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NEC CORPORATION
Annual Report 2007 Year ended March 31, 2007

Table of contents

  • Page 1
    Annual Report 2007 Year ended March 31, 2007 NEC CORPORATION

  • Page 2
    ... March 31, 2006 on this annual report presented under Japan GAAP for comparison purpose. CAUTIONARY STATEMENTS: This annual report contains forward-looking statements pertaining to strategies, financial targets, technology, products and services, and business performance of NEC Corporation and its...

  • Page 3
    ... on the weighted-average number of shares outstanding during each period. 3. Cash dividends per share for the year ended March 31, 2007 are the total of interim and year-end dividends approved by the Company's board of directors on November 21, 2006 and May 21, 2007, respectively. 4. Owner's equity...

  • Page 4
    Message From the Management NEC's DNA is all about innovation. By fusing technologies in the three domains of IT, networks and semiconductors, we aim to drive growth on a global scale by generating impressive and inspiring innovation for customers. Currently, the next generation network (NGN) is ...

  • Page 5
    Hajime Sasaki Chairman of the Board Kaoru Yano President 03

  • Page 6
    Message From the President Kaoru Yano President 04

  • Page 7
    ... the first half of fiscal 2007. In January 2007, we filed an Improvement Report required by the Tokyo Stock Exchange and other stock exchanges in Japan in relation to the correction of our financial results. This report outlines measures to improve our information disclosure controls and procedures...

  • Page 8
    ...-capacity and highly reliable IP (Internet Protocol)-based networks. For example, NGNs will enable more reliable and user-friendly services, including bill payment and video streaming via mobile handsets; home security services including disaster readiness, and remote medical care. NEC has world...

  • Page 9
    ...an order for network products that will play a vital role in NTT's NGN field trials. In these ways, NEC was able to steadily establish a strong track record in NGN-related businesses. Initiatives to Create Solutions Using Next Generation Networks (NGN) In May 2007, NEC began demonstrating services...

  • Page 10
    ... share of the global market in 2006. Furthermore, NEC is taking active steps to open up new markets by aggressively launching products featuring cutting-edge technologies, such as a new Virtual PC Type thin client system and next-generation grid storage systems. NEC also aims to actively develop...

  • Page 11
    ... we keep compliance firmly in mind as our top priority. Our wish is to draw on a wellspring of innovation to lay a strong foundation for our next stage of growth, while making progress toward realizing our ambitions. We look forward to your continued support. June 21, 2007 Kaoru Yano President 09

  • Page 12
    ... lives. Initiatives in Japan's World-leading Market Proposing New Working Styles NEC Example of Operational Improvement through Web Conferencing NEC is proposing Web conferencing as an example of a new working style. Web conferencing enables you to use a PC to share documents over networks while...

  • Page 13
    ... Studios Japan™, to jointly develop a theme park attraction reservation system based on the Tokutoku RFID tags Pocket Osaifu Keitai® service offered by NEC for mobile handset users. Called Universal Express Pass™ Mobile, the new service was launched in December 2006. This new system enables...

  • Page 14
    ...play IP-based television service called "now TV" that distributes more than 110 channels of live and ondemand high-definition content using its broadband network. This system is underpinned by NEC's Digital Subscriber Line Access Multiplexer (DSLAM), a unit that provides interactive services for the...

  • Page 15
    ... health care services to 1.5 million local residents in Vancouver, Canada. NEC has constructed FHA's network system, which is centrally regulated by NEC's UNIVERGE IP telephony solution. Through this network, we have realized a digital archives network for medical images, and a telephone conference...

  • Page 16
    ...; and routers and switching systems that control the pathways for communications signals. These systems also involve network control infrastructure to control and guarantee communications quality and shared service delivery platforms that enable various applications. High-resolution video-on-demand...

  • Page 17
    ... Retail (Online shopping) (Mobile phone with credit card function) (Large-scale ITS) Education (School security) (E-learning) Local governments (E-local government) (Disaster readiness) Manufacturing Communications and media (Video distribution) (Links to interactive TV programs) (Real...

  • Page 18
    ...0 0 2006 2007 -100 2006 2007 Mobile/Personal Solutions Business The Mobile/Personal Solutions business provides mobile handsets, personal computers and other terminals that channel individuals to the ubiquitous networking society, as well as Internet services. This business underpins the NEC...

  • Page 19
    ... and Video Equipment Control Systems Aerospace and Defense Systems Mobile Terminals Mobile Handsets Personal Solutions Personal Computers Personal Communications Equipment BIGLOBE Internet Services Semiconductors System LSIs (For Use in Communications Equipment, Computing and Peripheral Products...

  • Page 20
    ... and video streaming. In addition, we were able to seize numerous business opportunities by actively proposing solutions to resolve our customers' issues. For example, we optimized systems through server/storage consolidations to reduce operating costs in existing systems, reinforced security using...

  • Page 21
    technologies. One example is the RFID-related solutions field, where tiny wireless chips are used to identify and track people or objects. NEC opened the RFID Innovation Center in our logistics center in November 2006 to enable customers to conduct RFID trials in simulated environments that ...

  • Page 22
    ... nowhere else. These products include blade (thin) servers and spacesaving servers, as well as water-cooled silent servers. Backed by strong customer support for these products, NEC captured a 26% share of Japan's server market on a unit basis in 2006, commanding the top share for the 11th straight...

  • Page 23
    ... departments, we reinforced our development capabilities in the IP telephony domain. Overseas, the PASOLINK point-to-point microwave wireless access system performed very well. With strong customer support for the high performance and reliability of NEC's products and our ability to meet short...

