Epson 2004 Annual Report Download - page 12

SEIKO EPSON CORPORATION10
the use of a PC. We launched four printer models for realizing home photo printing, including a
multifunction printer in October 2003, and PictureMate, a portable printer with a convenient
handle for easy carrying, in April 2004. We will continue to introduce new products for home
photo printing to make digital photography a more integral part of daily life.
Tenacious R&D to Build the Foundation for Future Growth
Epson’s tenacious R&D capabilities are a key factor in its development of key devices. By perse-
vering in areas that other companies have declared technologically impossible, we have brought
Epson’s unique skills to bear in the creation and development of new businesses. As a manufacturer,
one goal is to excite our customers by generating a steady flow of products with high added
value. This is the reason we strive to nurture new businesses that will form a base for growth five
to ten years down the road. Epson is moving forward with the development of Organic Light-
Emitting Diode (OLED) displays, a next-generation display technology that features low power
consumption, high luminance, and a thinner profile than conventional flat panels.
A Stronger Corporate Structure
We have undertaken two measures for building Epson into a truly resilient company: enhancement
of our product line and far-reaching reform of our earnings structure. Two years ago, we initiated
a project for improving procurement activities that has yielded significant cost reductions. We have
now launched the K-Project, which aims to lower the total cost to sales ratio (cost of production
ratio + SG&A ratio) through an extensive review of Epson’s business structure from a cost to
sales perspective. As we promote operational reform in the wake of the integration of Epson’s
production and sales divisions, optimization of the Epson Group will be the guiding principle as
we integrate procurement, production, sales and logistics activities incorporating the viewpoint
of our customers. In the fiscal year ending March 31, 2005, we will initiate structural reforms
targeting the production and sales framework for the printer business, a key source of earnings,
to build a structure for securing profits on both the product and service sides of this business.
Through these measures, Epson is aiming for a ten percentage-point reduction in the cost to
sales ratio by the fiscal year ending March 31, 2007. We are staunchly committed to actions for
lowering the cost to sales ratio as the expected benefits are crucial to attaining our recurring
profit margin goal of 9% or higher in the fiscal year ending March 31, 2007. At the same time, the
aim is to have effectively debt-free operations by the fiscal year ending March 31, 2008. We are
confident that these improvements in Epson’s financial structure can be achieved a full year
ahead of this schedule.
Maximizing the Benefits of Investment
Because Epson, through Action07, seeks to capture definitive opportunities in growth fields
while strengthening its financial position, intensive cash flow management will be essential. As
we give priority in our capital investment plans to investment in fields where we anticipate high
returns, we will strive to wring the maximum benefit from the smallest possible investment.