Plain-text annual report
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An nua l Repor t 2016
Year ended March 31, 2016
To Our Stakeholders
01
Self-help to create
a dependable self
At NEC, our greatest strengths include our superior
Information and Communication Technology (ICT) assets,
cultivated over a history spanning 117 years, and our ability
to integrate and combine these and deliver them to our
customers. Making the best use of these strengths, we
endeavor to provide social value for our customers as well as
for people in countries and regions across the world, in order
to establish abundant societies and lifestyles, and bright
futures full of hope. In 2014, we sought to embody this
mission through our corporate brand statement
“Orchestrating a brighter world,” devoting our energies to
delivering “Solutions for Society” and addressing seven
themes on the creation of social value, thus clarifying the
future direction for NEC.
As a Social Value Innovator, and to continue creating value
for our customers into the future, each of us at NEC needs to
demonstrate the spirit of self-help, displaying the
appropriate initiative, thought, and behavior to meet the
expectations of society and customers. In this process, we
will continue to engage in dialog with a variety of
stakeholders and build relationships of trust. With these
principles established as part of our corporate culture,
constructing a business model that allows us to continue to
create value is essential.
Based on my strong belief that in managing the NEC group
we should practice “Self-help to create a dependable self,”
I hope we can establish an NEC that continues to create
value for the next 100 years and beyond.
July 2016
Takashi Niino
President and CEO
Contents
Profile
01 To Our Stakeholders
02 Contents
03 Performance Highlights
05 At a Glance
Business Model:
The Social Value That the
NEC Group Aims to Create
07 Six Megatrends
08 The Seven Themes for Social Value
Creation
09 Value for Society
10 One-to-Many
11 Working in Concert with Stakeholders
to Find Solutions to Social Issues
13 NEC’s Distinctive ICT Underpinning
Social Value Creation
Commentary on
Management Strategy
15 Message from the President
23 Message from the CFO
Business Activities for
Social Value Creation
25 Initiatives on the Themes of Social
Value Creation
29 Review of Operations
37 Business Structure in Japan
38 International Business Structure
Business Foundation to
Support Value Creation
41 Corporate Governance
44 Messages from an Outside Director and
an Audit & Supervisory Board Member
45 Directors and Audit & Supervisory
Board Members
47 Business Execution Structure
49 Human Rights and Diversity
51 Environmental Efforts
53 Innovation Management
55 Ensuring Compliance
Corporate Data
56 Financial Section
65 Non-Financial Section
66 Corporate Overview
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Editorial Policy
Since 2013, NEC has published integrated annual reports that
provide both financial and non-financial information.
Annual Report 2016 contains six chapters: Profile, Business
Model: The Social Value That the NEC Group Aims to Create,
Commentary on Management Strategy, Business Activities for Social
Value Creation, Business Foundation to Support Value Creation , and
Corporate Data.
Chapter I presents a message from the President and a profile of
NEC. In Chapter II, we present a concise explanation of the value we
provide, our strengths and other matters based on worldwide
megatrends. Chapter III presents commentary from the President as
well as the CFO concerning our approach to medium- to long-term
value creation and details about the Mid-term Management Plan
2018. Chapter IV introduces examples of our businesses activities
for social value creation in addition to an overview of each segment
and our domestic and overseas business structure. Chapter V
introduces the management foundation that supports NEC's
medium- and long-term efforts to improve corporate value, including
corporate governance and environmental initiatives such as ESG-
related information.
By incorporating the opinions of the International Integrated
Reporting Council (IIRC), institutional investors and various other
stakeholders, and reflecting their opinions in its reporting, NEC will
continue to provide clearer and more useful information going forward.
Reporting Period
April 1, 2015 to March 31, 2016 (hereinafter referred to as
“Fiscal 2016”. Any other fiscal years would be referred similarly)
This report also includes information obtained after this
reporting period.
Scope of Report
NEC Corporation and its Consolidated Subsidiaries
Reference Guidelines
• ISO 26000
• Global Reporting Initiative (GRI)
“Sustainability Reporting Guidelines 4.0"
• United Nations Global Compact
NEC is a signatory to the United Nations Global Compact.
Other Related Information
• Earnings Releases/Annual Securities Report
• Corporate Governance Report
• Corporate Social Responsibility (CSR)
• Annual Environmental Report
• Information Security Report
• Social Contribution Activities
Evaluation by External Parties (As of July 2016)
RobecoSAM Sustainability Award
FTSE4Good Global Index
Euronext Vigeo
- World 120
ETHIBEL PIONEER
& EXCELLENCE
STOXX Global ESG
Leaders Index
Morningstar Socially Responsible
Investment Index
EcoVadis
MSCI Global Sustainability Indexes
THE INCLUSION OF NEC Corporation IN ANY MSCI
INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS,
SERVICE MARKS OR INDEX NAMES HERIN, DO NOT
CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR
PROMOTION OF NEC Corporation BY MSCI OR ANY OF
ITS AFFILIATES. THE MSCI INDEXES ARE THE
EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI
INDEX NAMES AND LOGOS ARE TRADEMARKS OR
SERVICE MARKS OF MSCI OR ITS AFFILIATES.
02
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016
Performance Highlights (Japanese GAAP)
NEC Corporation and Consolidated Subsidiaries
For the fiscal years ended or at year-end of March 31,
2010, 2011, 2012, 2013, 2014, 2015 and 2016
NEC Electronics
Corporation became an
equity-method affiliate
The consumer PC
business became an
equity-method affiliate
Divested NEC
Mobiling, Ltd.
Stopped the
development of new
smartphones
Divested NEC
BIGLOBE, Ltd.
Net sales
3,583.1
3,115.4
3,036.8
3,071.6
3,043.1
Sales of the current businesses
Operating income
2,600.0
2,550.0
50.9
57.8
2,630.0
73.7
2,730.0
114.6
2,890.0
106.2
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥3,583,148
¥3,115,424
¥3,036,836
¥3,071,609
¥3,043,114
Overseas sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
712,886
479,349
481,492
483,118
569,172
2010
2011
2012
2013
2014
Millions of yen
Percentage of international sales to
consolidated net sales (%) . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ordinary income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit (loss) attributable to
19.9
50,905
49,429
15.4
57,820
41
15.9
73,742
42,050
15.7
114,647
92,024
owners of the parent . . . . . . . . . . . . . . . . . . . . . . . .
11,428
(12,518)
(110,267)
30,434
Cash flows from operating activities . . . . . . . . . .
Cash flows from investing activities . . . . . . . . . .
Free cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
134,816
(41,241)
93,575
33,660
(146,244)
(112,584)
83,857
(49,706)
34,151
143,748
(101,742)
42,006
18.7
106,193
69,152
33,742
94,124
(38,893)
55,231
2,935.5
128.1
(Billions of yen)
2,821.2
107.3
2015
2016
¥2,935,517
¥2,821,181
586,844
603,169
20.0
128,084
112,112
57,302
87,917
(47,510)
40,407
21.4
107,306
82,735
68,749
97,829
(32,202)
65,627
R&D expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
275,970
176,514
161,968
151,676
142,723
134,205
123,995
1,107
Capital expenditures
(property, plant and equipment) . . . . . . . . . . . . .
83,098
Depreciation
(property, plant and equipment) . . . . . . . . . . . . .
111,167
52,850
62,097
41,980
53,306
45,614
51,167
98,708
45,167
Per share data (in yen and U.S. dollars):
Profit (loss) attributable to
owners of the parent . . . . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Owner’s equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on equity (%) . . . . . . . . . . . . . . . . . . . . . . . . . .
Owner’s equity ratio (%) . . . . . . . . . . . . . . . . . . . . . . .
5.04
4.00
2,937,644
790,904
1.6
26.9
(4.82)
0.00
2,628,931
757,054
—
28.8
(42.44)
0.00
2,557,570
656,956
—
25.7
11.71
4.00
2,580,966
710,666
4.5
27.5
12.99
4.00
2,505,329
695,949
4.8
27.8
37,425
48,518
22.05
4.00
36,347
44,879
26.45
6.00
2,620,652
823,650
2,493,441
792,092
7.5
31.4
8.5
31.8
325
401
0.24
0.05
22,263
7,072
Interest-bearing debt . . . . . . . . . . . . . . . . . . . . . . . . .
729,548
675,798
692,734
603,451
575,151
520,778
480,987
4,295
–7.6
Debt-equity ratio (times) . . . . . . . . . . . . . . . . . . . . . .
Number of consolidated subsidiaries . . . . . . . . . .
0.92
310
0.89
283
1.05
265
0.85
270
0.83
258
0.63
232
0.61
217
Number of employees . . . . . . . . . . . . . . . . . . . . . . . . .
142,358
115,840
109,102
102,375
100,914
98,882
98,726
CO2 emissions reduction by providing IT
solutions (thousand tons) . . . . . . . . . . . . . . . . . . .
Improvement in energy efficiency
of products (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
03
1,900
44
2,120
53
2,310
66
2,980
64
2,290
75
2,540
91
2,620
97
Key Management Measures
l Measures to optimize business portfolio
n Measures to grow business and strengthen financial foundation
Fiscal year ended March 31, 2011
l Made NEC Electronics Corporation, a semiconductor business
currently Renesas Electronics Corporation, into an equity-
method affiliate
Fiscal year ended March 31, 2012
l Made the consumer PC business into
an equity-method affiliate
n Acquired Global View S.A., a video surveillance services business
in Argentina
Fiscal year ended March 31, 2013
n Acquired the business support system business of U.S.-based
Convergys Corporation
n Acquired the IT service business of Australia-based CSG Limited
l Made NEC TOKIN Corporation into an equity-method affiliate
Fiscal year ended March 31, 2014
l Divested all of NEC’s stakes in NEC Mobiling, Ltd., currently MX
Mobiling Co., Ltd., a mobile phone sales business
l Stopped the development of new smartphones in mobile phone
business
Fiscal year ended March 31, 2015
l Divested all of NEC’s stakes in NEC BIGLOBE, Ltd., currently
BIGLOBE Inc., an internet service provider in March, 2014
n Made NEC Fielding, Ltd., providing operation and maintenance
service for IT systems, into a wholly owned subsidiary
n Established NEC Solution Innovators, Ltd. in a reorganization of
seven software development subsidiaries
n Established NEC Platforms, Ltd. in a reorganization of four
hardware development and manufacturing subsidiaries
n Established NEC Management Partner, Ltd. in a reorganization of
four back office operation subsidiaries
n Completed acquisition of an energy storage system business
for electric power companies and established NEC Energy
Solutions, Inc. in North America
Fiscal year ended March 31, 2016
(fiscal year under review)
n Transferred administrative staff functions and shared IT assets
from NEC to NEC Management Partner, Ltd. (Business Process
Optimization Project)
Notes: 1. U.S. dollar amounts are translated from yen, for convenience only,
at the rate of ¥112 = U.S.$1.
2. Profit (loss) attributable to owners of the parent per share is
calculated based on the weighted-average number of shares
outstanding during each period.
3. Owner’s equity is the sum of total shareholders’ equity and total
accumulated other comprehensive income.
4. The debt-equity ratio is calculated by dividing interest-bearing
debt by owner’s equity.
5. Improvement in energy efficiency of products is based on a
comparison with the fiscal year ended March 31, 2006.
04
Millions of
U.S. dollars
2016
$25,189
5,385
Percent change
2016/2015
–3.9%
2.8
958
739
614
873
(288)
586
–16.2
–26.2
20.0
11.3
—
62.4
–7.6
–2.9
–7.5
20.0
50.0
–4.9
–3.8
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Profile
At a Glance
NEC Corporation and Consolidated Subsidiaries
Net sales, operating income (loss), and composition of sales are financial results for the fiscal year ended March 31, 2016 (Japanese GAAP).
Public Business
Net sales
766.8 billion yen
Operating income
57.5 billion yen
Main customers
Government, public, healthcare, finance and media
Composition of sales
27%
Focus businesses
Infrastructure preparation towards the
year 2020
Cyber security
Major Products and Services
Systems Integration (Systems Implementation,
Consulting), Maintenance and Support,
Outsourcing/Cloud Services, System Equipment
Examples of Solutions by Business
Sector/Industry
Government: Social Security and Tax,
Fingerprint Identification, Air Traffic Control,
Satellite Communications/Earth Observation,
Outdoor Communication
Public: Local Government, School/Education,
Postal Tracking, Firefighting Command,
Firefighting Emergency Radio Systems, Disaster Prevention,
Traffic Control, Railroad Communication,
Infrastructure Surveillance/Energy Management
Healthcare: Electronic Medical Record,
Regional Healthcare Information Network
Finance: Banking, Business Branch Systems
Media: TV Program Production/News Production/
Transmission Systems, Digital TV Transmitters
Major Consolidated Subsidiaries
NEC Facilities, Ltd.
NEC Engineering, Ltd.
NEC Network and Sensor Systems, Ltd.
NEC Space Technologies, Ltd.
Nippon Avionics Co., Ltd.
Composition of sales
Focus businesses
IT services business for retail
Manufacturing Co-Creation Program
Major Products and Services
Systems Integration (Systems Implementation,
Consulting), Maintenance and Support,
Outsourcing/Cloud Services
11%
Examples of Solutions by Business
Sector/Industry
Major Consolidated Subsidiaries
ABeam Consulting Ltd.
Manufacturing: Global SCM, Product Lifecycle Management,
Production Management, Sales Management
Retail and Services: Retail Systems for Stores and
Head Offices, Logistics Management
Enterprise Business
Net sales
300.7 billion yen
Operating income
22.2 billion yen
Main customers
Manufacturing, retail and services
Telecom Carrier Business
Net sales
698.9 billion yen
Operating income
45.6 billion yen
Main customers
Telecom carriers
Composition of sales
25%
System Platform Business
Net sales
728.5 billion yen
Operating income
37.5 billion yen
Composition of sales
26%
Others
05
Net sales
Composition of sales
326.2 billion yen
Operating loss
–8.9 billion yen
11%
Focus businesses
Business expansion based on TOMS*1,
SDN *2/NFV*3
Enhancing development to maintain
competitiveness for 5G
*1 TOMS: Telecom Operations and Management
Solutions
*2 SDN: Software-Defined Networking
*3 NFV: Network Functions Virtualization
Focus businesses
Maximizing the profit of existing
businesses
Establishing an IoT*4 platform focused
on safety and retail
Strengthening key business areas
*4 IoT: Internet of Things
Focus businesses
International safety business
Major Products and Services
Network Infrastructure
Core Network, Mobile Phone Base Stations,
Submarine Systems (Submarine Cable Systems,
Ocean Observation Systems),
Optical Transmission Systems,
Routers/Switches, Mobile Backhaul (“PASOLINK”)
Services & Management
Telecom Operations and Management Solutions (TOMS),
Services/Solutions
Major Consolidated Subsidiaries
NEC Network Products, Ltd.
NEC Communication Systems, Ltd.
OCC Corporation
NEC Networks & System Integration
Corporation
Netcracker Technology Corporation
Major Products and Services
Hardware
Servers, Mainframes, Supercomputers, Storage,
Business PCs, Tablet Devices, POS, ATMs,
Control Equipment, Wireless LAN Routers,
Displays, Projectors
Software
Integrated Operation Management,
Application Servers,
Security and Database Software
Enterprise Network Solutions
IP Telephony Systems, WAN/Wireless Access Equipment,
LAN Products
Services
Data Center Infrastructure, Maintenance and Support
Major Consolidated Subsidiaries
NEC Platforms, Ltd.
NEC Fielding, Ltd.
NEC Display Solutions, Ltd.
NEC Embedded Products, Ltd.
Major Products and Services
Safety
Biometric Solutions (such as Face Recognition, Fingerprint Identification),
Surveillance
Smart Energy
Lighting Equipment
Major Consolidated Subsidiaries
NEC Energy Devices, Ltd.
NEC Energy Solutions, Inc.
NEC Lighting, Ltd.
NEC Nexsolutions, Ltd.
NEC Management Partner, Ltd.
06
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Profile The Social Value That the NEC Group Aims to Create
Building upon our corporate brand statement “Orchestrating a brighter world,” NEC is committed as a social value
innovator to providing value that leverages the power of ICT. In setting our direction for this, we first analyzed
worldwide economic, social, and technological trends, narrowing them down to six megatrends. Viewed from the
long-term perspective, these are the issues that will likely confront countries, companies, communities and people
for the next 20 or 30 years. Based on these megatrends, we established seven themes for social value creation,
taking advantage of our strengths in ICT. To maintain our own sustainable development while simultaneously
achieving a sustainable society, NEC is committed to providing social value centered on these seven themes.
6 Megatrends
(Material Issues)
The consumption of water and food due to population
growth and urbanization will impact the other
resources and the environment.
Rapid economic growth in emerging countries will
cause new issues, such as environmental concerns
and resource shortages, even as their power grows.
In advanced countries, low birthrates, aging of
populations, and the deterioration of facilities will
encourage reform of the current legal and social
systems.
Advancement of the Internet will raise concerns over
cyber-attacks, etc., while increasing the influence of
individuals on the global stage.
As emerging countries and individuals have more
influence, the world will decentralize and form a new
power balance.
Big changes in the world will generate various threats
to both the real world and cyberspace, and increase
demand for safety and security.
The Seven Themes for Social Value Creation
Value for Society
Safety
Security
Efficiency
Equality
Four Sources of Value
Real time
Dynamic
Remote
Secure
07
08
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Business Model:The Social Value That the NEC Group Aims to Create Value for Society
What is the social value that NEC provides? We strive hard to be a social value innovator who pursues
the improvement of the fundamental issues facing society, its customers, and enriches human lives.
These factors led us to conclude that there are four types of social value the NEC Group should
continue to provide: safety, security, efficiency, and equality.
Ensuring broad range
of safety for all from
individual to country
Serving society and
the Earth
Realizing sustainable
growth
Closing the social
divide and
eliminating inequality
Four Sources of Value
Backed by our ICT assets and our advanced ability to integrate these assets, the following four
capabilities represent our sources of value: happening in real-time, being dynamic, being remote,
and being secure.
Delivered by technologies
such as cloud infrastructure
and supercomputers.
Utilizing computing
capabilities that surpass
previous abilities, we
create value that
transcends the
constraints of time.
Delivered by software
technologies, such as
big-data analysis, and
image analysis, as well
as through system-
integration (SI) abilities.
It allows us to flexibly
create value in response
to any kind of change.
Delivered by technologies
such as mobile-communication
infrastructure, submarine
cables, and software-
defined networking (SDN).
Bringing advanced
networks into fruition, even
in remote locations, allows
us to provide value that
transcends the constraints
of distance.
In advancing the creation
of social value through
ICT, it is essential to
maintain safety both in
cyberspace and the real
world. While ensuring the
safety of value creation,
we guarantee the
expansion of the value
we provide.
One-to-Many
Tackling the fundamental issues
of our customers and society
To maximize the social value that NEC provides, the company needs to
change. Historically, we built our presence within a culture of responding
comprehensively to the requirements of each customer. In other words, it
was a one-to-one business model.
Moving forward, we need to tackle more social issues in the global market
and to keep making greater contributions. We also need to create our own
value for our customers’ customers. In addition to a one-to-one business
model, it is essential that we strengthen our one-to-many business model.
