishigaki: Yes, the concept itself has been around for some time. However, it is only recently that the industry has realized construction of practical systems. Also, SFA is becoming indispensable for companies seeking to enhance their customer satisfaction and develop strategic businesses. These are strong needs among corporate customers.

    We now have the essential technologies needed to construct SFA systems, such as a data warehouse and a data mart linked with a mission-critical system, wireless and other network infrastructures, and high-performance mobile information terminals.

    Just a few years ago, a company needed to invest in excess of hundreds of millions of yen to construct a data warehouse. Now, we can construct a fairly large system at a price of around 10 million yen.

    BizTech: Considering all these growth factors, how much do you think the information industry will grow this year?

    Nishigaki: I predict that the whole industry, including hardware, software and services, will grow at least 7 percent-8 percent annually. To reach 10 percent or even higher, Japan’s economy needs to improve much more. I estimate that NEC will grow 7 percent-8 percent in the year.

    Related story: NEC Posts April-Sept. Consolidated Net Loss of 19.7B Yen

    Click here for more New Year features.

    (BizTech News Dept.)



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