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March 16, 2006 1:06 am

NEC’s president to step down

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NEC said on Wednesday that Akinobu Kanasugi would step down as president of the Japanese electronics group after just three years in the job. He will be succeeded by senior executive vice-president Kaoru Yano.

Mr Kanasugi, known for pushing through bold restructuring measures at NEC, was relinquishing his post due to illness, NEC said. He has been appointed vice-chairman.

The senior management changes come as NEC suffers a deterioration in its business outlook due to severe competition in the mobile phone market and a downturn at NEC Electronics, the semiconductor subsidiary in which it has a 70 per cent stake.

In the last quarter, NEC posted a decline in consolidated operating profits, which fell to Y19bn ($162m) while net profits for the quarter were 19 per cent down at Y20.8bn.

It forecasts a 24 per cent drop in operating profits and an 11.5 per cent decline in net profits on higher revenues of Y4,930bn for the year to March. NEC has suffered from a sharp decline in its mobile handset business, which saw sales decline from Y729.7bn in the year to March 2004, to Y629.1bn last year. Handset sales are expected to suffer a further 30 per cent decrease this year. The semiconductor business, spun off as NEC Electronics, has also been battered by severe price declines and a general downturn in its markets.

Mr Yano, 62, president of NEC USA in the late 1990s, said he shared Mr Kanasugi’s experience in restructuring operations, but emphasised that the era of major restructuring was over. He said it was time for NEC to try to expand its operations through mergers and acquisitions. “I think all the big targets [for restructuring] have been dealt with and now it is time to shift direction and go on the offensive,” he said.

He said a priority was to turn around both the semiconductor and mobile businesses.

“With mobile phones we need to hurry a bit,” he said, adding that they aimed to return to profitability in the first half of 2006.

“It is an abnormal situation to have more than 10 Japanese companies in this market, and with foreigners coming in as well, I believe . . . that if this continues Japanese [mobile phone] manufacturers will all collapse together,” he said.

But Mr Yano said he did not intend to quit the mobile phone market. Rather NEC would seek an alliance with another group, although this would be difficult to achieve. “This will have to be an alliance that is based on some very clever thinking. And NEC will take the initiative,” he said.

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