This framework is based on developing business models through
understanding of our customers’ requirements, taking advantage of our past
experience in successfully creating various kinds of value and also by
working together with our customers in creating new value for society as a
whole. In addition, we will consider the external environment when
elaborating on NEC’s unique business model for our customers and society.
The efforts of all our employees will lead us to establishing a one-to-many
culture. Through this transformation, we aim to both continue providing
greater value to society and to become a true business partner, irreplaceable
to our customers.
09
10
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Business Model:The Social Value That the NEC Group Aims to Create Working in Concert with Stakeholders to
Find Solutions to Social Issues
Through dialog and cooperation with our various stakeholders, NEC is working to better understand the
fundamental issues facing our customers and society. We aim to build a better relationship of trust by doing
so. NEC will continue to create and provide new value by working toward finding solutions to social issues
together with our stakeholders.
Working with Our Customers to
Resolve Issues Together
The opinions of customers that we receive as a result of our day-to-day business
activities are a valuable source of information when it comes to improving those business
activities and generating ideas for new solutions. And to help spur innovation, we have
established a co-creation workshop space at NEC that is being used to collaborate with
customers and partners to help clarify the issues facing our customers and society. Then,
we can better come up with ideas about how to address those issues.
Aiming to Resolve Social Issues
as a Member of Local Communities
When it comes to resolving social issues, engaging in dialog with local governments,
NPOs, and other organizations that are familiar with regional issues is imperative. In
this fiscal year, we were able to deepen collaborative ties with local governments by
signing a reconstruction cooperation agreement with Minamisanriku town in Miyagi
Prefecture. This was an extension of the Great East Japan Earthquake reconstruction
volunteer activities of the NEC Group’s
“TOMONI” Project. We also co-hosted the Tokyo
Sign Language College in cooperation with the
Tokyo Metropolitan Government and Tokyo
Metropolitan University, a public-university corporation.
At NEC, we will continue to work toward resolving social
issues by focusing on the three themes of “Welfare &
Diversity,” “the Environment,” and “Education, Culture, &
Sports.” We will do this while promoting social contribution
programs, such as our employee community volunteer
program: the NEC Make-a-Difference Drive.
Signing Ceremony for the Reconstruction
Cooperation Agreement, November 2015
(Left: General Manager of NEC Tohoku
Branch Division, Right: Minamisanriku Mayor)
Improving Corporate Value via Dialogs
with Shareholders and Investors
Our shareholders and investors provide valuable feedback that can
lead to improvements in management, such as the ability to
make rapid responses to changes in the external environment.
At NEC, the Investor Relations Office, a department within the
Corporate Strategy Division, focuses primarily on investor
relations activities with the assistance of the president and
CFO. These activities include meetings with shareholders,
quarterly financial result briefings, and business briefings. The
ideas gained through these dialogs are communicated to senior
management and reported regularly to the Board of Directors.
Moving forward, NEC will continue to actively engage in IR activities
to make our dialogs with shareholders and investors even more fruitful.
11
Engaging in Responsible Corporate
Activities with Suppliers
The need to work with suppliers to ensure responsible procurement is a
common issue worldwide. Even the 2015 G7 Summit Leaders’ Declaration
included a reference to “Responsible Supply Chains.” At NEC, we established the
NEC Group Procurement Policy based on ISO26000 guidance on social
responsibility to address six priority risk categories related to procurement.
They are human rights, labor, fair trade, the environment, information security,
and supply responsibility. So, for example, we use our CSR-PMR* on-site
assessment of human rights and occupational safety and health as a program
unique to NEC. It has been conducted with suppliers since fiscal 2013. Rather
than a simple one-sided audit, the program relies on engaging in mutual dialogs
with suppliers.
*PMR = Process Management Review
Organizational Revitalization via Dialogs with Employees
The opinions of our employees serve as an essential gauge to indicate
whether we are fostering an organizational culture that they
are happy to be a part of. At NEC, we conduct a “One NEC
Survey” annually to identify the factors that motivate
employees as well as those that need improvement.
For the fiscal 2016 Japan survey, responses were
obtained from 64,825 employees, making the
response rate about 83%. More than 70% of
the respondents expressed positive opinions
about their degree of trust in their
co-workers, their desire to contribute to
customers, and their loyalty to NEC. However,
only 40% to 50% of the employees had
positive opinions about career opportunities,
evaluation systems, and work processes. NEC
also holds regular labor-management council
meetings in Japan and overseas to brief labor
unions on management policies and hear the
opinions of employees directly.
12
The Social Sector: Dialogs with CSR Review Forum-JapanAt NEC, annual reports and CSR reports are used to engage in dialogs with NPOs as a part of our CSR management. This includes dialogs that are based on ISO26000. They have been going on since 2011 with CSR Review Forum-Japan, an NPO that was jointly established by labor groups, consumer groups, and NGO/NPOs with the goal of building a sustainable society.A dialog was held in 2016 that covered our new Mid-term Management Plan, issues with partnerships in creating solutions for society, privacy issues when promoting business using ICT, and CSR procurement.NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Business Model:The Social Value That the NEC Group Aims to Create NEC’s Distinctive ICT Underpinning
Social Value Creation
ICT connects numerous physical things in the real world and allows us to visualize them in the cyber world. By
analyzing how these physical things are linked, we can better understand and predict the true needs of our
stakeholders and help create new value for our customers and society. Artificial intelligence (AI) helps us
visualize these physical things and analyze data. And controls and guidance help us turn the results of that
analysis into services and solutions. Here are a few of NEC’s powerful ICT assets that help us in our quest to
create new value.
The World’s No.1 Face
Recognition Technology
With over 40 years of continued R&D, NEC is a pioneer in the field of
biometric authentication. We have implemented more than 700 biometric
authentication systems in over 70 countries around the world. Our face
recognition AI technology took first place at three consecutive Face
Recognition Vendor Tests conducted by the U.S. National Institute of
Standards and Technology (NIST). There was an overwhelming gap
between us and all other participating vendors each time. NEC has
therefore established itself as the undeniable global leader in this area.
The World’s First AI Technology
to Support Big Data Analysis
Our “Invariant Analysis Technology” automatically models correlations
between large amounts of sensor data to enable the early detection of
anomalies that would otherwise be unnoticeable. The technology is
being used for factory prediction monitoring and diagnostic systems.
And our “Heterogeneous Mixture Learning Technology” uncovers
multiple relationships hidden in Big Data to automatically discover and
predict useful patterns and regularities. This enables prediction and
decision making in a way that makes reasons known in dynamically
changing environments. It was previously problematic with machine
learning technologies.
SDN Architecture: More Flexible
and Efficient Networks
Traditional networks are complex, requiring a high level of specialized
knowledge to modify or troubleshoot them. However, with the
development of cloud solutions and server virtualization, networks are
now expected to be more flexible and efficient. SDN uses software to
achieve centralized management of a network, resulting in a network
that is not only easier to modify than traditional ones, but also more
flexible and efficient. NEC proactively led the standardization of SDN
from early on. And, in 2011, NEC was one of the first companies in the
world to release SDN products. Now, over 600 systems around the world
rely on NEC’s SDN technology*.
* As of May 2016
Cyber Security Technology with
Support from Agencies Worldwide
and a Proven Track Record
NEC provides safe and secure ICT environments based on its “security-
by-design” concept that requires strong security from the planning and
design phases. We are also developing advanced technologies to help
protect against increasingly sophisticated cyberattacks, including
AI-driven measures against unknown attacks. Moreover, the cooperative
ties we have forged with INTERPOL and other agencies have allowed
NEC to collect and analyze threat intelligence from around the world to
help strengthen cyber security globally.
13
14
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Business Model:The Social Value That the NEC Group Aims to Create Message from the President
NEC Corporation is working to improve
management speed, enhance execution power,
and pursue group business management in
preparation for the large changes
that will take place in the future.
Takashi Niino
President and CEO
September 1954 Born in Fukuoka Prefecture, Japan
March 1977 Graduated from the Faculty of Engineering of
Kyoto University
Joined NEC Corporation
April 1977
April 2008 Senior Vice President,
April 2010 Executive Vice President
June 2011 Executive Vice President and Member of the Board
April 2012 Senior Executive Vice President and Member of the Board
April 2016 President and CEO (Representative Director) (to present)
Mr. Niino was appointed President and CEO in April 2016 after being engaged
in the management of the financial solutions business and the NEC Group’s
management strategies.
Sustainable Development of Society and the NEC Group through The NEC Way
Global environment
Stakeholders
Customers/ Shareholders and Other Investors/ Business Partners/
Local Communities/ Employees, etc.
Build trust through
communication
An information society friendly to
humans and the earth
Provide active disclosure
and feedback
NEC Group
Core Values
(What we value
and base our
behavior on)
Daily work
Fiscal year plan
Mid-term growth plan
NEC Group Vision
NEC Group
Code of Conduct
(Corporate
ethics and
compliance)
NEC Group Corporate Philosophy
NEC Group Charter of Corporate Behavior
The NEC Way includes the Group Corporate Philosophy, the Group Vision,
the Group Core Values, the Group Charter of Corporate Behavior, and the Group Code of Conduct.
NEC Group Corporate Philosophy: NEC strives through “C&C” to help advance societies worldwide toward deepened mutual
understanding and the fulfillment of human potential
To be a leading global company leveraging the power of innovation to realize an information
society friendly to humans and the earth
Passion for Innovation, Self-help, Collaboration, and Better Products, Better Services
NEC Group Core Values:
NEC Group Vision:
Message from the President
Introduction
Introduction
Review of Mid-term
Management Plan 2015
NEC’s Challenges
Management Policy
Mid-term Management Plan 2018
Market Environment and
Risks/Opportunities
Framework of Mid-term
Management Plan 2018
Reorganization of Profit Structure
Getting Back on the Track to Growth
Evolving Our Corporate Culture
Page 15
Page 17
Page 17
Page 18
Page 19
Page 19
Page 20
Page 20
Page 22
15
Ever since its establishment in 1899, NEC has strived
to maintain high ethical standards, create products
and services that provide value to our customers, and
become a company trusted and chosen by all of its
stakeholders, including customers, under our motto of
“Better Products, Better Services.” This philosophy is
alive and well today as a part of The NEC Way, a
cohesive framework that outlines the NEC Group’s
management practices and operations such as the
NEC Group Corporate Philosophy and NEC Group
Vision. By implementing The NEC Way we ensure
continual development of the NEC Group and
contribute to a sustainable society by working to
create social value under the brand message,
commitment, NEC is promoting corporate business
“Orchestrating a brighter world.”
activities in compliance with the ten principles in the
NEC is working to realize “an information society
areas of human rights, labor, the environment, and
friendly to humans and the earth” as asserted in the
anti-corruption based on the UNGC framework. NEC is
NEC Group Vision, based on NEC’s Corporate
working to solve social issues by providing value in
Philosophy. With the belief that NEC, as an enterprise,
the four areas of safety, security, efficiency and
must contribute to the well-being of society,
equality. This is aimed at creating a sustainable
everyone at NEC values ethics and is committed to
society and making contributions to building a
meeting compliance standards in daily business
peaceful and just society, which is the stated goal of
operations by practicing the NEC Group Core Values.
“Transforming Our World: the 2030 Agenda for
In doing so, the NEC Group aims to solve social and
Sustainable Development” (SDGs*) adopted by the
environmental issues that affect people’s lives.
United Nations in 2015.
In 2005, NEC became a signatory to the United
Nations Global Compact (UNGC). Based on this
* SDGs: Sustainable Development Goals
16
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Commentary on Management Strategy
Review of Mid-term Management Plan 2015
Management Policy
The Mid-term Management Plan 2015, announced in
billion or higher, and net income grew slowly but
A commitment to thorough enforcement of
we will clarify each person’s authority and
April 2013 as a three-year plan up to the fiscal year
steadily. Additionally, we lowered our debt-equity
compliance and the evolution of corporate culture
responsibility in new business creation. Also, we will
ended March 31, 2016 (the fiscal year under review),
ratio (on a net basis) steadily, which I believe shows
represent the very foundation of business operations
always consider potential partnerships to speed up
calls for NEC to further strengthen its four focus
the strengthening of our profitability and the
and, for this reason, we are working to thoroughly
execution. Until now, NEC’s culture has been strongly
businesses of Big Data, Cloud, Safety/Cyber Security,
progression of our financial strength.
improve and reinforce these areas as a top priority.
inclined to go it alone, believing that our own
and SDN (Software-Defined Networking), given the
Our progress under the three management policies
First, from the perspective of improving
technologies and know-how would be enough.
expected decline in our existing businesses in Japan.
cited in the Mid-term Management Plan 2015 is as
management speed, we will clarify decision making
However, we will now work to change this mindset.
The other major goal of this plan is to create new
follows. In terms of focusing on “Solutions for
for the corporate, business unit and business division
Finally, in terms of promoting corporate group
businesses primarily in international markets. Prior to
Society,” we achieved solid results in strengthening
levels, and also quickly implement the PDCA cycle to
business management, we will work to optimize the
the previous fiscal year, our profits exceeded the
the core assets in our four focus businesses and
achieve continual improvements. In order to
entire NEC Group. Currently, the NEC Group comprises
targets in the plan, underpinned by demand in major
restructuring our business portfolio in the consumer
accelerate the pace of execution after decisions are
more than 200 affiliated companies employing some
public infrastructure replacements mainly in Japan.
business. Nevertheless, we are left with the
made, we will ensure thorough discussion takes place
100,000 employees. Through the work style
However, in the fiscal year under review, we fell
challenge of having to make up for delays in
and that business is executed with alignment among
transformation by each employee and the creation of
largely short of our targets in terms of net sales and
launching new businesses, including transforming our
all those involved. Also, in the arena of new value
a more open and collaborative culture as “One NEC,”
operating income.
business model. In terms of focusing on Asia and
creation, it is essential that our organizations are
we will continue working on optimizing the entire
Comparing the operating income target and results
promotion of “locally-led” businesses, we
closely intertwined both vertically and horizontally
NEC Group to respond to the constantly changing
for the fiscal year under review shows a major gap
accumulated positive results in Asia and Latin
and work closely together. In order to do this, from
world of tomorrow.
between the two for the telecom carrier business
America, mainly in the safety business, while our
the perspective of enhancing execution power, firstly
and smart energy business. I believe this is because
international operations also grew steadily, but both
both businesses had excessive expectations for their
sales and operating income fell short of the target.
markets and lacked the execution power to achieve
Finally, in terms of stabilizing the financial
our targets.
foundation, we achieved a sound balance sheet and
Meanwhile, looking at the results from the previous
increased the dividend, but again we fell short of our
four years, we achieved operating income of ¥100
goals for free cash flows and return on equity (ROE).
Enforcement of compliance / Evolution of corporate culture
Instill and build corporate ethics and compliance as group-wide corporate culture
Strengthen capability to continuously create value, and establish system based on “HR philosophy”
While progress has been made in optimizing our business portfolio, we are behind
schedule in terms of business growth and earnings structure improvements.
Improve management speed
Implement PDCA that is conducive to swift decision-making
Build alignment by thorough discussion and accelerate execution speed
NEC’s Challenges
We set out three years ago to devote our energies to
the reasons we did not achieve our targets was that
“Solutions for Society,” and our goal of finding
measures to address various risks were not included
solutions to social issues through ICT as a social
in our action plans in the essential planning stage of
value innovator remains the same today. I know that
the PDCA cycle. Another challenge was that we were
NEC has the necessary technical and human assets
unable to create new value fast enough to stay
to create value in this growth field. However, one of
ahead of the rapid changes in the market.
Enhance execution power
Clearly define authority / responsibility within the complex businesses
Select business partners based on strong capability to navigate the market
Group business management
Pursue the “Best” for the whole NEC Group.
Transform the work style of the 200 group companies and 100,000
employees, and optimize resource allocation
17
18
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Commentary on Management Strategy Mid-term Management Plan 2018
Market Environment and Risks/Opportunities
NEC’s forecast for the future macro environment indicates that
Europe and North America will see stable growth, while emerging
countries’ growth will slacken, especially in resource-rich
countries. Japan will continue to see low growth. In contrast, in
the ICT market, general awareness of artificial intelligence (AI)
and the Internet of Things (IoT) will grow and it will become
reality where people, things, and phenomena are connected
securely in various aspects of our lives. In other words, the
importance of Solutions for Society will continue to grow. The
values of safety, security, efficiency and equality that NEC
provides will become of greater use around the world and will
serve as a tailwind propelling NEC’s business strategy forward.
Framework of Mid-term Management Plan 2018
Under the new Mid-term Management Plan, we will usher in
in-house reforms based on the various challenges we face and
continue to further strengthen our focus on Solutions for
Society. With regards to this, our management policy is largely
broken down into inward efforts and outward efforts.
Inward efforts will focus on reorganizing the profit structure,
with the goal to generate a 5% operating income ratio as the very
minimum. To accomplish this, we will reform underperforming
businesses and unprofitable projects, promote our Business
Process Optimization Project, and optimize development and
manufacturing functions.
For our outward efforts, we will work to get back on a growth
track. This will be achieved by globalizing Solutions for Society
after reconfiguring the business perspective of our four focus
businesses, which until now have been based on technical
assets, and focusing management resources on the three
business areas of Safety, Global Carrier Network and Retail IT
Service.
The Mid-term Management Plan targets for the fiscal year
ending March 31, 2019 (under International Financial Reporting
Standards [IFRS]) are net sales of ¥3,000 billion, operating
income of ¥150 billion (operating profit ratio of 5%), profit
attributable to owners of the parent of ¥85 billion, free cash
flows of ¥100 billion, and ROE of 10%. We will now work
diligently to achieve these targets, which represent the absolute
minimum to be attained.
Mid-term Management Policies
Implement reforms to address challenges and continued focus on Solutions for Society
Reorganization of profit structure
— establish profit structure for generating 5%
operating profit ratio —
Reform underperforming businesses and unprofitable projects
Business process optimization project
Optimization of development and manufacturing functions
Getting back on the track to growth
— globalization of Solutions for Society —
Focus on key businesses
Safety business
Global carrier network business
Retail IT service business
Mid-term Management Targets
(Billions of Yen)
Net sales
Operating income
(Operating income ratio)
Profit attributable to owners of the parent
Free cash flow
Return on equity (ROE)
FY2016/3
JGAAP
2,821.2
107.3
3.8%
68.7
65.6
8.5%
IFRS
2,824.8
91.4
3.2%
75.9
—
—
FY2019/3 Target
IFRS
3,000.0
150.0
5%
85.0
100.0
10%
* FY2016/3 IFRS figures are currently not audited and subject to change upon audit completion during FY2017/3.
19
Reorganization of Profit Structure
There are three key areas we must address in reorganizing our
profit structure.
