Canon 2002 Annual Report Download - page 43

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LOOKING FORWARD
For Canon, 2003 marks the halfway point of Phase II of its
Excellent Global Corporation Plan (2001-2005), which targets
the completion of structural reforms in 2005. As such, Canon
will move forward with several initiatives designed to ensure the
meeting of the goals set out in the plan by 2005, including
further operating-reformation efforts, from R&D and production
processes to head-office administrative operations,
simultaneously targeting improved productivity and the
elimination of waste. Particularly in the area of development,
Canon will target the further shortening of product-development
periods and improvements in design quality, and will strive to
substantially reduce product development costs through the
implementation of digital trial production procedures that do
away with the need to create prototypes. As for production,
energies will be focused on the in-house production of key
components and innovative high-efficiency factory automation
equipment to realize even greater cost reductions. With regard
to marketing activities, in addition to promoting marketing
reformation through the structural reorganization of marketing
activities and strengthening of marketing channels, Canon is also
working to expand and strengthen its solutions business
together with improving hardware solutions offerings through
greater customization to better meet customer needs. Canon
also views the protection of the environment as an essential
part of its management activities and will continue to develop
environmentally conscious products and introduce
resource-recycling systems while actively expanding its green
procurement and purchasing programs.
Canon sells laser beam printers on OEM basis to Hewlett-
Packard Company (“HP”). During the year ended December 31,
2002, such sales constituted approximately 21% of
consolidated net sales.
In May 2002, HP announced that it completed its merger
transaction with Compaq Computer Corporation. Canon
believes that this merger will not directly affect in an adverse
and material way Canon’s OEM business. However, Canon’s
operating results could be significantly and adversely affected if
HP’s management decides not to continue its OEM business
relationship with Canon.
On November 20, 2002, Canon Inc. and Canon Sales Co.,
Inc (“Canon Sales”) have entered into an agreement to transfer
all of the shares of Canon N.T.C., Inc. (“Canon N.T.C.”), a wholly
owned subsidiary of Canon Sales, from Canon Sales to Canon
Inc. following the completion of the corporate separation of two
Canon N.T.C. operations divisions. In accordance with the
restructuring initiative for the Canon Sales Group announced on
May 17 2002, Canon N.T.C.’s marketing operations will be spun
off and merged with Canon System & Support Inc. and its real
estate operations will be spun off into a newly established
property management company, effective April 1, 2003.
Following the corporate spin-offs, Canon N.T.C.’s operations will
focus on development and manufacturing activities, after which,
during the second quarter of 2003, all of Canon N.T.C.’s shares
will be transferred from Canon Sales to Canon Inc.. Canon
N.T.C. is already consolidated subsidiaries of Canon Inc., and
accordingly the merger is expected to have no impact on
Canon’s future business results.
On November 21, 2002, Canon Sales executed a definitive
agreement to acquire all of the shares of Sumitomo Metal
System Solutions Co. Ltd. from Sumitomo Metal Industries, Ltd.
for approximately ¥12,478 million (U.S.$104 million). On
January 10, 2003, the acquisition of Sumitomo Metal System
Solutions Co. Ltd. was completed and its name was changed to
Canon System Solutions Inc. The new company is expected to
play a starring role of expanding IT business in Canon Sales
group, which believes the key pillar of business expansion in the
future is in the IT service field. The impact of the acquisition on
Canon’s consolidated financial statement is not expected to be
material.
On January 1, 2003, Canon Aptex Inc. and Copyer Co.,Ltd.
merged, and changed its name to Canon Finetech Inc, following
resolutions by their respective board of directors’ meetings. By
the merger of both companies, the new company expects to
enhance its corporate disposition by restructuring its corporate
bases, by building an efficient organization and by reinforcing its
product development and its cost competitiveness. Both
companies are already consolidated subsidiaries of Canon Inc.,
and accordingly the merger has no impact on Canon’s future
business results.
The foregoing discussion in Financial Overview contains
forward-looking statements that reflect management’s current
views with respect to certain future events and financial
performance. Actual results may differ materially from those
projected or implied in the forward-looking statements. Further,
certain forward-looking statements are based upon assumptions
of future events that may not prove to be accurate. The
following important factors could cause actual results to differ
materially from those projected or implied in any forward-
looking statements: exchange rate fluctuations; the uncertainty
of Canon’s ability to implement its plans to localize production
and other measures to reduce the impact of exchange rate
fluctuations; uncertainty as to economic condition, in Canon’s
major markets; uncertainty of continued demand for Canon’s
high-value-added products; uncertainty as to the recovery of
computer and related markets; uncertainty of recovery in
demand for Canon’s semiconductor production equipment;
Canon’s ability to continue to develop products and to market
products that incorporate new technology on a timely basis, are
competitively priced and achieve market acceptance; the
possibility of losses resulting from foreign currency transactions
designed to reduce financial risks from changes in foreign
exchange rates; and inventory risk due to shifts in market
demand.