NEC Announces Financial Results Forecast for First Half & Fiscal Year, Fiscal 1999 — Year to March 31, 2000 - Company Financial Information

Cambridge Telcom Report, Oct 4, 1999

NEC announced Tuesday, its forecast for the first half of fiscal 1999, ending September 30, 1999 and its revised consolidated and non-consolidated financial results forecasts for fiscal 1999 (year to March 31, 2000). Details of the results forecasts are as follows:

1. First half results forecasts for fiscal 1999 (year to March
31, 2000)

(Consolidated base)                           (Billions of Yen)
                Net sales       Income before       Net income
Forecast as of                   income taxes
 September,
 1999          2,250( 6%)                 -50              -50
Percentile figures indicate increases compared with the same
period last year

(Non-consolidated base)                       (Billions of Yen)
                              Ordinary income       Net income
Forecast as of
 September,
 1999         1,750 ( 3%)                 -20                0
Percentile figures indicate increases compared with the same
period last year

2. Fiscal year results forecasts for fiscal 1999 (year to March
31, 2000)

(Consolidated base)                           (Billions of Yen)
                Net sales       Income before
                                 income taxes       Net income
Forecast as of
 May, 1999    5,050 ( 6%)                  50               25
Forecast as of
 September,
 1999         5,000 ( 5%)                  30               10
Percentile figures indicate increases compared with the same
period last year

(Non-consolidated base)                       (Billions of Yen)
                              Ordinary income       Net income
Forecast as of
May, 1999     3,830 ( 4%)         90 ( 7819%)               55
Forecast as of
 September,
 1999         3,830 ( 4%)         80 ( 6950%)               30
Percentile figures indicate increases compared with the same
period last year

3. Background to NEC Corporation's Financial Results Forecast

A. First Half Financial Results Forecast

i. Due to restrained investment by domestic communications operators and stagnant situation with Asian economies, sales of communications networking equipment saw significant decreases. Favorable demand, however, for cellular telephones for NTT's mobile telephone services, for personal computers in the domestic market and for color liquid crystal display panels in general, is expected to result in consolidated sales for the first half of the current fiscal year to increase by approximately 6% against the same period last year, to reach 2,250 billion Yen. Non-consolidated sales are also anticipated to rise to approximately 1,750 billion Yen, a 3% gain on the same period a year ago.

ii. Due to falls in sales of communications networking equipment and in the price of memory devices, NEC forecasts a loss in its consolidated financial results for the first half of the current fiscal year of 50 billion Yen, and a loss of 20 billion Yen in its non-consolidated financial results. With extraordinary income of approximately 20 billion Yen, including revaluation of shares, non-consolidated net income is expected to be zero.

B. Fiscal Year Financial Results Forecast

i. As concerns the forecast for consolidated sales, favorable demand for cellular telephones for NTT's mobile telephone services, personal computers in the domestic market and for color liquid crystal display panels and logic ICs in general weighed against significant decreases in sales totals of memory devices and of communications equipment to overseas customers, resulting in a revision of NEC's May 1999 financial results forecast. Sales forecast to reach 5,050 billion Yen in May are now forecast to fall 50 billion Yen to 5,000 billion Yen an expected increase of 5% against the results for the previous fiscal year. Non-consolidated sales are expected to see a 4% increase for the period to 3,830 billion Yen as forecast in May 1999.

ii. Consolidated Profit and Loss:

- Appreciation of the Yen and falling memory prices are expected to result in a decrease of first half income before income taxes of 20 billion Yen;

- In order to implement management measures to restructure its businesses, and to meet the expenses of restructuring at NEC Home Electronics and othernon-profitable businesses, NEC is planning to take an extraordinary loss of 100 billion Yen;

- Through sales of shares and other assets, NEC expects to generate extraordinary income to cover the foregoing extraordinary loss.

As a result, income before income taxes for its consolidated results is expected to reach 30 billion Yen, a 20 billion Yen decrease from initial forecast of May 1999. Consolidated net income is now predicted to reach 10 billion Yen, a decrease of 15 billion Yen from the initial forecast of May 1999 of 25 billion Yen.

iii. Non-consolidated operating income is expected to fall 10 billion Yen from the May 1999 forecast, to an expected 80 billion Yen, while the extraordinary loss due to expenses involved in restructuring measures at subsidiaries, that are anticipated to reach 180 billion Yen, are expected to be met by generation of extraordinary income through the sale of shares and other assets of 150 billion Yen. For this reason, non-consolidated net income is now forecast to be 25 billion Yen lower than the May 1999 forecast, at 30 billion Yen.