First, NEC will reform underperforming businesses and
unprofitable projects. Initially, this will involve making
improvements to the smart energy business where we recorded a
significant loss in the fiscal year under review. Our target is to
improve profits by ¥24 billion in the fiscal year ending March 31,
2019 (compared to the fiscal year under review). We carried out
asset impairments of around ¥10 billion in the fiscal year under
review, so that actual improvement in profits will be around ¥14
billion. In April 2016, NEC reorganized the smart energy business
as a business division under direct control of Corporate and
executed management structure reforms. In addition to optimizing
the scale of its resources by minimizing operations, NEC will
continue to transform its business portfolio and shift its business
model towards system integration and service business. We will
make efforts to curtail unprofitable projects, with the target to
improve profits by ¥13 billion in the fiscal year ending March 31,
2019 (compared to the fiscal year under review). This past year
the public business and international business saw increases in
unprofitable projects, but the enterprise business successfully
eliminated unprofitable projects through risk assessments prior to
the contract and careful management at key project milestones.
NEC will laterally deploy this know-how of profitability control
across the entire NEC Group to reduce these projects. In addition,
NEC will focus on strengthening its project management
capabilities and PMO* functions. The management for global
affiliates will be urgently reinforced in an effort to improve
profitability control.
The second key area is the Business Process Optimization
Project. In 2014, NEC established NEC Management Partner, Ltd.
(NMP) to achieve ¥30 billion in cost savings and, through
Getting Back on the Track to Growth
Under the Mid-term Management Plan 2015, we made strong
progress in terms of company-wide strategic investments
primarily in the Big Data, Cloud, Safety/Cyber Security and SDN
domains. Sales from these four domains in the fiscal year ended
March 31, 2014 totaled about ¥120 billion, but in the fiscal year
under review this amount nearly doubled to about ¥230 billion.
This growth far outpaces that of the market. Over the past three
years, these domains have not only contributed to sales, they
have helped us to reinforce our technical assets.
IoT will play an integral role in the world of tomorrow. For this
reason, a variety of businesses will be created atop the platform
of IoT. This will involve a series of processes spanning from
visualization and standardization of operations and process reform,
NEC has striven to streamline its Administrative Staff operations
by 30%. We have already achieved ¥5 billion of this target in the
fiscal year under review, so now we will work to achieve the
remaining ¥25 billion over the next three years. Specifically, NEC
will expand the consolidation of Administrative Staff operations to
16 of its largest Group companies to accelerate process reform
along with visualization and standardization. Workforce reduction
of 30% should be delivered through curbing supplemental staff
and shifting personnel to other operations. We will consolidate IT
operation management, including order operations and mission-
critical systems to thoroughly streamline costs, with the target of
¥10 billion in cost savings in the fiscal year ending March 31, 2019
(compared to the fiscal year under review).
The third key area is optimization of development and
manufacturing functions. We will further accelerate the
integration of these functions within the Group in an effort to
realize ¥10 billion in cost savings in the fiscal year ending March
31, 2019 (compared to the fiscal year under review). NEC has a
track record of successful cost reduction through integration of
subsidiaries, such as NEC Network Products, Ltd., combining three
subsidiaries engaged in network related hardware businesses;
NEC Solution Innovators, Ltd., merging seven software
subsidiaries; and NEC Platforms, Ltd., combining four subsidiaries
engaged in IT hardware businesses. NEC will continue with similar
initiatives in the future to achieve even greater effects. For the
optimization of hardware development and production, NEC will
integrate development processes and development environments.
In the software segment, NEC will pursue the optimal allocation
of resources flexibly, regardless if a subsidiary is engaged in
IT-related or network-related software.
* PMO: Project Management Office
visualizing a wide range of data on the real world in the cyber
world, to analyzing this data and predicting the near future, which
result in providing value to the real world through necessary
controls and guidance. This same series of processes will be
found in every form of business in the future. It will be critical to
produce various forms of value within this flow of processes and
the four domains we have focused on strengthening will serve as
very important assets for us going forward.
Under the Mid-term Management Plan 2018, we will commit
management resources to the three businesses of Safety, Global
Carrier Network and Retail IT Service, while also being mindful of
IoT platforms and the seven themes of value creation.
20
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Commentary on Management Strategy
The sales goal for each of these three focus businesses in the fiscal
year ending March 31, 2019 is ¥142 billion for the Safety business
(3.4 times compared to the fiscal year under review), ¥210 billion
for the Global Carrier Network business (1.8 times compared to the
fiscal year under review), and ¥160 billion for the Retail IT Service
business (1.2 times compared to the fiscal year under review).
Focus Business
Safety Business
Studies indicate that the world’s population will increase 1.3 times to more than 9 billion people by the year 2050. The population of people living in cities
will increase 1.8 times, causing urban issues such as rush hour overcrowding, traffic congestion, deterioration of public safety, and pollution to grow
worse. For this reason, we believe there will be growing demand for the Safety business, which will underpin people’s safe and secure lives in the future.
NEC maintains some of the most advanced face and fingerprint recognition technologies in the world, while it has also established a high level of
expertise in security operation center operations, winning a broad range of bids from governments and other companies in the process. We will utilize
these strengths to contribute to even greater safety and security by understanding events and phenomena in real time. The targets of these efforts
will be major cities in APAC, the Middle East, Africa, and Latin America, as well as important facilities such as government institutions or airports. To
achieve this, we will need to further enhance our global delivery capability through partnerships. Under the Mid-term Management Plan 2015, we
established the Global Safety Division (GSD) in Singapore. Under the Mid-term Management Plan 2018, we will further strengthen GSD and enhance
the business globally.
Focus Business
Global Carrier Network Business
By the year 2020, the amount of computerized information is expected to increase about 10 times that of today (44 trillion gigabytes). All
new businesses utilizing IoT, such as smart factories, connected cars, connected homes and smart logistics, will be underpinned by information
communication services. This represents a major business opportunity for NEC.
NEC has the customer base and ability to provide Telecom Operations and Management Solution (TOMS), and an established track record in
Proof of Concept projects and commercialization of SDN/Network Functions Virtualization (NFV). Utilizing this track record, we can help
telecommunications carriers deliver new value-added services that meet the social needs of its customers quickly and efficiently. Specifically,
we will enhance IT/network integrated solutions combining TOMS and SDN/NFV and accelerate business expansion through a shift to open
standards and partner collaborations.
Focus Business
Retail IT Service Business
As urbanization advances in the future, demand from cities will grow for food, water and energy. The development of platforms for retail business
represents a critical task for facilitating convenient consumer activities for people living in cities, including purchasing safe and secure food.
NEC has established a solid track record over the past several decades providing various services to major convenience store chains in Japan.
The business model of operating safe, secure and efficient stores 24 hours a day, 365 days a year has some of the most demanding standards
in the world. Based on our experience gained from these relationships, we will examine practical solutions that can be rolled out globally. NEC
will work on expanding the value it provides through solutions including omni-channel retailing, authentication and clearing, operational
streamlining and facilities/equipment management. In particular, we will rapidly roll out solutions by enhancing our dedicated launch support
organization (Regional Business Support Center (RBSC)) for APAC, China and North America.
Safety
Surveillance, Cyber Security
Global Carrier Networks
TOMS, SDN / NFV
Retail IT Services
International Sales
(excl Japan)
(Billion ¥)
142.0
Global Sales
(Billion ¥)
3.4
times
Inter-
national
42.0
Inter-
national
1.8
times
120.0
Inter-
national
Japan
210.0
Inter-
national
Japan
Global Sales
(Billion ¥)
134.0
Inter-
national
Japan
1.2
times
160.0
Inter-
national
Japan
FY2016/3
FY2019/3 (target)
FY2016/3
FY2019/3 (target)
FY2016/3
FY2019/3 (target)
21
Evolving our Corporate Culture
Since its founding, NEC’s corporate culture has been embodied by
our emphasis on technology and our employees’ strong work ethic
and commitment to complete work. We should value these traits
as integral parts of our corporate DNA, but we need to transform
ourselves if we expect to produce value and address the
environmental changes taking place globally. As our main policy
under the Mid-term Management Plan 2015 was to focus on
Solutions for Society, we created the corporate brand message
“Orchestrating a brighter world” and the booklet, “NEC Group
Vision,” which describes our future vision and direction. These
were shared extensively within and outside the company. Next,
we began more thorough communication among top management
and also started activities to foster a shared understanding of
NEC’s vision for the future, in order to practice “team-based
management.” This aims to deliver value with common goals and
directions shared by each organization of the NEC Group, instead
of having each organization act independently. NEC has gradually
expanded the scope to include executives and then general
managers, etc. in an effort to foster this culture internally. We
also commenced activities to further establish this business
model approach and actions with customers for value
creation. These initiatives were executed with the goal of
building a foundation for growth in the first stage of our
transformation efforts.
In response, the new Mid-term Management Plan
represents the second stage of our transformation, where we
will create a growth pillar atop the growth foundation built
during the first stage. The next three years will be used to
create a stronger workforce that can lead NEC’s value
creation and accelerate innovation, further evolving our
corporate culture while also utilizing the positive traits unique
to NEC. This will enable us to make positive step-by-step
progress toward becoming a stronger company.
Social Solution Business
Acceleration of innovation / Improvement of quality
Creating “Best Practices”
People
Development
Creation of human resources who lead
in “Value Creation”
Review of recruitment, evaluation and training
Reform – 2nd phase
(2018 mid-term plan)
Creating the
PILLAR for growth
Value creation activity
/ Cooperation activity
Communication culture
Enhancement of value provision point of
view / business model thinking
Practice of team-based management
(Enhancing links between executives and
business managers)
Business vectors to focus on
Orchestrating a brighter world
NEC Vision Book
NEC’s advantages and corporate culture -
cultivated since its establishment
Reform – 1st phase
(2015 mid-term plan)
Creating the
BASE for growth
DNA
22
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Commentary on Management Strategy Message from the CFO
NEC will commit to improving its enterprise value placing the focus of its
capital policy on increasing shareholder returns, while expanding investments
in growth business areas and enhancing the financial foundation.
Executive Vice President, CFO (Chief Financial Officer)
and Member of the Board
Isamu Kawashima
Fiscal 2016 Performance
The NEC Group recorded consolidated net sales of ¥2,821.2
billion for fiscal 2016, a decrease of ¥114.3 billion or 3.9% year
on year. While the Enterprise business saw an increase in sales,
there were decreases in the sales of the Public and Telecom
Carrier businesses. In addition, sales of Others declined due to
deconsolidation of the logistics service business. Regarding
profitability, consolidated operating income declined by ¥20.8
billion year on year to ¥107.3 billion, mainly due to the decline in
gross profit as a result of a drop in sales despite our efforts to
(Billion ¥)
Net sales
Overseas sales
Overseas sales ratio
Operating income
Operating income ratio
Profit attributable to owners of the parent
Return on equity (ROE)
Fiscal 2016 Financial State
reduce selling, general and administrative expenses. Profit
attributable to owners of the parent was ¥68.7 billion, a year-on-
year improvement of ¥11.4 billion, mainly due to a tax expenses
decrease from the debt waiver for NEC Mobile Communications
Ltd. As a result, return on equity (ROE) was 8.5%, a 1.0
percentage point improvement from the previous fiscal year. NEC
attained the target for profit attributable to owners of the
parent, and a dividend of ¥6 per share was issued as announced
at the beginning of the period.
FY2015/3
Results
FY2016/3
Initial Forecasts
Results
2,935.5
3,100.0
2,821.2
586.8
20.0%
128.1
4.4%
57.3
7.5%
135.0
4.4%
65.0
603.2
21.4%
107.3
3.8%
68.7
8.5%
Total assets were ¥2,493.4 billion as of March 31, 2016, a
decrease of ¥127.2 billion compared with the end of the
previous fiscal year. Current assets as of March 31, 2016
decreased by ¥49.5 billion compared with the end of the
previous fiscal year to ¥1,527.3 billion as a result of collection in
accounts receivable-trade. Noncurrent assets as of March 31,
2016 decreased by ¥77.7 billion compared with the end of the
previous fiscal year to ¥966.2 billion due to declines in
retirement benefit assets and goodwill.
Total liabilities as of March 31, 2016 decreased by ¥95.5 billion
compared with the end of the previous fiscal year to ¥1,640.9
billion, mainly due to declines in trade notes and accounts payable
and interest-bearing debt. The balance of interest-bearing debt
amounted to ¥481 billion, a decrease of ¥39.8 billion from the
end of the previous fiscal year. The debt-equity ratio as of March
31, 2016 was 0.61, an improvement of 0.02 percentage points
compared with the end of the previous fiscal year. The balance of
net interest-bearing debt as of March 31, 2016, calculated by
offsetting the balance of interest-bearing debt with the balance
of cash and cash equivalents, amounted to ¥288.7 billion, a
decrease of ¥51 billion compared with the end of the previous
fiscal year. The net debt-equity ratio as of March 31, 2016 was
0.36, an improvement of 0.05 percentage points compared with
the end of the previous fiscal year.
Total net assets decreased by ¥31.7 billion compared with the
end of the previous fiscal year to ¥852.5 billion as a result of
declines in remeasurements of defined benefit plans and foreign
currency translation adjustment, despite recording profit
attributable to owners of the parent.
As a result, the owner’s equity as of March 31, 2016 was ¥792.1
billion and the owner’s equity ratio was 31.8%, an improvement of
0.4 percentage points compared with the end of the previous year.
Net cash inflows from operating activities for the fiscal year
ended March 31, 2016 were ¥97.8 billion, an improvement of
¥9.9 billion compared with the previous fiscal year, mainly due to
improved working capital.
Net cash outflows from investment activities for the fiscal
year ended March 31, 2016 were ¥32.2 billion, a decline of ¥15.3
billion compared with the previous fiscal year. This was mainly
due to decreased outflows for business acquisitions. As a result,
free cash flows, the sum of cash flows from operating activities
and cash flows from investment activities for the fiscal year
ended March 31, 2016 totaled cash inflows of ¥65.6 billion, an
increase of ¥25.2 billion year on year.
Net Debt-Equity Ratio
Owner’s Equity, Owner’s Equity Ratio
(times)
0.67
0.57
0.53
(Billion ¥)
657.0
710.7
695.9
823.7
792.1
Operating Cash Flows, Investment
Cash Flows, Free Cash Flows
(Billion ¥)
143.7
83.9
94.1
87.9
97.8
0.41
0.36
25.7% 27.5% 27.8%
31.4% 31.8%
34.2
42.0
55.2
40.4
65.6
2012
2013
2014
2015
2016
(At year-end)
2012
2013
2014
2015
2016
(At year-end)
Owner’s Equity
Owner’s Equity Ratio
–49.7
–38.9
–47.5
–32.2
–101.7
2012
2013
2014
Operating Cash Flows
Free Cash Flows
2016
2015
(Years Ended March 31)
Investment Cash Flows
Mid-term Management Plan 2018 and the Initiatives for Fiscal 2017
NEC decided to adopt the International Financial Reporting
Standards (IFRS) from the fiscal year ending March 31, 2017. Under
the Mid-term Management Plan 2018 announced in April 2016,
NEC targets to achieve an average sales growth of 2% per annum
and an increase in operating income by approx. ¥60 billion to ¥150
billion, which is 1.6 times the current level over three years for the
fiscal year ending March 2019. As for the management policy, in
terms of income, NEC will first undertake reorganization of its
earnings structure, implementing various enterprise-wide
measures to achieve an operating income ratio of 5% and an ROE
of 10% for the fiscal year ending March 2019. Then, with regard to
growth, NEC will get back on the track to growth and achieve a
new sales target exceeding ¥3 trillion, concentrating on three
focus businesses which have been newly defined.
In the upcoming fiscal year, NEC will try to improve profitability
through speedy PDCA and creating a stable cash flow from these
two viewpoints of income and growth. NEC will make company-
wide efforts to achieve the target for the upcoming fiscal year
and to get back on the track to growth this year with its eyes set
on the policies/targets under the new Mid-term Management Plan.
Capital Allocation
Under the Mid-term Management Plan 2018, NEC will commit to the
improvement of corporate value while expanding investments in
growth business areas and enhancing its financial foundation, placing
the focus of its capital policy on shareholders’ returns. We set profit
attributable to owners of the parent of ¥85 billion as a target for the
fiscal year ending March 2019 through resolving issues for growth
and promoting operational efficiency. We also aim to achieve free
cash flows of ¥100 billion by creating cash through improvement of
the cash conversion cycle (CCC) as well as accumulation of profits.
For growth-oriented investments, we have secured a ¥200 billion
framework for inorganic strategy including M&A, and allocate
investments to accelerate the growth of our three focus businesses.
With regard to enhancement of the financial foundation, we will aim
for an increased dividend from the current annual dividend of ¥6 for
shareholders’ return, making conscious effort to achieve the net
debt-equity ratio of 0.5 as of March 31, 2019.
Capital Allocation
Aiming for shareholder returns while expanding investment in growth
business areas and enhancing the financial foundation
Net income
FY2019/3 (Target):
¥85 billion
Free cash flow
FY2019/3 (Target):
¥100 billion
Secure operating income by
resolving of issues and streamlining
to operational efficiency
Compress operating capital by
promoting CCC improvement
Investment
for growth
Secure ¥200 billion
framework for inorganic
strategy
Enhancement of
financial foundation
Net D/E Ratio around 0.5
times
Shareholder returns
Aim for increased dividend
from ¥6 (annual dividend)
23
24
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Commentary on Management Strategy
Initiatives on the Themes of Social Value Creation
NEC utilizes its years of experience and unique strengths to focus on seven themes of social value creation in
order to solve the challenges faced by customers and society.
These seven themes of social value creation were established based on six megatrends identified by analyzing
trends in global economics, society, and technology, and they directly relate to the 17 Sustainable Development
Goals (SDGs) adopted by the 193 member states at the UN Sustainable Development Summit.
For example, the “Sustainable Earth” theme of social value creation relates to “Goal 7: Affordable and Clean
Energy” and “Goal 13: Climate Action” indicated in the SDGs. The themes of “Safer Cities & Public Services,”
“Lifeline Infrastructure,” and “Communication” also relate to “Goal 9: Industry, Innovation and Infrastructure”
and “Goal 11: Sustainable Cities and Communities.” Furthermore, the theme of “Industry Eco-System” relates to
“Goal 8: Decent Work and Economic Growth,” in addition to Goal 9. Finally, the themes of “Work Style” and
“Quality of Life” relate to Goal 8 and “Goal 16: Peace, Justice and Strong Institutions.”
Of these seven themes of social value creation, NEC initiatives for “Safer Cities & Public Service,” “Lifeline
Infrastructure,” and “Industry Eco-System” are described here, and these all relate to “Goal 9: Industry,
Innovation and Infrastructure” indicated in the SDGs.
Overview of SDGs
The SDGs include a total of 17 goals and 169 targets.
NEC promotes corporate activities that respect ten principles regarding human rights, labour, the
environment, and anti-corruption, based on the UN Global Compact signed in 2005.
As a company that provides social value on a global scale, NEC promotes business activities that recognize
the 17 goals and 169 targets of the SDGs.
Building and Developing Safe and Secure Urban and
Administrative Foundations
In cities where populations are becoming concentrated and globalization is taking place, the risk of safety being
threatened with a cyber attack is also increasing. There is also a need to prepare for natural disasters, which
occur around the world on a daily basis. By developing early warning systems for crime and disasters, NEC will
contribute to the realization of an administrative foundation in which the appeal of regions can be exhibited by
making use of the power of the region’s people in addition to the fields of industry, government, and academia.
