Epson 2007 Annual Report Download - page 7

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5
Annual Report 2007
In March 2006, Epson established the Creativity and Challenge 1000 mid-range business plan
in response to a worsening business situation. Based on the policies laid out in this plan, we
are now implementing a series of measures aimed at restoring profitability and driving growth.
Our aim is to generate annual ordinary income of ¥100 billion or more by the end of the fiscal
year ending March 31, 2009.
In the fiscal year ended March 31, 2007, the first year of the business plan, we were faced
with a deteriorating business environment brought about by intensified competition and severe
price erosion. However, our efforts to implement the policies of redefining and reinforcing our
business and product portfolios, reorganizing our electronic device businesses, and
streamlining costs meant that we were able to surpass our business plan ordinary income
targets for the fiscal year.
We succeeded in boosting profitability in our largest business, inkjet printers. This was
achieved through a profit-driven marketing strategy,wide-ranging variable cost reductions, and
the elimination of waste in both manufacturing and sales, resulting in reduced fixed costs. We
are now building on these achievements by implementing a strategy that creates a balance
between the desire to secure short-term profits and the need to generate medium-term growth.
In small- and medium-sized displays, we suffered significant losses. Although our cost-
cutting efforts enabled us to keep up with ongoing price erosion, our technical response to
customer needs was unsatisfactory, and we were unable to achieve sufficient sales volume. To
rectify this situation, in March 2007 we announced a series of fundamental structural reforms
aimed at rebuilding this business.
As a result of the charges associated with the structural reforms in the display business, I
regret that we recorded a net loss for the fiscal year under review.
Although facing a tough competitive situation, we expect to reap the benefits of our efforts
in the fiscal year ending March 31, 2008. The second year of our mid-range business plan will
be an extremely important one as we seek to lay the groundwork for achieving the targets for
the final year of the plan.
Management and employees areworking assiduously as we drive forward reforms to
rebuild the display business, increase profitability in our various businesses, and sow the seeds
for new businesses that will generate futuregrowth.
July 2007
Seiji Hanaoka, President