  • Page 24
    ...networking society closer to reality, mobile handsets and PCs will come to serve as direct user interfaces allowing us all to benefit from the advantages of such a society. The Mobile/Personal Solutions business covers the BIGLOBE Internet service and these information terminals, and aims to provide...

  • Page 25
    ... to launch even more attractive handsets through these initiatives, NEC aims to continue driving growth in mobile handset shipments. Held the Top Share of Japan's PC Market with Distinctive Products In the PC field, NEC held the top market share in 2006 in Japan despite slowing growth in the...

  • Page 26
    ...a track record in offering highly scalable and reliable service platforms capable of processing large data volumes and traffic loads. Examples include Nippon Television Network Corporation's "NTV VALUESTAR N balances a space-saving design surpassing laptops with the user friendliness of desktop PCs...

  • Page 27
    ... fields. provided for only NEC PC users, that enables users to easily expand their use of the Internet beyond email and website browsing to include obtaining a broader range of digital content and online shopping. Furthermore, NEC launched BIGLOBE Stream (i-appli) in January 2007, a new service...

  • Page 28
    ... in the semiconductor area. In response, NEC adjusted production levels and booked expenses related to the consolidation of some development projects outside core fields to concentrate development resources. processing in Nintendo Co. Ltd.'s new home game console Wii ® . By embedding DRAM circuits...

  • Page 29
    ... consolidating production lines. With respect to assembly and testing, NEC will speed up their relocation overseas and realign its network of plants in Japan. On the organizational front, NEC implements organizational changes by business field, specifically System on Chip (SoC), microprocessors, and...

  • Page 30
    ... converging fields of IT and networks that are computers and communications. Furthermore, as broader uptake of NGN increasingly facilitates the exchange of information, collaboration between enterprises across different industries is set to give rise to new services and businesses. For the NEC group...

  • Page 31
    ... by Promoting "Open Innovation" In the ubiquitous networking society, where information flows freely, there are high hopes for applying the laws of physics in new ways to IT and communications systems and for capturing synergies with people who actually use these systems. In order to develop new...

  • Page 32
    ... of 2007, NEC plans to commercialize this product in the North American market, where there is strong demand in this field. NEC then plans to extend this product to Japan and other regions to fuel global business expansion. HYDRAstor R&D Team (NEC Laboratories America, Inc. (Princeton, U.S.A.)) 30

  • Page 33
    ... the Convergence of Broadcasting and Communications ~Realized interruption-free video distribution by enhancing the reliability of multicast~ NEC has recently developed a multicast method that realizes highly reliable, high-quality Internet broadcasting services on a par with high-definition...

  • Page 34
    ... 2 of the Company Law of Japan Executive Committee and Business Progress Committee The Executive Committee, which comprises around 20 corporate officers, discusses important management issues such as the NEC group's management policies and strategies. This committee extensively discusses matters of...

  • Page 35
    ... this system. In accordance with Japan's Company Law, NEC's Board of Directors formulated a basic policy on establishing an internal control system, structured to ensure appropriate corporate business operations. This policy is disclosed on NEC's website at the following URL: http://www.nec.co...

  • Page 36
    ... business efficiently in accordance with medium-term corporate management goals and budgets established by the Board of Directors. (v) In order to ensure that the NEC group conducts operations appropriately, NEC shall send directors and corporate auditors to subsidiaries; share information routinely...

  • Page 37
    ...the Board Professor, Keio University Graduate School of Media and Governance Member of the Board Member of the Board Member of the Board Member of the Board President, IPSe Marketing, Inc. Senior Adviser, Advisor, Chairman of the Board, Sumitomo Mitsui Banking Corporation Daiwa Securities Group Inc...

  • Page 38
    ... March 31, 2006 To extend our CSR promotion activities, we formulated the Supply-chain CSR Guidelines for our business partners. We surveyed 20 of our Japanese and overseas business partners to analyze the status of CSR activities in our supply chain. Fiscal Year Ended March 31, 2007 In the years...

  • Page 39
    ... it has developed thus far and supply rechargeable lithium-ion batteries to the automotive industry throughout the world. NEC Internet Safety Program Personal computers and the Internet are highly effective means of communication. However, problems resulting from Internet crime have become...

  • Page 40
    ... Data 40 Management's Discussion and Analysis 50 Consolidated Balance Sheets 52 Consolidated Statements of Operations 54 Consolidated Statements of Changes in Net Assets 56 Consolidated Statements of Cash Flows 59 Notes to Consolidated Financial Statements 114 Report of Independent Auditors 38

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    ... Price Range on the Tokyo Stock Exchange (Yen) 1,500 1,000 Stock Exchange Listings and Quotations (As of March 31, 2007) NEC common stock is listed on the Tokyo and four other stock exchanges in Japan. American Depositary Receipts for common stock (Symbol: NIPNY) are quoted in the NASDAQ system...

  • Page 118
    ... Promotion Unit Marketing Unit Intellectual Asset R&D Unit MONOZUKURI Innovation Unit Corporate Staff IT Platform Business Unit Systems Integration and Software Development Group Business Unit Mobile Terminals Business Unit Personal Solutions Business Unit Trademarks • NEC is a registered...

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    7-1, Shiba 5-chome, Minato-ku, Tokyo 108-8001, Japan Telephone: +81-3-3454-1111 NEC home page: http://www.nec.com Investor Relations home page: http://www.nec.co.jp/ir/en ISSN 0910-0229 ©NEC Corporation 2007 Printed in Japan