Initiatives in Conjunction with Toshima City, Tokyo
The World-first* Total Disaster Prevention System with
“Crowd Behavior Analysis Technology”
* Source: NEC
The Great East Japan Earthquake struck the country in
March 2011. On the day of the disaster, Toshima city was
not able to make swift decisions since there was no way
to promptly gather and grasp the information related to
the disaster and the situations of the stranded
commuters. Thus, Toshima city decided to implement
NEC’s “comprehensive disaster control system” which
provides integrated management for collecting, managing
and distributing disaster information.
The city installed 51 disaster prevention cameras in the
emergency relief centers near major transport facilities,
and on major roads to collect real-time information on
damage caused by natural disasters. NEC’s indigenous AI
“crowd behavior analysis technology” detects
overcrowding or stagnation on disaster prevention
camera footage. In addition, emergency alerts, accidents,
relief center preparation and other information can be
compiled centrally on a geographical information system,
and then displayed visually using maps.
NEC provides real-time data collection and integrated
visual representation of the overall situation to enable
Toshima city to make swift decisions, distribute pertinent
information, and formulate measures to help stranded
commuters, thereby contributing to disaster-resilience.
Percentages indicate the
density of people in the area
Colors indicate the
density of people
Arrows indicate flow
of people
Unusual
congestion
Crowd
stagnation
The crowd behavior analysis technology enables to perform highly precise
analyses and issues an alert if predetermined threshold levels are exceeded.
Without overlooking, initial response can be delivered timely.
Initiatives in Conjunction with the City of Tigre, Argentina
NEC “Face Recognition Technology” Incorporated into the Monitoring System to
Detect Suspicious Activities
NEC provides the world’s best*1 face recognition
technology, which is adopted in the urban surveillance
system in the City of Tigre, Argentina for urban security.
The video feeds from network cameras installed in railway
and river stations are checked against a massive database
of enrolled photos in real time, to allow prosecutors,
judicial institutions, and public welfare organizations to
search for missing persons.
Unique technologies such as detection of double riding
on a motorcycle, a common method of purse-snatching,
behavior detection for spotting suspicious behavior and
vehicles, license plate recognition to identify suspicious or
stolen vehicles, and advanced solutions such as crime
area mapping to plot the locations of past crimes on a
map for better visualization also contribute to crime
reduction across the city.
*1 Rated No. 1 based on benchmarks by the National Institute of Standards and
Technology (NIST).
Operation center that integrates the urban surveillance system in the City of
Tigre, Argentina. NEC ICT solutions are actively used to improve safety.
25
26
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Business Activities for Social Value Creation Building and Developing Safe and High-Efficiency Lifelines
Production and infrastructure are becoming increasingly diverse and complex with the global progress of
urbanization. Social infrastructure from now on must flexibly respond to demographic and technical changes,
and the growing risks of major disasters. NEC continues to ensure safe and efficient supply of valuable
resources by providing infrastructure that operates 24/7, alleviating regional and time disparities with flexible
and sophisticated ICT systems.
Supporting a World Recreated with New Bonds of Industries and ICT
The IoT connects people, tangible objects, and intangible objects together to enable a highly productive and
efficient value chain with the real-time visualization of production and sales processes. User consumption
patterns and needs are also diversifying, with the consumption of intangible objects becoming more important
than physical products, and users preferring to share things rather than own them. In order to respond to this
trend, NEC will realize a next-generation industry eco-system through new digital platforms.
Advanced SDN/NFV Solutions from NEC to Flexibly Respond to
Increasingly Diverse and Complex Social Infrastructure
Initiatives in Conjunction with Yamato System Development Co., Ltd.
Improving the Efficiency of Manpower and Time for Inspection Work
The progression of the IoT leads to diversifying demands
for communication environments, including the need for
secure networks and bandwidth guaranteed networks.
For telecommunications providers, this means a large
investment is required to build the networks that will
meet these diverse needs, and delays can easily lead to
lost opportunities.
The SDN/NFV solutions of NEC utilize virtualization
technologies that enable the overall network system to be
dynamically rebuilt, which provides high cost-effectiveness
and flexibility.
NEC and Telefónica, one of the world’s leading telecom
carriers, completed the first phase of a pre-commercial trial
for vCPE*2 for residential users in the network of
Telefónica’s Brazilian affiliate, Telefónica Brasil (Vivo), NEC’s
vCPE solutions will enable network functions such as IP
address allocation, security and others to be shifted away
from the residential gateways and towards Telefónica
Brasil’s own network. This will improve Telefónica Brasil’s
broadband access network service through better and
NEC Airport Solutions Provided for
More Than 50 Years
As demand for air transportation increases year after year,
it leads to excessively dense and crowded airports and air
routes, a highly reliable system that is resilient to failure is
essential for ensuring efficient and safe
air navigation. The need to prevent
unauthorized access and improve service
in airports is also increasing.
stronger operability and safety, as well as network
simplification. It also enables various services to be
provided to the end user, which leads to increased
convenience and customer satisfaction.
Operation and maintenance of the broadband access network services has
improved and the creation of new services for end users on various household
terminals is expected.
*2 vCPE: virtualized Customer Premises Equipment
Over the past fifty years, NEC has provided airport
solutions to more than 50 countries and regions across the
world, with a focus on Japan and other parts of Asia. For
example, NEC’s air traffic control radar uses the latest
semiconductor circuit technology and signal processing
technology to accurately detect aircraft.
The ICT system that operates the Tom Jobim (Galeão)
international airport in Brazil is one such example. This
comprehensive system contributes to safe and efficient
airport management by providing a security camera
system for preventing unauthorized entry, an entry/exit
control system, displays for showing flight information,
communication tools to enable employees to efficiently
contact each other, a wireless Internet environment, and a
fire alarm system.
The logistics outsourcing business handles a large amount
of pamphlets and manuals without barcodes and product
identification information. In order to maintain high
shipping quality, it is necessary to conduct visual and
manual product inspection daily, hence Yamato System
Development Co., Ltd. (YSD) was seeking solutions to
improve efficiency in terms of manpower and time.
NEC took this opportunity to create labor saving
mechanisms using its well-proven image recognition
technologies and gravimeters, by developing an image and
gravimeter inspection system that instantly detects
product types and numbers, reducing the burden of
inspection work performed by workers. Furthermore, with
YSD’s know-how in logistics and inspection, as well as
their system integration function for warehouse
management system, a total management of product
master, shipping instruction data, inspection results and
the like is now made possible. This inspection support
system, an industry first for logistics, is aimed at
optimizing the inspection work at YSD and achieving a
20% reduction in overall costs, realizing highly accurate
shipping quality, to support a society that allows its
citizens to live comfortably.
Realizing high efficiency and cost reduction by introducing inspection support
system to the YSD warehouse located in “Haneda Chronogate,” Yamato group’s
total logistics terminal, and contributing to a comfortable lifeline.
Initiatives in Conjunction with Kagome Co., Ltd.
Utilizing ICT for Increased Crop Yields and Agricultural Efficiency
In order to respond to the worldwide challenges of
climate change and food security, NEC aims to utilize the
IoT to provide value to the various operators in the food
and agricultural supply chain that cover everything from
agricultural materials to production, processing, and
distribution. This will help achieve the production
reforms needed to meet the increasing demand for food
all over the world and its fair distribution, while
contributing to the realization of a safe and secure food
environment everywhere.
NEC and Kagome Co., Ltd. agreed to collaborate on
developing cultivation technology that utilizes ICT for
processing tomatoes, and since March 2015 the companies
have been conducting tests in tomato fields at a Portuguese
subsidiary based on the results of virtual field simulations
generated in a computer according to data collected by
various sensors about the agricultural environment.
These tests enabled NEC and Kagome to analyze the
factors that affect crop yields and identify the optimal
cultivation method for each field, while also providing
accurate predictions of yields and the proper time for
harvesting.
Flight information display at Narita International Airport (top left)
Airport monitoring radar (bottom right)
Tests conducted in tomato fields in Portugal
27
28
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Business Activities for Social Value Creation Review of Operations
Public Business
In the public business, we provide safe, secure and efficient social
solutions for Japanese and foreign governments, governmental agencies,
local governments, public institutions, financial institutions and other
organizations by combining our distinctive technology assets, including
network and sensor technologies and analysis technology, with a broad
expertise in systems integration.
Executive Vice President Tomonori Nishimura
Sales
(Billion ¥)
738.4
821.9
766.8
2014
2015
2016
Strengths
In the public business,
sales were ¥766.8 billion,
a decrease of 6.7%
year-on–year, mainly due
to decreased sales from
large-scale projects for
governmental agencies
and public services during
the same period of the
previous fiscal year.
Strong track record in delivering products and systems
that support social infrastructure over many years—
such as satellites, outdoor communication systems,
firefighting emergency radio systems, and broadcasting
systems—cultivating high credibility and advanced
technologies during this process. Remarkably high
market share in Japan.
Operating Income, Operating Income Ratio
(Billion ¥)
Operating Income
Operating Income Ratio
74.8
58.6
57.5
9.1%
7.9%
7.5%
2014
2015
2016
Operating income
worsened by ¥17.2 billion
year-on-year, to an
operating income of
¥57.5 billion, mainly
owing to decreased sales
and an increase in loss-
making projects.
(Fiscal year ended on March 31)
System integration capabilities and project
management skills developed in the implementation of
large-scale, mission-critical IT systems to governmental
agencies, public institutions, and financial institutions.
Unique products and solutions born from our strengths
in three technology areas: sensor, network and
information technologies. (Notably, world-leading face
recognition and fingerprint recognition technologies,
Big Data analysis, etc.)
Market Environment (Risks and Opportunities)
Risks
Due to the nature of the Japanese ICT infrastructure
business, our performance may be impacted by
fluctuations of large-scale public investment. Accordingly,
we are reviewing the deployment of personnel and other
resources in order to balance the needs between periods
of high demand and slow periods.
Opportunities
The infrastructure development process is underway for
the expanded usage of the Social Security and Tax Number
System (“My Number”), and brisk activity is predicted in the
future. In addition to this Public Sector infrastructure
development business, we expect to expand into medical
care and financial institutions as well as other areas in the
private sector. It is also expected that investment will be
stimulated for the safe, secure, and efficient operation of
international events towards the year 2020.
Fiscal 2016 Main Accomplishments
We focused efforts to support the introduction of the Social Security and Tax
Number (“My Number”) System, mainly for the national and local governments,
and related sales increased greatly from ¥10 billion the previous fiscal year to
¥42 billion.
“My Number” System
Fiscal year ended March 2016
¥42 billion
Fiscal year ended March 2015
¥10 billion
For the My Number System, in addition to completing the
implementation of the Intermediate Server Platform that
is the foundation of the overall system, we also delivered
a face recognition system for counters at local public
bodies across the country to be used for confirming the
identity of residents when handing over their individual
number cards. NEC will conduct business so that we can
make contributions at many levels, such as enhanced
security for and expanded private-sector usage of the
My Number System.
There was a peak of large-scale demand as we
approached the May 2016 installation deadline for the
digitization of firefighting emergency radio systems. NEC
leveraged its No. 1
domestic position in this
domain to successfully implement systems at many local
governments.
The deployment of new solutions for future growth is
proceeding. Surveillance—such as a crowd behavior
analysis solution, powered by NEC’s image recognition
and Big Data analysis technologies—is being
progressively introduced to ensure safety around train
stations and other places where many people gather. The
Cyber Security Factory’s security monitoring services and
emergency response services upon anomaly detection
are already being employed by more than 100 entities.
Initiatives in the Medium- to Long-Term
Net Sales, Operating Income, Operating Income Ratio (IFRS)
(Billion ¥)
Net Sales
Operating Income
Operating Income Ratio
771.6
* FY2016/3 IFRS figures
are currently not audited
and subject to change
upon audit completion
during FY2017/3
57.3
7.4%
2016/3
735.0
780.0
69.0
69.0
9.4%
2017/3
Forecast
8.8%
2019/3
Target
Growth in the
focus businesses
Infrastructure
preparation towards
the year 2020
Cyber security
The sales target for the fiscal year ending March 2019
moderately increased: a 0.4% annual growth rate
compared to the fiscal year under review. This is because
we anticipate decreased sales of large projects, such as
the digital firefighting emergency radio systems, while
expecting growth focused on the area of public safety
that contributes to a safe and secure society. At present,
it is expected there will be infrastructure improvement
and safety enhancements for safe and secure urban
development towards the year 2020. NEC will contribute
to this through offering immigration control systems and
new-style security services which leverage its unique
crowd behavior analysis technology and the world’s
leading face recognition technology, and disaster
prevention support systems that analyze landslide risk
level using sensors.
With the ever increasing threat of cybercrime, we are
accelerating our responses to the government’s initiative
of Local Government Information System Strength
Improvement Model through the Cyber Security Factory’s
security monitoring service, as well as network
implementation and information leakage prevention
leveraging SDN technology, where NEC has a broad range
of experience in Japan.
Moreover, we are also making efforts in advanced fields
such as FinTech that fuses finance and ICT and
increasingly sophisticated medical care utilizing ICT. In this
way, we are striving to create new value.
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NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Business Activities for Social Value Creation
Review of Operations
Enterprise Business
NEC provides IT solutions in manufacturing and retail/services in the
private sector, launching new services to help create new value for
customers. In particular, we are accelerating development in the total
supply chain management (SCM) business for manufacturing, logistics,
retail and services worldwide as it will be a growth field going forward.
Executive Vice President Chikara Ishii
Sales
(Billion ¥)
272.3
270.5
300.7
2014
2015
2016
Strengths
In the enterprise business,
sales were ¥300.7 billion,
an increase of 11.2%
year-on–year, mainly due
to increased sales from
large-scale projects for
the retail/services sector
and manufacturing
industries.
Operating Income, Operating Income Ratio
(Billion ¥)
Operating Income
Operating Income Ratio
22.2
7.4%
6.5
2.4%
2014
8.3
3.1%
2015
2016
Operating income
improved by ¥13.9 billion
year–on-year, to an
operating income of
¥22.2 billion, mainly
owing to increased sales
and the improved
profitability of system
integration services.
(Fiscal year ended on March 31)
The trust and expertise we have accumulated over 40
years in providing IT services to domestic retail
business operators, such as convenience stores,
supermarkets, and drug stores.
The knowledge and expertise we have developed in
manufacturing innovation at our own plants as a
company in the manufacturing industry, as well as SCM
transformation for global corporations.
Market Environment (Risks and Opportunities)
Risks
There is a great deal of competition in the IT market for
the domestic private sector. Intense price competition is
continuing so ensuring profit in this field is a challenge.
Moreover, the adoption of cloud services is being
accelerated, such as the expanded usage of Paas and IaaS,
so we anticipate a gradual decline for existing solutions.
Opportunities
Urbanization is progressing across the world, and it is
expected that Japanese business models can be applied
to convenience stores and logistics industries
internationally. Markets are also being started using IoT,
providing opportunities to establish a new growth
foundation.
Fiscal 2016 Main Accomplishments
To improve profitability, we worked to expand business models presupposed on
horizontal deployment and enhance upstream processes, including consulting.
Profitability has been steadily improving, although partially supported by
increased sales of large-scale projects.
The operating income
ratio has improved to
7.4%
Manufacturing NEC implemented a Product Lifecycle
Management (PLM) system for OMRON Corporation for the
globally integrated management of its product technology
information. NEC also started offering NEC Industrial IoT, a
solution that leverages the IoT to support next-generation
manufacturing, and delivered Head Office/Plant network
infrastructure utilizing SDN for construction machinery
manufacturer Takeuchi Mfg. Co., Ltd.
Logistics NEC launched an image and weight inspection
solution, the first in the industry that utilizes image
recognition technology to conduct automatic inspections
of three-dimensional products. NEC also established a
joint venture company with Delhi Mumbai Industrial
Corridor Development Corporation Limited for providing
logistics visualization services in India.
Retail NEC helped Seven
& i Holdings Co., Ltd. improve its
customer service by installing chargers for EV and PHV at
approximately 40 Ito-Yokado and Ario stores across Japan.
In collaboration with SOHGO SECURITY SERVICES CO.,
LTD., NEC began offering a cloud-based security camera
service at Seven-Eleven Japan Co., Ltd. stores.
Quality of Life NEC assisted Gunze Limited with IoT
technology in developing the clothing-type wearable
system that measures biological data just by wearing it..
NEC also implemented the “Kumamon no IC CARD” system
that can be used at public transportation and commercial
facilities in Kumamoto Prefecture.
Initiatives in the Medium- to Long-Term
Net Sales, Operating Income, Operating Income Ratio (IFRS)
(Billion ¥)
Net Sales
Operating Income
Operating Income Ratio
300.3
305.0
23.9
340.0
19.0
21.0
* FY2016/3 IFRS figures
are currently not audited
and subject to change
upon audit completion
during FY2017/3
8.0%
2016/3
6.2%
2017/3
Forecast
6.2%
2019/3
Target
Growth in the
focus businesses
IT services business
for retail
Manufacturing
Co-Creation Program
In the enterprise business, the three years of the Mid-
term Management Plan 2018 are positioned as a period
to solidify a foundation for future growth. During this
period we are building a business foundation for SI model
transformation and global deployment, and also creating
new value through IoT. As for business domains, we are
focusing efforts on NEC’s strengths including the IT
service business for the retail industry and manufacturing
co-creation*, and are working for business expansion
primarily in these areas. In the IT service business for the
retail industry, we are adding new value to the expertise
we have already accumulated through providing IT
services to retail business operators in Japan over the
past 40 years, striving to accelerate horizontal
deployment on the global stage with an eye towards
developments in other industries as well. For
manufacturing co-creation, we are combining the
expertise we developed in our own manufacturing
innovation and SCM reforms for global businesses with
cutting-edge technologies such as IoT and AI. In this way,
we are working to expand the value we offer and move
into new business domains.
* Manufacturing co-creation: Collaboration program where NEC offers enhanced
solutions based on its own production innovation expertise through
facilitating information exchange between customers, executing joint
research or conducting Proof of Concept projects, etc.
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NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Business Activities for Social Value Creation
Review of Operations
Telecom Carrier Business
We provide telecom carriers with network control platform systems and
operating services for operations management, along with equipment for
network implementation. NEC’s wealth of experience in large-scale
network implementation and strong technical capabilities contribute to
the development of highly reliable communications networks.
Executive Vice President Shunichiro Tejima
Sales
(Billion ¥)
725.8
740.2 698.9
2014
2015
2016
Strengths
In the telecom carrier
business, sales were
¥698.9 billion, a decrease of
5.6% year-on-year, mainly
due to decreased domestic
sales, despite increased
international sales of
submarine cable systems
and Telecom Operations
and Management Solutions
(TOMS).
Track records of delivering: fixed and mobile telecom
products; IP systems in Japan; and an accumulation of
technology know how.
Successful delivery of management and operations
support for more than 200 telecom carriers worldwide
in the TOMS area.
Operating Income, Operating Income Ratio
(Billion ¥)
Operating Income
Operating Income Ratio
60.3
62.0
8.3%
8.4%
45.6
6.5%
Operating income
worsened by ¥16.4 billion
year-on-year, to an
operating income of
¥45.6 billion mainly due
to decreased sales and
loss-making international
projects.
2014
2015
2016
(Fiscal year ended on March 31)
Industry-leading achievements in SDN/NFV, latest
network technologies, with technological development
and commercial deployment, such as virtualized
Evolved Packet Core (vEPC).
Market Environment (Risks and Opportunities)
Risks
There is a risk of telecom carriers curtailing capital
investment in the domestic market. In addition, there is a
possibility of intensified competition, including from
global vendors, as the market becomes more borderless.
Opportunities
The market for SDN/NFV and TOMS is expected to expand
even further in the future. These technologies contribute
to network transformation through outcomes such as
faster delivery of services, optimization of network
resources and reduced operating costs for telecom carriers.
We expect more business opportunities with the
planned commercial deployment of the 5G next-
generation mobile telecommunications standards,
starting mainly from the Japanese and Asian markets,
towards 2020.
Fiscal 2016 Main Accomplishments
We increased our results for the introduction of TOMS and SDN/NFV, our major
focus business over the medium- to long-term.
We expanded our global business with large-scale project orders received in
existing business fields, etc.
Expanded introduction
of TOMS and
SDN/NFV
Global business
expansion
NEC expanded its TOMS business through Netcracker
Technology Corporation, a subsidiary of NEC. We received
Operation Support System (OSS) orders from América
Móvil, S.A.B. de C.V., a Mexican company that is the largest
mobile telecom carrier in Latin America, and PT Indosat
Tbk a major Indonesian telecom carrier.
Rapid future expansion is expected for SDN/NFV, and
NEC was awarded orders including a virtualized mobile
core for commercial networks to NTT DOCOMO, INC.
Together with Spanish company Telefónica, S.A., we
successfully conducted the
world’s first Proof of Concept
project utilizing a commercial network related to
virtualized Customer Premises Equipment (vCPE).
In existing business areas, we expanded our global
business through orders for large-scale projects such as
SACS, the world’s first submarine optical cable system for
the South Atlantic, as well as increases including mobile
backhaul and optical transmission devices.
Initiatives in the Medium- to Long-Term
Net Sales, Operating Income, Operating Income Ratio (IFRS)
(Billion ¥)
Net sales
Operating income
Operating Income Ratio
* FY2016/3 IFRS figures
are currently not audited
and subject to change
upon audit completion
during FY2017/3
697.5
705.0
46.5
48.0
795.0
57.0
6.7%
2016/3
6.8%
2017/3
Forecast
7.2%
2019/3
Target
Growth in the
focus businesses
Business expansion
based on TOMS,
SDN/NFV
Enhancing development
to maintain
competitiveness for 5G
Business expansion in the global market through offerings
with a global competitive edge, such as TOMS and SDN/
NFV, is the key for medium- to long-term growth in the
telecom carrier business. We have the customer base and
ability to provide TOMS solutions, and an established track
record in commercialization of SDN/NFV. We will contribute
to the swift realization of new services for telecom carriers
by continually enhancing IT/network integrated solutions
combining TOMS and SDN/NFV.
We are carrying out Proof of Concept projects together
with leading telecommunications providers for the next
generation mobile telecommunications standard, 5G. We
are also engaging in advanced development for 5G to
achieve the high speed, high capacity, and low video
compression delay times required of networks for new
services in the IoT era, including high-definition video
delivery (such as 8K and 4K) and autonomous driving.
In this way, by offering high-value-added networks
around the world—made more sophisticated with new
technologies—that are safe, secure, and efficient, we will
help resolve social issues and assist in the development
of the NEC Group.
33
34
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Business Activities for Social Value Creation
Review of Operations
System Platform Business
In the system platform business, we provide products for business,
ranging from terminals to network and computer equipment, software
products and service platforms, as well as solutions and services based
on them. We deliver labor-saving and efficient platforms for customers,
while at the same time creating new value based on ICT.
Executive Vice President Kimihiko Fukuda
Sales
(Billion ¥)
780.8
728.9 728.5
Operating Income, Operating Income Ratio
(Billion ¥)
Operating Income
Operating Income Ratio
37.5
30.7
31.4
3.9%
4.3%
5.2%
Operating income
improved by ¥6.1 billion
year-on-year, to an
operating income of
¥37.5 billion, mainly due
to improved profitability
in hardware.
Sales were ¥728.5 billion,
almost remaining flat
year-on-year, mainly due
to decreased
maintenance services
sales, despite increased
sales in hardware.
2014
2015
2016
2014
2015
2016
Strengths
Unique technologies in the fields of SDN, cloud
services, Big Data, and security (global best of breed
technologies, such as image recognition technology,
advanced Big Data analysis technology, vector
computing technology, etc.)
(Fiscal year ended on March 31)
Dependability and quality developed in the fierce
competitive environment in Japan.
Comprehensive strength of having a wide range of
assets to build the IoT platform, including cloud
services, networks, sensors and other devices.
Market Environment (Risks and Opportunities)
Risks
The hardware market is expected to shrink continuously,
and competition is getting tough in the market. For that
reason, there is the risk that sales and profit of “products
selling,” such as general-purpose hardware, will be
depressed.
Opportunities
An upward trend for SDN, cloud services, Big Data, and
the security market is evident, and the IoT market is
expected to develop further. These areas are business
opportunities for NEC, but at the same time, many
competitors—including those entering the market from
other industries—are making increasingly rapid
movements to establish positions in the IoT field, so rapid
deployment is necessary.
Fiscal 2016 Main Accomplishments
We achieved the No. 1 share for the 20th consecutive year in the domestic PC
server market*. As the vendor with the top share, we will strive to further improve
customer satisfaction by continuing to provide products while listening sincerely
to customer requests.
Achieved the No.1
share for the 20th
consecutive year in
the Japanese
PC server market
In the fiscal year under review, we worked to enhance our
products in growth areas such as cloud platforms and
SDN. Regarding cloud services, we opened the NEC Kobe
Data Center, as our flagship data center in western Japan.
Our other initiatives included strengthening the security
of the cloud platform service, “NEC Cloud IaaS”.
In terms of SDN for enterprises, we have reliably
expanded our deliveries, helping customers strengthen
their management foundation and enhance their
competitiveness.
Furthermore, to create
the future IoT platform, we
have determined that we will strengthen our
development system for enhancing the ICT platform
product business that upholds our IoT solutions, and will
aim to accelerate development and business expansion
from the next fiscal year.
* Source: CY1996-2015 Japan x86 server (shipment, revenue)
Source: IDC Japan, Japan Quarterly Server Tracker CY16Q1
Note:
IDC declares a statistical tie in the server market when there is less than
one percent difference in the revenues or the unit shipment of two or
more vendors.
Initiatives in the Medium- to Long-Term
Net Sales, Operating Income, Operating Income Ratio (IFRS)
(Billion ¥)
Net sales
Operating income
Operating Income Ratio
728.6
755.0
31.7
32.0
795.0
39.0
* FY2016/3 IFRS figures
are currently not audited
and subject to change
upon audit completion
during FY2017/3
4.4%
2016/3
4.2%
2017/3
Forecast
4.9%
2019/3
Target
Growth in the
focus businesses
Maximizing the profit
of existing businesses
Establishing an IoT
platform focused on
safety and retail
Strengthening key
business areas
In our Mid-term Management Plan 2018, we are striving
to enhance our profitability in the system platform
business, first by optimizing existing businesses.
Specifically, we are working to maximize profit through
comprehensive measures, including optimizing
development costs, cutting costs, adding high value to
products, and strengthening our sales structure.
In addition, we are making efforts to establish an IoT
platform in order to enhance the value provision of the
system platform business. To that end, we are aiming to
develop unique solutions and services based on the
technologies that are our strengths, such as image
analysis and security. We are also striving to provide
customers with common platforms in a timely manner
with such high quality that can only be offered by NEC,
including networks. While it is expected that the IoT
platform will be deployed horizontally in various
industries, first we will devote resources to boost the
Safety business and the Retail IT Service business, in line
with the Mid-term Management Plan 2018.
Moreover, we will make efforts to clarify the value by
defining practical use cases by customer segments—and
also maximize value for customers—regarding the growth
fields in which we refined our strengths in the Mid-term
Management Plan 2015: the cloud services , SDN, Big
Data, and security.
35
36
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Business Activities for Social Value Creation
Business Structure in Japan
International Business Structure
Senior Executive Vice President
In charge of Corporate Sales and Sales Operations Unit Manabu Kinoshita
Executive Vice President and CGO (Chief Global Officer) Takayuki Morita
Providing Solutions That Harness the Comprehensive Strengths of
One NEC through a Nationwide Sales Network
NEC’s domestic sales network consists of 64 branch offices and
sites nationwide. NEC’s approach is to leverage all of the capabilities
of One NEC, integrating the solution assets of each business unit
and affiliated company and to present solutions for realizing
advanced social infrastructure utilizing ICT. We provide these
solutions for a wide range of customers including telecom carriers,
the government, governmental agencies, local governments, public
institutions and the private sector.
Creating New Value by Cultivating Market Needs
NEC’s domestic business accounts for about 80% of its total sales
and underpins the business foundation of the entire Company.
Nevertheless, the Mid-term Management Plan 2018 has established
a forecast that domestic sales in the fiscal year ending March 2019
will remain largely unchanged from the current fiscal year. This is
because existing businesses will decline in size due to a number of
factors, including telecom carriers curtailing capital investment and
passing the peak for firefighting emergency radio systems of local
authorities, which had grown at a robust rate over the previous
several years. However, NEC believes these market changes
represent a business opportunity. Toward that end, we will focus on
winning orders in fields including SDN, Big Data, cloud services, and
cyber security, each being one of our areas of strength. We will also
work to increase orders through well-timed efforts, including
business opportunities arising from usage of the My Number System
in the private sector and preparing for the increase in in-bound
visitors and infrastructure development in the run up to the year
2020. At the same time, we will accelerate new business creation
for markets where strong growth is anticipated given the future
expansion of IoT, such as smart factories and others, using these
new businesses as drivers for the growth of the entire company.
Cooperation between sales partners is another key point that
sustains our business in Japan. In addition to our conventional
hardware, we will provide competitive, high-value-added products
and services in new domains, such as Cloud and SDN, among others,
expanding sales of both. We will also work together with sales
partners to co-create new value, such as through solutions
embedded within customers’ products.
Enhancing Sales Capabilities to Solve the Essential Issues Customers Face
NEC will quickly respond to market changes and is developing the
frontline capabilities of employees to think and act on their own in
order to contribute even more to customers in these new fields. We aim
to create new value to tackle essential issues that society and
customers face. To this end, we carefully examine customers’ business
issues, and connecting these with our technology assets in creating
new value for the customers. We are transforming the way our sales
force thinks and investing in the development of each sales force in
improving multi-faceted analytical capabilities on market environments
and customer challenges and in having extensive knowledge on
leading edge technologies and solution assets in the company.
Going forward, domestic business teams will work on creating new
social value as a point of customer contact in the field, and
contributing to the development of a society in which people can live
more prosperous lives.
37
NEC’s Branch Network
Spreads Across Japan
NEC Headquarters
Office and Branches (64 locations)
For further details about NEC branch offices and their locations, please visit the
following URL:
http://jpn.nec.com/profile/branch.html (Japanese only)
Looking Back on Mid-term Management Plan 2015
In the Mid-term Management Plan 2015, NEC had the management
policy to create a foundation for growth globally by focusing on Asia
and promoting “locally-led” businesses. During the period, we were
able to steadily expand our global business, while also recording
concrete results such as growing the safety business, which includes
Globalization of “Solutions for Society”
Under the Mid-term Management Plan 2018, our new three-year
plan, we will seek to further increase sales from the global business.
This plan positions Safety business, Global Carrier Network business
and Retail IT Services as NEC’s three key businesses. The growth of
these businesses in the global market is key to achieving the Mid-
Term Management Plan 2018. Therefore, we are focusing efforts on
enhancing NEC’s competiveness in these fields and globalizing
“Solutions for Society.”
This will require a quicker pace of management, including decision-
making and execution at the global level, enhanced execution power,
including the use of multi-faceted partnering, and maximizing NEC
Group’s assets around the world as One NEC to harness the full
capabilities of the NEC Group.
Buoyed by the tailwind of rising awareness in the global business
by each business unit fostered throughout the three-year period of
the Mid-term Management Plan 2015, as CGO I will work on
addressing the company-wide issues we face in expanding
“Solutions for Society” globally. Additionally, I will pursue
partnerships with the governments of various nations, international
institutions, and local companies, in addition to business alliances
biometrics, cyber security, and video analytics, providing managed
services for public institutions, delivering retail IT services, and
conducting more than 50 SDN/NFV Proof of Concept projects with
service providers globally.
and M&A, in order to enhance NEC’s presence globally. From the
standpoint of harnessing the NEC Group’s comprehensive strengths,
we will actively move forward with regional collaboration and
collaboration between business units that will enable us to deliver
more complete and comprehensive solutions.
Under the Mid-term Management Plan 2018, global business will
become the key to NEC’s growth. Knowing that global growth will
pave the way for the future of NEC, we will devote efforts to
expanding the global business.
International Sales, International Sales Ratio
(Billion ¥)
International Sales
International Sales Ratio
483.1
16%
603.2
21%
2013/3
2016/3
Mid-term Management Plan 2015
800.0
27%
2019/3
Target
Mid-term Management Plan 2018
38
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Business Activities for Social Value Creation
NEC is working to grow globally while leveraging the strengths of its businesses in each market by locating regional
headquarters in North America, Central and South America, EMEA (Europe, the Middle East and Africa), Greater China,
and APAC (the Asia/Pacific).
Under the Mid-term Management Plan 2018, NEC will speed up the global expansion of its “Solutions for Society” and work
toward enhancing earnings power with a focus on its three key businesses. The safety business greatly increased sales during
the three-year period of the Mid-term Management Plan 2015, with efforts concentrated around the Global Safety Division
(GSD) in Singapore. Starting the upcoming fiscal year, we will integrate operations with our domestic business unit with a track
record in developing biometrics technologies and mission-critical systems such as fingerprint recognition systems for police.
By enhancing our solutions proposal and delivery capabilities, we will work to further expand the scale of our business. In the
network business for global carriers, we will accelerate the expansion of SDN/NFV solutions through a cooperation with
Netcracker Technology Corporation, our subsidiary. For the IT service business for retail, we will utilize regional business
support centers located in major areas such as Asia and North America to further increase sales. We will further expand
the managed service business, a core business in Australia and Singapore and expand it to neighboring countries.
As a means to enhancing our earnings power, we will practice the approach of “One-to-Many” and horizontally roll out
best practices globally in an effort to boost both sales and profits. At the same time, we will pursue the optimization of
local operations, including thoroughly managing project risks.
In the coming few years, we see abundant
opportunity for our identity solutions in our global
safety business, including airports, stadiums and
other public venues. Additionally, high consumer
confidence in America means that our IT service
business for retail can offer opportunity for
enhanced security and efficiency as many retailers
enter a technology refresh period.
healthcare, agriculture and retail, and contribute to
society in the process. We will continue to build up
cooperation with customers and partners, and devote
our energies toward achieving a society where people
can live brighter, more prosperous lives.
NEC Corporation of America provides solutions that
improve the way people live, work and communicate by
leveraging our Smart Enterprise platform focused on
improving safety, security and operational efficiency.
In the fiscal year under review, we secured
significant, long-term biometrics contracts with the
U.S. Department of Homeland Security and other
federal government agencies. Additionally, we
strengthened our presence within the Federal
Government by adding a new office and biometrics
showcase in Washington, D.C. We also integrated our
Networks and IT business units to better align our
technology offerings with the needs of our customers.
Meanwhile, our Retail solutions team added a
significant technology services contract with a major
convenience store retailer in North America.
NEC Latin America is rooted in Central and South
America and deploys its business to meet the needs of
the region. Specifically, we are working to solve
customer issues in the fields of security and
elimination of the digital divide.
In the fiscal year under review, we dedicated efforts
to expanding the public safety business, providing
security solutions for national ID programs as well as
airports, ports, and railways in various countries. We
will continue with our efforts of becoming the No. 1
value provider of security solutions in the region.
Achieving further development in the region will
require better innovation and productivity. In addition
to existing businesses, we will work with customers in
the Proof of Concept stage to create new value in
Toshiya Matsuki
Executive Vice President
of NEC Corporation
In charge of the Global
Business Unit
North America
Shinsuke Takahashi
President & CEO of
NEC Corporation of
America
Central and
South America
Masazumi Takata
President & CEO of
NEC Latin America
39
EMEA
(Europe, the Middle East
and Africa)
Masahiro Ikeno
President & CEO of
NEC Europe
Greater China
Naoki Yoshida
President of
NEC (China)
APAC
(Asia/Pacific)
Tetsuro Akagi
Senior Vice President of
NEC Corporation,
CEO of NEC Asia Pacific
NEC Europe has business operations in 115 countries
across Europe, Russia, the Middle East and Africa. We
will seek to further grow our business in the Middle
East, Africa, and Russia, which has high growth and in
Europe, which is driving technology trends, so as to
meet the diverse needs of these markets through focus
and selection.
In the fiscal year under review, we made an equity
investment in XON Holdings Proprietary Limited, an ICT
solutions firm in South Africa, with the goal of
accelerating our business expansion in Africa. We were
also able to greatly increase orders for face recognition
systems, mainly in the Middle East and Africa, after
making enhancements in the “Solutions for Society.” In
Europe, we commenced partnerships with governments
aimed at realizing smart cities. Also in Europe and
Russia, we reinforced relationships with major telecom
carriers in the network business especially in Europe,
where we succeeded in capturing global service
agreements. We were able to step up sales of enterprise
SDN, a field with growing demand.
The Middle East, Africa, and Russia are expected to see
rapid growth going forward, and NEC Europe will again
focus on these regions in the next fiscal year. NEC Europe
will continue to increase sales by expanding its “Solutions
for Society,” while
also improving the
profitability of
existing business, in
an effort to achieve
stable earnings.
Our future business expansion in the Greater China
Region will depend on our collaboration with partners
in the region. We already have promising partnerships
in place in each business segment and now we will
work toward strengthening our relationships and
expanding our businesses.
We also serve as an offshoring hub for software
development. This places us in a position to contribute
to NEC’s business expansion in the Greater China
Region as well as
our growth in
global markets,
including Japan.
Police, ensuring we will make positive contributions
toward the realization of safe and secure societies.
In the next fiscal year, we will focus on further
business growth mainly centered on the safety
business, network business for global carriers and IT
service business for retail positioned as core
businesses under the Mid-term Management Plan
2018 and lead NEC’s global businesses forward.
NEC (China) is developing social infrastructure
platforms in the Greater China Region, including Hong
Kong and Taiwan, that deliver value in the areas of
safety, security, efficiency, and equality.
During the fiscal year under review, we supplied a
number of services and solutions to customers in the
Greater China Region, including face recognition and bus
operation systems, cyber security solutions, building
energy managements systems (BEMS), dealer
management systems (DMS), Mobile Backhaul
(PASOLINK), optical telecommunications equipment, and
display related products. Also, taking the lead regionally,
we are working jointly with customers on Proof of
Concepts for airports, healthcare and air pollution
countermeasures in order to create value for customers.
Our goal is to quickly commercialize these ventures.
NEC Asia Pacific is deploying business within the 10
nations of ASEAN as well as in India and Oceania, where
growth is particularly robust. We are promoting “Solutions
for Society” using ICT for each of the governments and
companies in the region. Through collaboration with
NEC Laboratories Singapore and the Global Safety
Division in Singapore, we are building innovative
business models and pursuing business development
closely in tune with local needs.
In the fiscal year under review, we set up a Cyber
Security Factory in Singapore to reinforce our global
security monitoring network. In the safety business, we
won orders for a biometrics system (fingerprint and face
recognition) for the Government of Australia and a
fingerprint recognition system for the Philippine National
40
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Business Activities for Social Value Creation Corporate Governance
In recognition of the fact that reliable corporate governance is essential to the continuous creation of social value
and the maximization of corporate value, NEC is committed to strengthening its corporate governance practices
through (1) assurance of transparent and sound management, (2) realization of prompt decision making and
business execution, (3) clarification of accountability and (4) timely, appropriate and fair disclosure of information.
Overview of the Corporate Governance Structure
Elect and Dismiss
Elect and Dismiss
Elect and Dismiss
GENERAL MEETING OF SHAREHOLDERS
Main Initiatives for Strengthening Corporate Governance
NEC Group Corporate
Philosophy formulation
2000.4-2003.3
In-house company structure
2003.4-2010.3
Business line structure
NEC Group Charter of
Corporate Behavior/Code of
Conduct formulation
NEC Group Vision/
NEC Group Core Values
formulation
2010.4-2013.3
Structure driven by
products and services
1990
1999
2000
2001
2003
2004
2007
2008
2010
2011
2012
2013
2013.4-Present
Structures driven by
markets and customers
41
Instituting Corporate Officer System
NEC instituted a corporate officer system in April 2000 and worked to delegate authority from
the Board of Directors to corporate officers with the aim of separating management supervision
from business execution and expediting business execution based on prompt decision making.
Reducing the Number of Directors
The number of Directors was reduced to streamline the Board of Directors. The aim is to
ensure even sounder management through greater discussion at meetings of the Board of
Directors and to deliver prompt decision making.
Reduction in the number of Directors
(At the conclusion of the Ordinary General Meeting of Shareholders)
1999
37
2000
17
From 2012 onward
11
Appointing Multiple Outside Directors
NEC added an Outside Director in June 2001 for a total of two Outside Directors in order to
strengthen the supervisory functions of the Board of Directors. The number of members has
increased and the system of five Outside Directors has continued since its inception in June 2007.
Ratio of Outside Directors to all Directors
(At the conclusion of the Ordinary General Meeting of Shareholders)
1999
2.7%
2010
33.3%
From 2012 onward
45.5%
Shortening Directors’ Terms
In June 2004, the term of Directors was shortened from two years to one year in order to
clarify their responsibility for management.
Establishing a Nomination and Compensation Committee
The committee has been established to ensure the transparency, validity and objectivity of
the nomination and remuneration of Directors*. The committee is made up of five members,
including three Outside Directors, one of whom is appointed as the chairperson.
* The Compensation Committee established in 2001 was enhanced to become the Nomination
and Compensation Committee in 2010.
http://www.nec.com/en/global/about/executives/committee2.html
Instituting the Chief Officer Position
The chief officer position was instituted in July 2011 for the purpose of developing
company-wide strategy and leading business units in the promotion of the company’s
business, toward realization of the NEC Group Vision. In the Board of Directors, chief officers
carry out the function of overseeing business execution by each business unit from a
company-wide perspective.
Audit
Management/Supervision
Accounting
Auditors
Cooperate
AUDIT &
SUPERVISORY BOARD
5 A&SBMs, including
3 Outside A&SBMs
Audit
BOARD OF DIRECTORS
11 Directors
Chairman of the Board
President
Chief Officers
5 Outside Directors
Deliberate
and
Report
NOMINATION AND
COMPENSATION COMMITTEE
5 members, including
3 Outside Directors
Cooperate
Supervise
Cooperate
CORPORATE AUDITING
BUREAU
EXECUTIVE COMMITEE
Around 20 corporate officers
BUSINESS PROGRESS COMMITTEE
Corporate officers and general managers
of business units etc.
(Corporate officers)
Business
Execution
Internal audits
Business units/Corporate staff/Affiliate companies
Board of Directors
The Board of Directors holds regular meetings once a month in
principle and extraordinary meetings as necessary to determine
important matters related to business execution, including
business realignment, funding plans and financing and investment,
as well as matters concerning business plans.
Business Progress Committee
The Business Progress Committee deliberates and reports on
matters related to the status of the NEC Group’s business
execution, such as monitoring progress with respect to meeting
budgets approved by the Board of Directors, with the aim of sharing
management information and promoting execution efficiency.
Fiscal 2016 Status
In addition to receiving Chief Officers’ activity reports and management
plans and progress reports for each business segment, the Board of
Directors actively discussed initiatives for the strengthening of corporate
governance, reform of underperforming businesses and the Business
Process Optimization Project, etc. A broad range of advice was given by
Outside Directors, in particular, tapping into their own extensive experience
in such roles as corporate management, and based on their deep insights.
Executive Committee
The Executive Committee discusses important NEC Group
management issues such as policies and strategies. This
committee extensively discusses matters of particular importance
prior to putting them forward to the meetings of the Board of
Directors for approval. In doing so, the committee enhances the
deliberations and ensures appropriate decision making.
Nomination and Compensation Committee
The Nomination and Compensation Committee deliberates on (i)
nomination of Directors, Representative Directors and Audit &
Supervisory Board Members (KANSAYAKU) (“A&SBMs”), the chairman
of the Board, and the president and (ii) the structure and the level of
remuneration for Directors, representative Directors and corporate
officers from an objective perspective. The committee reports the
results of its deliberations to the Board of Directors.
Audit & Supervisory Board (KANSAYAKU-KAI) (“A&SB”)
The A&SB holds regular meetings once a month and extraordinary
meetings as necessary, decides on audit policies, standards, and
annual audit plans, etc. and receives status reports on audits from
each Audit & Supervisory Board Member (KANSAYAKU) (“A&SBM”).
Form of Organization
Chair of the Board of Directors
Directors
Audit & Supervisory Board Members
(KANSAYAKU) (“A&SBMs”)
No. of Directors
Term
No. of A&SBMs
Term
Independent Directors/Independent A&SBMs
Policy regarding Incentive Payments to Directors
Remuneration*2 (For Fiscal 2016)
Directors
A&SBMs
Company with the Audit & Supervisory Board Members (KANSAYAKU)
Chairman of the Board
11 (of which Outside Directors: 5)
1 year
5 (of which Outside A&SBMs: 3)
4 years
No. of Independent Directors: 4, No. of Independent A&SBMs: 3
Remuneration and bonuses linked to business results*1
Total amount of
remuneration:
Total amount of bonus:
Total amount of
remuneration:
¥363 million for a headcount of 11
(of which, Outside Directors: 5, Total remuneration: ¥60 million)
¥37 million for a headcount of 6
¥96 million for a headcount of 6
(of which, Outside A&SBMs: 4, Total remuneration: ¥36 million)*3
*1 Director bonuses are linked to the NEC Group’s performance to assure performance incentives. Bonuses are not paid to Outside Directors in order to help ensure their independence.
*2 NEC does not disclose remuneration per individual. For NEC’s basic remuneration policies and systems, please refer to the Business Report in the notice of the 178th Ordinary General Meeting of
Shareholders and Corporate Governance Report.
*3 The above headcount includes 1 A&SBM who retired at the close of the 177th Ordinary General Meeting of Shareholders held on June 22, 2015.
42
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Business Foundation to Support Value Creation Continued Strengthening and Improvement of the System
NEC adopts the Company with Audit & Supervisory Board Members
(KANSAYAKU) corporate structure to provide a double-check
process: the Board of Directors supervises business execution and
the A&SB audits the legitimacy and appropriateness of NEC’s
decision making or activities. We have established a hybrid
structure by utilizing the combination of a corporate officer system,
multiple Outside Directors, and the Nomination and Compensation
Committee, which we established voluntarily and is comprised of a
majority of Outside Directors. In this way, we separate
management supervision from business execution while striving to
ensure management transparency and soundness.
NEC believes that its corporate governance is functioning
adequately under the current system described above. However,
NEC realizes the importance of further strengthening its corporate
governance in order to focus on “Solutions for Society” and to
strive to create social value and maximize corporate value.
NEC has mainly carried out the following initiatives in light of Japan’s
Corporate Governance Code that took effect from June 2015.
Early Disclosure of the Notice of
Shareholders’ Meeting
NEC posted the notice of the 178th Ordinary General Meeting
of Shareholders held on June 22, 2016 on its website prior to
the date of sending it out (May 31, 2016).
Revision of Criteria for Matters to Be Discussed by
the Board of Directors
In the interest of strengthening the Board of Directors’ supervision
functions and speeding up business execution, we have revised
the criteria for matters to be discussed by the Board of Directors
in order to expand the authority delegated to corporate officers
from the Board of Directors with respect to business execution.
Evaluation on the Effectiveness of
the Board of Directors
In order to improve the functions of the Board of Directors, NEC
has conducted an analysis and evaluation on the effectiveness of
the Board of Directors. In fiscal 2016, each Director and A&SBM
answered a questionnaire and was interviewed about the role,
composition and operation of the Board of Directors, and the
Board of Directors discussed its effectiveness based on the
results of such questionnaires and interviews. As a result of the
discussion above, it has been evaluated that in terms of decision
making for NEC’s important business execution, business
strategies and business plans, the Board of Directors is structured
and operated to facilitate active discussions, and the Board of
Directors has been functioning appropriately as a whole.
Meanwhile, it has been confirmed that the Board of Directors
needs to narrow down the matters and clarify the key points to
be discussed at the Board of Directors, in order to further
enhance deliberations at the Board of Directors and to more
appropriately indicate the strategic business direction of NEC.
Based on the results of the analysis and evaluation on the
effectiveness of the Board of Directors, NEC will continually make
the deliberations at the Board of Directors more active.
Further, in June 2016, NEC adopted the NEC Corporate
Governance Guidelines, which set out the basic framework and
policy of NEC’s corporate governance system to help strengthen
the relationship with stakeholders, thereby contributing to
sustainable growth and the increase in corporate value.
In addition to our basic views and policy on corporate governance
disclosed in our Annual Securities Report and Corporate Governance
Report, we disclose our policy on (i) active deliberations at the Board
of Directors, (ii) oversight by the Nomination and Compensation
Committee of succession planning for the President, (iii) appropriate
measures to ensure the exercise of shareholder’s voting rights at
the General Meetings of Shareholders, (iv) supporting system for
Directors and/or A&SBMs and (v) challenges surrounding
sustainability in these Guidelines, which systematically show the
status of NEC’s corporate governance.
Going forward, we aim to achieve more effective corporate
governance, which we will continually strive to strengthen and
improve.
For further details on the corporate governance of NEC Corporation, please visit the
following URL:
http://jpn.nec.com/profile/en/governance.html
Overview of NEC Corporate Governance Guidelines
Purpose of these Guidelines
Chapter
1
General
Provisions
Corporate Philosophy and Business
Strategies
Chapter
2
Corporate
Governance
System
Basic Views on Corporate Governance
Board of Directors
Nomination and Compensation Committee
Main Committees in Business Execution
Audit & Supervisory Board (A&SB)
(KANSAYAKU-KAI)
Compliance Hotline, Supporting System for
Directors and/or A&SBMs
Chapter
3
Relationship
with
Stakeholders
Relationship with Shareholders
Relationship with Other Stakeholders
Chapter
4
Disclosure
Basic Policy
Information Disclosure Structure
Please see the following URL for details on the contents of these Guidelines.
http://jpn.nec.com/profile/en/pdf/nec_governance_20160601.pdf
Messages from an Outside Director and
an Audit & Supervisory Board Member
Communication is Fundamental
Corporate Governance is ultimately for the sake of improving efficiency, maintaining soundness, and ensuring
transparency for achieving these ends.
The basis for corporate governance is putting in place an environment in which each employee can play an active
and energetic role through smooth communication. This is the prime mission of organizations’ leaders. Thoroughly
communicating to share organizational strategies and information allows each employee to fully demonstrate their
skills and fulfill their individual roles. As a result, each employee can have a sense of personal achievement and can
contribute to realizing the organization’s targets.
Communication is also fundamental for ensuring thorough compliance. I believe that in an organization that
achieves smooth communication vertically and horizontally, compliance violations do not occur. If, by chance, a
violation should occur, proper communication ensures that top management is promptly
informed and appropriate steps for resolution are quickly taken. To achieve smooth
communication, it is important that leaders personally communicate policies and
strategies with members, gain members’ understanding, listen to their input, and
reflect that input in strategies of the organization. Continually implementing these
steps leads to an organization with a positive atmosphere. To that end, daily
awareness is important, as is keeping up constant communication, and it starts with a
daily greeting every morning.
I believe that a good company is one in which every employee can work actively
and energetically. I have high expectations that all NEC employees will be able to
work in this way under a sound governance system.
Outside Director
Motoyuki Oka
Implement Compliance Management and Expand Business
I was appointed outside A&SBM just after the Corporate Governance Code was enacted in June 2015. A little more
than one year has passed since then.
What is characteristic of NEC is that discussions in meetings of the Board of Directors, and the comments of
Outside Directors in particular, are extremely vigorous. With six Inside Directors and five Outside Directors, questions
and opinions voiced by Outside Directors are outspoken and range across the topics of overall management policies,
finances, marketing, and the handling of individual projects. A wealth of information is shared in meetings of the
A&SB, stemming from intimate connections with the Internal Auditing Division, and many fruitful discussions are
held. I think that NEC management sufficiently follows the general tenets of the Corporate Governance Code.
It is not necessarily easy to share this level of debate and spread these results across all of the companies in a large,
consolidated Group with some 100,000 employees. In order to do so, efforts are moving forward
in NEC’s Internal Control system to build out a framework to communicate messages inside
the Group, offer training, ensure the availability of reporting systems when trouble occurs,
and to quickly discover and work to prevent compliance-related issues.
In order to achieve the targets of the Mid-term Management Plan 2018 announced
in April 2016, growing international sales will be essential. International business is
accompanied by risks from competition laws, bribery, corruption and other issues of
which we must be especially vigilant under foreign laws and regulations.
From this perspective, and from an outside perspective, I will continue to do my
utmost so that NEC can appropriately manage and avoid risks, fulfill compliance
responsibilities, and achieve business growth.
Outside Audit & Supervisory Board Member (KANSAYAKU)
Takeshi Kikuchi
43
44
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Business Foundation to Support Value Creation Directors and Audit & Supervisory Board Members
(As of June 22, 2016)
Directors
Nobuhiro Endo
Chairman of the Board (Representative Director)
Mr. Endo has been engaged in the management of
NEC as President (Representative Director) since
2010 and as Chairman of the Board
(Representative Director) since April 2016.
Takashi Niino
President (Representative Director) and
CEO (Chief Executive Officer)
After being engaged in the management of the
financial solutions business and the NEC Group’s
management strategies, Mr. Niino has been
engaged in the management of NEC as President
(Representative Director) and CEO since April 2016.
Takayuki Morita
Executive Vice President,
CGO (Chief Global Officer) and
Member of the Board
After being engaged in the management of NEC’s
M&A and global business, Mr. Morita is now in
charge of global business strategy.
Takaaki Shimizu
Executive Vice President,
CMO (Chief Marketing Officer) and
Member of the Board
After being engaged in the management of the
government and public solutions business and IT
solutions business, Mr. Shimizu is now in charge of
marketing and business innovation strategies.
Isamu Kawashima
Executive Vice President,
CFO (Chief Financial Officer) and
Member of the Board
After being engaged in the management of
accounting and financial affairs at the business
units and overseas subsidiaries, Mr. Kawashima is
now in charge of the NEC Group’s accounting and
financial strategies.
Katsumi Emura
Executive Vice President,
CTO (Chief Technology Officer) and
Member of the Board
After being engaged in the management of
intellectual properties and Research and
Development, Mr. Emura is now in charge of the
NEC Group’s technology strategy.
45
Takeshi Kunibe
Member of the Board
President and Chief Executive Officer,
Sumitomo Mitsui Banking Corporation
Director and Member of the Board of Directors,
Sumitomo Mitsui Financial Group, Inc.
Mr. Kunibe has extensive experience and deep
insight with management of a bank.
• Attendance at meetings of the Board of Directors:
12 out of 12
Hitoshi Ogita
Member of the Board
Adviser to the Board, Asahi Group Holdings, Ltd.
Mr. Ogita has extensive experience and deep
insight with management of a manufacturing
company.
• Attendance at meetings of the Board of Directors:
12 out of 12
Kaori Sasaki
Member of the Board
President and CEO, UNICUL International, Inc.
President and CEO, ewoman, Inc.
Ms. Sasaki has a wide range of knowledge on
marketing and perspective of consumers.
• Attendance at meetings of the Board of Directors:
12 out of 12
Motoyuki Oka
Member of the Board
Senior Adviser, Sumitomo Corporation
Mr. Oka has extensive experience and deep insight
with management of a general trading company
including the management of overseas firms.
• Attendance at meetings of the Board of Directors:
12 out of 12
Kunio Noji
Member of the Board
Chairman of the Board, Komatsu Ltd.
Mr. Noji has extensive experience and deep insight
with management of a manufacturing company.
• Attendance at meetings of the Board of Directors:
11 out of 12
Audit & Supervisory Board Members (KANSAYAKU)
Board of Directors
Fujio Okada
Audit & Supervisory Board Member (full-time)
Mr. Okada has experience being in charge of the
legal and internal control division for many years.
11 Directors
6 Inside Directors
5 Outside Directors
(of which 4 are
independent Directors)
Tetsuya Fujioka
Audit & Supervisory Board Member (full-time)
Mr. Fujioka has accounting experience for many
years and experience as former General Manager
of Corporate Finance Division.
The Board of Directors makes important decisions regarding the Company’s
business execution, starting with deciding on its basic management
policies. It also fulfills the responsibility of overall supervision of business
execution, and therefore requires viewpoints based on broad knowledge,
and the Board of Directors is comprised with consideration given to
diversity in such factors as career background, specialties and gender.
Chairman of the Board
(Chair of the Board of Directors)
Kyoko Okumiya
Audit & Supervisory Board Member
Attorney at Law
Ms. Okumiya has a lot of experience and
professional insight as an attorney at law.
• Attendance: At meetings of the Board of
Directors: 12 out of 12
At meetings of the Audit & Supervisory Board:
16 out of 16
Takeshi Kikuchi
Audit & Supervisory Board Member
Attorney at Law
Mr. Kikuchi has a lot of experience and
professional insight as an attorney at law in the
field of IT and other fields.
• Attendance: At meetings of the Board of
Directors: 10 out of 10
At meetings of the Audit & Supervisory Board:
12 out of 12
(Appointed in June 2015)
Kazuyasu Yamada
Audit & Supervisory Board Member
Certified Public Accountant
Mr. Yamada has a lot of auditing experience as a
Certified Public Accountant and professional
insight in finance and accounting.
(Appointed in June 2016)
Outside
Directors
Inside
Directors
Non-Corporate Officer
Corporate Officer
Career background
and specialties of
5 Outside Directors
Tenure of
5 Outside Directors
2
Manufacturing
1
Banking
Marketing
1
General Trading Company 1
5 years
4 years
3 years
1
2
2
Audit & Supervisory Board (KANSAYAKU-KAI)
5 Audit & Supervisory Board Members
2 Inside Audit & Supervisory
Board Members
3 Outside Audit & Supervisory
Board Members
(All members are independent
Audit & Supervisory Board Members)
NEC appoints as Audit & Supervisory Board Members personnel who
have the knowledge and experience necessary for audits, such as
considerable expertise in finance and accounting or experience as an
attorney at law, and who strengthen the auditing functions of the Audit
& Supervisory Board.
46
Notes: 1. NEC has notified the Tokyo Stock Exchange of its four independent Directors and
three independent Audit & Supervisory Board Members (“A&SBMs”).
Independent Directors: Mr. Hitoshi Ogita, Ms. Kaori Sasaki, Mr. Motoyuki Oka and
Mr. Kunio Noji
Independent A&SBMs: Ms. Kyoko Okumiya, Mr. Takeshi Kikuchi and Mr. Kazuyasu
Yamada
2. Attendance at meetings: the number of attendance at meetings (meetings of the
Board of Directors or meetings of the Audit & Supervisory Board) out of the
number of the meetings held in the fiscal year ended March 31, 2016
For further details on the Directors and Audit & Supervisory Board Members of
NEC Corporation, please visit the following URLs:
Directors
http://www.nec.com/en/global/about/executives/directors.html
Audit & Supervisory Board Members (KANSAYAKU)
http://www.nec.com/en/global/about/executives/auditors.html
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Business Foundation to Support Value Creation
Business Execution Structure
(As of July 1, 2016)
At NEC, the chairman, the president, chief officers, corporate officers in charge of business units and other officers
interact actively in exchanging information and discussion to enhance management speed and to execute
business from a companywide perspective.
Nobuhiro Endo
Chairman of the Board
Achieving Sustainable Growth through ICT
With high expectations for ICT’s contributions to solving the
problems of human society, NEC will make continuous effort to
improve our computing expertise, network building know-how
and solutions capabilities. Aiming to utilize them to the fullest,
we will also devote efforts to training our employees, and, under
an ethical corporate culture, to contribute to realizing a society in
which people can live more abundant lives.
Tomonori Nishimura
Executive Vice President
In charge of the Public Business Unit
Expanding Business Domains toward Building a
Safe and Secure Society
“We want to bring happiness to the people of the world.” To
achieve that end, we are striving to gain a deeper
understanding of social structures and aim to grow as a
business that is able to contribute globally to ICT services
embedded in customers’ business domains.
Shunichiro Tejima
Executive Vice President
In charge of the Telecom Carrier Business Unit
Achieving Global Growth
Taking advantage of the business opportunities emerging from
the IoT expansion and orchestrating the diverse assets of NEC’s
IT and network technologies, we globally deliver our safe,
secure and efficient, high value-added network solutions
sophisticated by software. Through these efforts, we are
dedicated to resolving social challenges as well as to the further
development of NEC Group.
Manabu Kinoshita
Senior Executive Vice President
In charge of the Corporate Sales and Sales Operations Unit
Growing Order Numbers through Customer-
Centric Value Proposals
Through value proposals leveraging our technologies and through
co-creation with customers and sales partners, NEC is driving
toward company-wide growth while fostering the frontline
capabilities of thinking and acting on their own in order to quickly
respond to market changes.
Takayuki Morita
Executive Vice President and CGO (Chief Global Officer)
Achieving Growth in the Global Market
NEC is proposing and executing strategies with an emphasis on
boosting competitiveness in the three business areas of Safety,
Global Carrier Networks, and Retail IT Service. Additionally, we are
actively striving to solve global challenges across business units
and liaising with international agencies in order to boost the
presence of NEC.
Takaaki Shimizu
Executive Vice President and CMO (Chief Marketing Officer)
In charge of the Business Innovation Unit
Implementing Innovations and Reforming
Marketing
Through new business creation, and by instilling the culture of
creating internal business frameworks, etc., we are transforming
NEC into an innovative company. Additionally, we are proceeding
to renovate our marketing processes with digital marketing and
other approaches, while striving to improve ROI.
47
Isamu Kawashima
Executive Vice President and CFO (Chief Financial Officer)
Strengthening the Profit Structure and
Expanding Key Businesses
NEC will establish the foundation for business expansion by
addressing underperforming businesses, maintaining and
bolstering a stable financial foundation, and supporting
strategic growth with our financial strength.
Katsumi Emura
Executive Vice President and CTO (Chief Technology Officer)
Proposing and Implementing Company-wide
Technology Strategies that Contribute to Growth
Leveraging our strong core technologies, NEC is predicting the
future society and communicating a vision of new social value
that we will create. In order to achieve that vision, we will take
full advantage of strong technology assets, to create NEC’s
original “Solutions for Society,” and contribute to providing
maximum value.
Nobuhiro Odake
Executive Vice President
In charge of the Supply Chain Management Unit
Strengthening the One NEC Supply Chain
Platform
We are building out and strengthening a customer satisfaction-
oriented supply chain from the perspective of One NEC. With
the Group coming together as one unit, connected plants can
create a multitude of products connected with customers and
with which we can contribute to value creation through our
“Solutions for Society.”
Kimihiko Fukuda
Executive Vice President
In charge of the System Platform Business Unit
Providing Platforms with Value
Through the development of “Solutions for Society,” NEC strives
to globally provide our robust ICT platforms with recognized value.
NEC will continue contributing to business growth that is
mutually beneficial for our customers and for us.
Kazuhiro Sakai
Executive Vice President
In charge of the System Integration, Services & Engineering
Operations Unit
Establishing a Services Business Foundation and
Executing a Global System Integration Rollout
In order to roll out new service businesses, such as the IoT, with
speed and global scope, NEC is driving toward business growth
while utilizing open innovation and establishing a shared,
company-wide business foundation.
Yasujiro Ryuno
Executive Vice President, CIO (Chief Information Officer) and
CISO (Chief Information Security Officer)
Achieving an ICT Environment that Contributes
to Business Growth
To help NEC get back on the track to growth, we are accelerating
the speed of business and pursuing ways to leverage ICT that
contributes to growth. We are dedicating effort to realizing an ICT
environment that supports diversifying work styles and
co-creation with customers and partners.
Susumu Makihara
Executive Vice President
In charge of Personnel and General Affairs
Making Diversity the Driver of Growth
For NEC to expand its Solutions for Society globally, we must rally
diverse human resources and be a company where employees can
work energetically. Therefore, we are striving to hire a more
diverse workforce, build systems, frameworks, and cultures that
support them, and strengthen leadership that leverages diversity.
Toshiya Matsuki
Executive Vice President
In charge of the Global Business Unit
Contributing to Customers through Social
Solutions and Strengthening Profitability in the
Global Marketplace
We are striving to accelerate the rollout of our “Solutions for
Society” with our safety business, which utilizes NEC’s world-
leading recognition technologies, and our network business,
which is backed by a rich track record, as the foundations for
business. At the same time, we are striving to solve social issues
and improve business profitability.
Chikara Ishii
Executive Vice President
In charge of the Enterprise Business Unit
Establishing a Foundation for Growth as a Base
for Providing Value
We are striving to expand and enhance how we provide value,
focusing on value chain innovation that connects capabilities “to
create,” “to transport,” “to sell,” and “to live,” while striving to
increase projects for a global market. We will work to maximize
business with a base of providing value for customers in
manufacturing, logistics, and service industries.
For further details on the corporate officers of NEC Corporation, please visit the
following URL:
http://www.nec.com/en/global/about/executives/svp.html
48
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Business Foundation to Support Value Creation Human Rights and Diversity
The NEC Group Human Rights Policy was formulated based on the International Bill of Human Rights and the
Guiding Principles on Business and Human Rights (UNGP). NEC strives to respect human rights, including those of
women, the disabled, and the LGBT* community, in all of its corporate activities. NEC also views the cultivation of
an environment and culture that enable diverse human resources to bring out the most of their ability to be an
important management strategy. The company therefore focuses on efforts to promote diversity, such as
achieving work-life balance with different working styles.
Participation in the World Assembly for Women in Tokyo (WAW! 2015)
Also as a result of those discussions, a proposal called
Designing New and Flexible Working Styles Utilizing Information
and Communications Technology (ICT) was included in the WAW!
2015 report. It was also registered as a United Nations document.
Nobuhiro Endo (then president of NEC) attended a high-level
roundtable of the international World Assembly for Women in
Tokyo (WAW! 2015), a symposium held by the Ministry of Foreign
Affairs in August 2015. He discussed work-life management with
foreign heads of state, executives of global IT companies, and
other attendees.
As part of those discussions, Mr. Endo explained the importance
of a system that enables a diverse range of people, not only
women, to make choices themselves in order to make work
something of value. He also explained that, to create systems that
enhance diversity, NEC promotes the shortening of work hours,
simplification of work processes, and sharing of information. This
enables a working environment in which employees can substitute
for each other at any time.
Reforming Working Styles and Achieving Work-Life Balance
Mr. Endo (then president) explaining NEC’s efforts
The rate of taking paid leave at NEC Corporation* for this fiscal
year was 67.9%, which was slightly less than the previous year
(68.4%). The average monthly overtime remained the same as last
year at 17.4 hours.
At NEC, labor and management cooperate to implement flexible
working styles, prevent overwork, and promote time off from work.
The status of these efforts is confirmed by labor-management
committees in each business unit and office to shorten work
hours and ensure employee health while also promoting time off
from work. In addition, to respond to changes in the business
environment and the diversifying needs of employees, we have
expanded the range of employees allowed to work from home and
to “bring your own device” (BYOD). This has not only contributed to
creating a better work-life balance for employees, it has also led to
increases in worker productivity.
Assisting the Self-Empowerment of NEC Group Employees with a Hearing Disability
From this fiscal year, bi-monthly study sessions for expanding
knowledge about NEC have been held for NEC Group employees
with a hearing disability. This effort was started based on the
comment of an employee who was in charge of guiding a
customer with a hearing disability similar to his own at the annual
C&C User Forum & iEXPO held by NEC. That employee said “I would
like to expand my knowledge about my company’s business on a
regular basis rather than just before an event, but I do not have
many opportunities to do so.”
These study sessions were held four times this fiscal year for a
total of 200 participants. The sessions focused on important
themes for expanding knowledge about the NEC Group, such as
barrier-free efforts at NEC, brand strategy, how to read
management indices, and NEC products and solutions.
The content of the sessions’ lectures is communicated via sign
language. And information accessibility is also guaranteed using
ICT, such as projecting a summary of the content on a screen and
installing an audio induction loop (a device that makes it easier to
hear with a hearing aid).
NEC Group Efforts for LGBT* Rights
The creation of new innovations requires a corporate culture that
enables diverse human resources to fully utilize their
individualities and personalities to propose diverse ideas and
opinions. The NEC Group Human Rights Policy formulated in April
2015 explicitly prohibits discrimination and acts that impair
individual dignity based on someone’s sexual identity or sexual
orientation in addition to race or creed. This declaration has been
made for both inside and outside the company.
NEC is proceeding with the three efforts below after having had
several discussions with ReBit, an NPO whose mission is to
engage in education promotion projects that will allow LGBT
children to become the adults they want to be. ReBit is also a
supporting target in the NEC Social Entrepreneurship School,
which assists the startups of young social entrepreneurs.
Enabling employees with a hearing disability to conduct
discussions and give presentations also contributes to cross-
department networking while providing an opportunity to expand
knowledge and knowhow.
NEC will continue to promote the creation of a workplace that
enables all employees to work actively. We will do this based on
the idea that ICT includes technologies that aid communication
and contribute to closing the information gap.
A summary of the lecture is projected on a display next to a sign-language interpreter
(1) CSR Promotion and Social Contributions Office held an event
for LGBT student job seekers. The goals of this event were to
both create a corporate culture that allows diverse human
resources to utilize their individualities and personalities to
propose various ideas and to eliminate the unease felt by LGBT
job seekers.
(2) Human Resources Development Division held three LGBT study
sessions (regarding basic understanding and discussions)
featuring instructors from ReBit. Approximately 120 employees
attended from the Human Resources Division, General Affairs
Division, Human Rights Hotline Desk, and Health Care Division.
(3) The Human Rights Hotline Desk established at each company
in the NEC Group has been accepting queries regarding LGBT
issues since April 2016.
* NEC Corporation only
49
Labor-management discussions on work-style reforms
Human Resources Development Division holding a study session
about LGBT
Explanation about LGBT by ReBit representative Mr. Yakushi
* LGBT is a collective term for sexual minorities
and stands for lesbian, gay, bisexual, and
transgender (the latter being people who
identify with a gender identity that differs
from the person’s sex at birth).
50
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Business Foundation to Support Value Creation Environmental Efforts
NEC works to reduce the environmental impact of its business activities throughout the entire supply chain and
strives to create social value from an environmental perspective via solutions to customers.
Environmental Management and Responsibility at NEC
Two international agreements regarding the conservation of the
natural environment were made in 2015. One was the Sustainable
Development Goals (SDGs) of the United Nations. The other was
the Paris Agreement made at the 21st Session of the Conference
of the Parties to the United Nations (UN) Framework Convention
on Climate Change (COP21). Both economics and the global
environment are essential for achieving these agreements’ goals.
The main goal of environmental management focused on by NEC
is to solve the various issues around the world to enable society
to develop. NEC will continue to create maximized solutions for
the targets the world aims for in order to provide the benefits
provided by safety, security, efficiency, and equality.
The Evolving Environmental Management of NEC
The environmental activities of NEC started in earnest in 1970,
when a dedicated environmental organization was established.
The president at the time had a strong awareness of corporate
responsibility regarding the environment and declared both
internally and to the public that NEC would actively pursue the
things it should do for the environment. That was an advanced
idea for a company at the time. Since then, NEC has engaged in a
wide range of activities while always looking one step ahead.
The NEC Environmental Management Vision 2010 announced in
2003 set forth a meaningful environmental vision. Since then, NEC
has promoted the contributions that ICT can make to reducing the
CO2 emissions of society as a whole. In 2009, this vision was
expanded to include efforts to protect ecosystems, biodiversity, and
the recycling and conservation of resources. Moreover, 2014 saw
the formulation of long-term goals to enhance climate-change
measures. We are therefore proceeding with environmental
management that is an inseparable part of our business.
Progress of Environmental Activities at NEC
i
E
x
p
a
n
d
n
g
s
c
o
p
e
o
f
e
n
v
i
r
o
n
m
e
n
t
a
l
a
c
t
i
v
i
t
i
e
s
51
Construction of
efficient systems
Environmental Charter
formulated (1991)
Environmental report
issued (since 1995)
ISO14001 adopted
(1996)
Zero-waste operations
(since 1985)
Environmental
Improvement Month
established
Environmental
Management Action Plan
2017/2030 formulated
(2010)
Climate change measures
enhanced (2014)
Efforts in all
business fields
Environmental impact/risk
minimization
All products made
environmentally friendly
Expanded contributions via
business
Environmental
Management Vision 2010
formulated (2003)
Recycling system
(since 1969)
Dedicated department
established (1970)
Environmental audit
system (since 1973)
1970s
1980s
1990s
Since 2000s
Implementing Climate Change Measures for Both Mitigation and Adaptation
NEC investigates what kind of social value its unique technologies
and solutions can provide to further enhance conventional
environmental management by focusing on mitigation. Last fiscal
year, climate-change adaptation was added to our main pillars of
environmental management. NEC believes that collecting data on
the ever-changing status of everything, including the environment
and social infrastructure, and performing big-data analysis enable
major changes to be predicted and help lead to appropriate
measures. These activities contribute to achieving a safe and
secure society. Comprehensive value can also be provided to
address the global problem of climate change by promoting
adaptation via our social-solution business while further reducing
CO2 emissions.
Overview of ICT Contributions to
Climate-Change Adaptation
Monitoring data
Increased
population
Climate
change
Food scarcity
Water scarcity
Increased CO2
Energy scarcity
Increased natural
disasters, etc.
The Cloud
Sensing
Transport
Electricity
Telecom-
munications
Social infrastructure
Water
Big data
Monitoring
Monitoring & analysis,
prediction,
understanding signs
Gas
Monitoring
Balance of supply and
demand, precautions,
prevention, maintenance
& management
Ecosystem
CO2
Forests
Freshwater
Climate
Global environment
Optimizing resource usage (eliminating waste), preparing for crises
Evolution in Environmental Management
With the growing prevalence of the IoT, the overall environmental
impact of society is being reduced with more efficient distribution
and less waste due to the improved accuracy of supply and
demand. This has a great effect on mitigation. NEC is creating the
Kobe Data Center with energy-saving capabilities that are among
the best in the world. It will start operations in the next fiscal year
and further reduce the power consumption of ICT.
In terms of adaptation, NEC is proceeding with the introduction
of disaster-prevention systems (particularly in Asia) to deal with
natural disasters, which are becoming more severe due to climate
change. These systems contribute to creating a society in which
people can live safely and securely. Moreover, utilizing SX-ACE
vector supercomputers is expected to help solve global
environmental problems, shed light on the mechanisms that cause
tectonic activity and earthquakes, and predict and deal with
natural disasters. Such efforts enable NEC to steadily increase the
value that it provides in terms of both mitigation and adaptation.
NEC is also proceeding with the reduction of environmental
impact throughout its entire supply chain. For example, energy
savings of approximately 50% were achieved when renovating
Building 9 of the NEC Tamagawa Plant by adopting a state-of-
the-art ICT solution for saving energy and electricity. This
knowledge on saving energy has also enabled NEC to both help its
business partners save energy and to provide solutions that
reduce the environmental impact of its customers.
52
Pollution preventionEnvironmental conservationEnvironmental managementEnvironmental managementNEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Business Foundation to Support Value Creation
Innovation Management
To solve global social issues, NEC focuses its investments on the technologies and fields that are sources
generating new customer value. In addition, NEC promotes open innovations to strengthen core technologies and
cultivate future technologies and cooperates with external research institutes that have leading technologies.
Moreover, a chief technology officer (CTO) position was established in April 2016 to link these technology
strategies with business strategies and implement them on a company-wide level. The CTO optimizes NEC’s
overall development investments, conducts planning and process design for open-innovation strategies with
external entities, and carries out technology development that is more strategic.
Policy
NEC’s research and development efforts go through a process of
carefully selecting solutions that will be able to provide high value.
This approach thoroughly hones the “No. 1/Only 1” core
technologies required to deliver the solutions via co-creation with
partners and customers. NEC then verifies the value.
To conduct such R&D, NEC has established a Technology
Strategy Committee with the CTO as the chair. This committee
debates technology strategy on a company-wide level to make
effective and efficient use of the R&D investments, which are 4 to
5% of NEC sales. The CTO is responsible for both selecting the
core technologies that NEC should focus its investments on and
promoting open innovation.
To continue enhancing No. 1/Only 1 core technologies into the
future, NEC actively recruits the top human resources at research
institutes overseas and increases the recruitment of PhD holders
and graduates of top universities in Japan. Moreover, NEC strives
to recruit and cultivate highly diverse human resources to broaden
its horizons for the creation of new value. NEC also cooperates
with NPOs to conduct study abroad programs and overseas
training in developing countries for its employees and thereby
provide an opportunity to learn about other business mindsets.
In addition, NEC’s Business Innovation Unit is responsible for
creating new solutions and new business from the core
technologies generated by the R&D. And this unit provides
strategies for cross-departmental business fields and plans and
promotes new business models that transcend the boundaries of
existing business. It also standardizes activities for global service
deployment.
Research and Development Process at NEC
7
T
h
e
m
e
s
S
o
c
i
a
l
V
a
u
e
l
I
n
n
o
v
a
t
i
o
n
:
Customer
challenges
Partners
(Technical cooperation)
Focus
Solutions
Competitor
analysis,
NEC’s strategy
Core competency
Solution
prototype
No.1/Only 1
technology
Validate value with
partners and leading
customers
Customers
(Knowledge/Validate)
C
r
e
a
t
e
s
o
u
t
i
o
n
s
l
f
o
r
s
o
c
i
e
t
y
Safety
Security
Efficiency
Equality
Promoting Concentrated Investments and
Open Innovation in Key Technologies and Fields
NEC concentrates its investments in research and development in
the fields of data science and ICT platforms. Data science involves
visualization, analysis, the control/guidance of the real world, and
the development of AI technology to create new value. ICT
platforms have computing and network technologies that can
respond to changes in the real world dynamically and in real-time.
They also have security technologies for the stable and secure
operations of social systems. NEC has many technological assets
in these fields that are unique and superior. But, to further
enhance competitiveness, NEC’s data science researchers will be
doubled by 2018 to strengthen AI technologies and create new
technologies.
Concentrated Investments in Data Science and ICT Platforms
Visualization
Analysis
Control/Guidance
No. 1*1
Face recognition
Only 1
Invariant analysis
Data
Science
Only 1
Only 1
Only 1
Only 1
No.1 in patent
ownership in
Japan *2
GLVQ (Quantifying general learning vector)
Self-learning super resolution
Crowd behavior analysis
Object Fingerprint
Optical Vibration Sensing
Speech recognition
Only 1
Heterogeneous mixture learning
Scent analysis
Only 1
Autonomous and Adaptive Control
No. 1*3
Textual Entailment Recognition
Only 1
Predictive Robust Optimization Framework
High speed
RAPID machine learning (deep learning)
Emotion recognition
High speed
Profiling Across Spatio-Temporal Data
ICT
Platform
No. 1*4
First in
the world
Only 1
Computing
Vector computing
I/O virtualization (ExpEther)
NanoBridge®
First in
the world
Phase change
cooling
Only 1
CWB*5
Networking
Security
Only 1
Applicable rate control
Leading
commercialization
SDN/NFV
High speed
authenticated encryption
First in
the world
Secure computing
Only 1
Automated Security Intelligence
Integrated access control
*1 Ranked 1st three consecutive times in task assessment as sponsored by National Institute of Standards and Technology (NIST) of the U.S.
*2 As of November 2015 based on research by NEC *3 Ranked 1st in task assessment as sponsored by National Institute of Standards and Technology (NIST) of the U.S. (2012)
*4 As of November 2013 based on research by NEC *5 CyberWorkBench
Intellectual Property Strategies
NEC positions intellectual property (IP) as an important
management resource that supports the business competitiveness
and stability of the NEC Group. IP also strengthens the company’s
own intellectual property and protects its brand.
and China to focus efforts on building a global patent network.
And, in the field of “Solutions for Society,” a strategic patent
project has been rolled out across Group companies to promote
the acquisition of strong and useful patents.
Looking ahead to global business expansion, NEC has
established intellectual property centers in North America, Europe,
As of March 2016, the NEC Group held a total of approximately
53,000 patents in Japan and overseas (with 21,000 of those in Japan).
Major Business Achievements
Business track record
Technology validation of landslide risk estimation at local authorities both in Japan and overseas
Established face recognition technology development center and introduced face recognition
solutions at airports in Brazil, etc.
Built Comprehensive Disaster Control System in Toshima Ward, Tokyo
Validating optimal water supply facilities management in cities and towns in the UK
Delivered over 600 SDN systems globally
Started offering NEC Industrial IoT, a next-generation manufacturing solution
Started offering a solution for predicting demand for repair parts
Released customers’ voice analysis solution
No.1/Only 1 technology
Data analysis technology
Face recognition
Crowd behavior analysis
Hybrid sensor
Predictive Robust Optimization Framework
Only 1
No. 1
Only 1
Only 1
Only 1
Leading
commercialization
SDN
Only 1
Only 1
Only 1
No. 1
Object fingerprint
Invariant analysis
Heterogeneous mixture learning
Textual entailment recognition
4K terrestrial broadcast test conducted with the largest commercial television broadcaster in Chile
High speed
Ultra high-resolution compression technology
53
54
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Business Foundation to Support Value Creation
Ensuring Compliance
Financial Section
57 Consolidated Balance Sheets
59 Consolidated Statements of Operations
60 Consolidated Statements of Comprehensive Income
61 Consolidated Statements of Changes in Net Assets
63 Consolidated Statements of Cash Flows
Notes: 1. U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥112 = U.S.$1.
2. Please refer to the separate publication “Annual Report 2016 (Financials)” for details of “Note XX” on pages 57 to 64.
NEC considers compliance to include not only legal compliance, but also compliance with the expectations and
demands of society, such as social norms and common sense. Also, from the perspective of risk management,
ensuring compliance such as complying with laws on competition and preventing bribery is extremely important.
NEC recognizes compliance as an important issue that relates to the very existence of a company and continues to
promote company-wide efforts that include top management.
Reviewing and Enhancing Internal Systems for Implementing Fair Trade
NEC formulated Rules for Contacts with Competitors in 2011.
They define the rules to prevent unnecessary contact with
competitors. These rules have been strengthened and clarified
based on the facts of on-site inspections conducted by the Japan
Fair Trade Commission previous fiscal year and this fiscal year.
More specifically, this entailed the addition and adjustment of
matters regarding contact with competitors that require prior
consultation. It also included the addition of precautions to reduce
the risk of becoming involved in bid-rigging at the initiative of
government agencies. The name of these rules was accordingly
changed to Rules for the Prevention of Cartels and Bid-riggings.
A manual on the rules was also created. It includes detailed
information on matters that require prior consultation, how to
respond when offered entry into a cartel or bid-rigging, and
precautions for reducing the risk of becoming involved in bid-
rigging at the initiative of government agencies.
Reviewing and Enhancing Internal Measures for Preventing Bribery
Anti-corruption such as preventing bribery is one of the ten
principles of the UN Global Compact and a common concern
around the world.
NEC has formulated Basic Rules on Anti-bribery. They define a
bribery-prevention system including basic actions to be taken by
executives and employees to ensure that bribery is prevented in
its business activities.
NEC has also created an Anti-Bribery Manual for Business
Divisions based on the Basic Rules on Anti-bribery. The manual
outlines the roles that the heads of business divisions play and
specific methods for preventing bribery. It includes the methods of
bribery risk evaluations and third-party due diligence implemented
for NEC business operations. The rules and manual were revised
this fiscal year in response to the latest guidance issued by
government agencies.
Compliance Training and Awareness Building
stratified training, etc., are also utilized to ensure employees
recognize the importance of working according to the NEC Group
Code of Conduct.
In addition to the systems above, NEC and its Japan subsidiaries
have been conducting web training on compliance once a year for
all executives and employees. Because ensuring global compliance
has become more important than ever, this training was made
multilingual (in English, Spanish, Portuguese, and Chinese) this
fiscal year and is being conducted for overseas subsidiaries. The
latest information regarding compliance is also shared with Group
companies worldwide on NEC’s intranet.
Moreover, an NEC Business Ethics Forum is held annually to
improve compliance awareness via lectures by external experts
and messages from NEC’s president about the importance of
compliance. The theme of this year’s forum was items that
employees (including managers) have to take care of, mainly
regarding competition laws. The training of new employees and
55
56
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Corporate Data
Consolidated Balance Sheets
NEC Corporation and Subsidiaries
March 31, 2015 and 2016
ASSETS
CURRENT ASSETS:
Millions of Yen
Thousands of
U.S. Dollars (Note 1)
2015
2016
2016
LIABILITIES AND NET ASSETS
Millions of Yen
Thousands of
U.S. Dollars (Note 1)
2015
2016
2016
CURRENT LIABILITIES:
Cash and cash equivalents (Note 19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 181,132
¥ 192,323
$ 1,717,170
Short-term borrowings (Notes 8 and 19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 28,988
¥ 40,102
$ 358,054
Short-term investments (Note 19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade notes and accounts receivable (Note 19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets (Notes 19 and 20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,972
928,367
241,146
65,351
163,968
(5,151)
1,818
874,496
228,059
79,418
157,982
(6,837)
16,232
7,808,000
2,036,241
709,089
1,410,554
(61,045)
Current portion of long-term debt (Notes 8 and 19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade notes and accounts payable (Note 19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses (Note 19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities (Notes 10, 13, 19 and 20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
106,267
466,677
169,070
298,546
117,174
415,427
155,240
284,099
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,069,548
1,012,042
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,576,785
1,527,259
13,636,241
LONG-TERM LIABILITIES:
Long-term debt (Notes 8 and 19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net defined benefit liability (Notes 3 and 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities (Notes 11, 19 and 20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
385,523
228,686
2,410
50,293
323,711
258,632
1,891
44,672
1,046,196
3,709,170
1,386,071
2,536,598
9,036,089
2,890,277
2,309,214
16,884
398,857
PROPERTY, PLANT AND EQUIPMENT,
NET OF ACCUMULATED DEPRECIATION (Notes 2f and 8):
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
57,787
172,177
20,189
67,643
20,319
57,189
168,001
19,516
66,265
20,823
510,616
1,500,009
174,250
591,652
185,919
Total long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
666,912
628,906
5,615,232
COMMITMENTS AND CONTINGENT LIABILITIES (Notes 18, 20 and 21)
NET ASSETS (Notes 12 and 24):
SHAREHOLDERS’ EQUITY:
Common stock:
Total property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
338,115
331,794
2,962,446
Authorized — 7,500,000 thousand shares
INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 6 and 19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
157,078
143,116
1,277,821
Investments in affiliated companies (Note 19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term loans receivable (Note 19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net defined benefit asset (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets (Notes 19 and 20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total investments and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90,153
66,985
94,194
39,424
85,114
74,622
102,682
(4,500)
705,752
91,626
46,123
89,358
37,271
818,089
411,813
797,839
332,777
Issued
— 2,604,733 thousand shares in 2015 and 2016 . . . . . . . . . . . . .
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock — at cost:
5,916 thousand shares in 2015 and
6,059 thousand shares in 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Valuation difference on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred gains or losses on hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
397,199
148,694
207,021
(3,025)
749,889
47,385
(271)
12,795
13,852
73,761
60,542
397,199
149,034
265,404
(3,077)
808,560
36,710
(1,525)
(1,175)
(50,478)
(16,468)
60,401
852,493
3,546,420
1,330,661
2,369,678
(27,473)
7,219,286
327,767
(13,616)
(10,491)
(450,696)
(147,036)
539,295
7,611,545
114,316
1,020,679
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,634
93,020
(4,076)
211,018
830,536
(36,393)
Remeasurements of defined benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . .
NON-CONTROLLING INTERESTS (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
634,388
5,664,179
Total net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
884,192
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥2,620,652
¥2,493,441
$22,262,866
TOTAL LIABILITIES AND NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥2,620,652
¥2,493,441
$22,262,866
See notes to consolidated financial statements.
57
58
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Corporate Data
Consolidated Statements of Operations
NEC Corporation and Subsidiaries
Years Ended March 31, 2014, 2015 and 2016
Consolidated Statements of Comprehensive Income
NEC Corporation and Subsidiaries
Years Ended March 31, 2014, 2015 and 2016
NET SALES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥3,043,114
¥2,935,517
¥2,821,181
$25,189,116
PROFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥41,595
¥ 55,925
¥ 74,039
$ 661,063
Millions of Yen
Thousands of
U.S. Dollars (Note 1)
2014
2015
2016
2016
Millions of Yen
Thousands of
U.S. Dollars (Note 1)
2014
2015
2016
2016
COST OF SALES (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,128,457
2,039,499
1,978,757
17,667,473
OTHER COMPREHENSIVE INCOME (Note 16):
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
914,657
896,018
842,424
7,521,643
Valuation difference on available-for-sale securities . . . . . . . . . .
15,858
Deferred gains or losses on hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . .
Remeasurements of defined benefit plans . . . . . . . . . . . . . . . . . . . .
Share of other comprehensive income of
associates accounted for using equity method . . . . . . . . . . . . . . .
Total other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . .
(253)
4,450
—
1,239
21,294
12,028
674
11,218
78,611
4,150
106,681
(10,418)
(30)
(11,798)
(63,674)
(6,120)
(92,040)
(93,018)
(268)
(105,339)
(568,518)
(54,643)
(821,786)
COMPREHENSIVE INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥62,889
¥162,606
¥(18,001)
$(160,723)
Comprehensive income attributable to
owners of the parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥54,917
¥160,309
¥(21,480)
$(191,786)
non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,972
2,297
3,479
31,063
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (Notes 9 and 14) . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NON-OPERATING INCOME:
808,464
106,193
767,934
128,084
735,118
107,306
6,563,554
958,089
Interest and dividends income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliated companies, net . . . . . . . . . . . . . . . . .
Foreign exchange gain, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-operating income (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . .
6,251
2,719
593
8,672
5,658
8,126
4,468
8,240
Total non-operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,235
26,492
NON-OPERATING EXPENSES:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,036
10,066
Foreign exchange loss, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement package and compensation for damage (Note 5) . .
Provision for contingent loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement benefit expenses (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-operating expenses (Note 5) . . . . . . . . . . . . . . . . . . . . . . .
Total non-operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ordinary income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SPECIAL GAINS (Note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SPECIAL LOSSES (Note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROFIT BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INCOME TAXES (Note 13):
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROFIT (LOSS) ATTRIBUTABLE TO
NON-CONTROLLING INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
3,836
11,452
11,325
18,627
55,276
69,152
58,341
43,532
83,961
33,558
8,808
42,366
41,595
—
2,554
5,872
10,357
13,615
42,464
112,112
7,801
23,176
96,737
31,868
8,944
40,812
55,925
5,916
4,562
—
7,498
17,976
9,760
8,482
7,220
4,745
—
12,340
42,547
82,735
6,095
10,908
77,922
20,085
(16,202)
3,883
74,039
52,821
40,732
—
66,947
160,500
87,143
75,732
64,464
42,366
—
110,179
379,884
738,705
54,420
97,393
695,732
179,330
(144,661)
34,669
661,063
7,853
(1,377)
5,290
47,233
PROFIT ATTRIBUTABLE TO OWNERS OF THE PARENT . . . . . . .
¥ 33,742
¥ 57,302
¥ 68,749
$ 613,830
PER SHARE OF COMMON STOCK (Note 23):
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥12.99
¥22.05
¥26.45
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends applicable to the year . . . . . . . . . . . . . . . . . . . . . . . . . .
—
4.00
—
4.00
—
6.00
$0.24
—
0.05
2014
Yen
2015
U.S. Dollars (Note 1)
2016
2016
See notes to consolidated financial statements.
59
60
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Corporate Data
Consolidated Statements of Changes in Net Assets
NEC Corporation and Subsidiaries
Years Ended March 31, 2014, 2015 and 2016
BALANCE, MARCH 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,604,733
¥397,199
¥148,405
¥157,771
¥ (2,946)
¥700,429
¥ 18,333
¥ (1,076)
¥ (7,020)
—
¥ 10,237
¥125,481
¥836,147
Thousands
Outstanding
number of shares
of common stock
Shareholders’ equity
Accumulated other comprehensive income
Millions of Yen
Common stock
Capital surplus
Retained earnings
Treasury stock
Total
Valuation difference
on available-for-sale
securities
Deferred gains or
losses on hedges
Foreign currency
translation
adjustments
Remeasurements
of defined
benefit plans
Total
Non-
controlling interests
Total
net assets
Profit attributable to owners of the parent . . . . . . . . . . . . . . . . . . . .
Cash dividends paid, ¥4 per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change of scope of equity method . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net changes in items other than
shareholders’ equity during the year . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
BALANCE, MARCH 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,604,733
397,199
148,402
Cumulative effects of changes in accounting policies . . . . . . . . .
Restated balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
397,199
148,402
Profit attributable to owners of the parent . . . . . . . . . . . . . . . . . . . .
Cash dividends paid, ¥4 per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change of scope of equity method . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net changes in items other than
shareholders’ equity during the year . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
294
BALANCE, MARCH 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,604,733
397,199
148,694
Profit attributable to owners of the parent . . . . . . . . . . . . . . . . . . . .
Cash dividends paid, ¥4 per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in treasury shares of parent arising from transactions
with non-controlling shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change of scope of equity method . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net changes in items other than
shareholders’ equity during the year . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
342
33,742
(10,394)
1,451
182,570
(22,458)
160,112
57,302
(10,393)
207,021
68,749
(10,396)
30
(35)
5
(2,976)
(2,976)
(54)
5
(3,025)
(56)
4
33,742
(10,394)
(35)
3
1,451
—
725,195
(22,458)
702,737
57,302
(10,393)
(54)
3
294
—
749,889
68,749
(10,396)
(56)
2
342
30
—
BALANCE, MARCH 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,604,733
¥397,199
¥149,034
¥265,404
¥ (3,077)
¥808,560
15,959
34,292
(283)
(1,359)
5,499
(1,521)
(60,658)
(60,658)
(39,483)
(29,246)
34,292
(1,359)
(1,521)
(60,658)
(29,246)
(53,767)
71,714
(1,608)
70,106
13,093
47,385
1,088
(271)
14,316
12,795
74,510
13,852
103,007
73,761
(9,564)
60,542
33,742
(10,394)
(35)
3
1,451
(93,250)
767,663
(24,066)
743,597
57,302
(10,393)
(54)
3
294
93,443
884,192
68,749
(10,396)
(56)
2
342
30
(10,675)
¥ 36,710
(1,254)
(13,970)
(64,330)
(90,229)
(141)
(90,370)
¥ (1,525)
¥ (1,175)
¥ (50,478)
¥ (16,468)
¥ 60,401
¥852,493
BALANCE, MARCH 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,546,420
$1,327,625
$1,848,401
$ (27,009)
$6,695,437
$423,080
$ (2,420)
$ 114,241
$ 123,679
$ 658,580
$540,554
$7,894,571
Shareholders’ equity
Accumulated other comprehensive income
Thousands of U.S. Dollars (Note 1)
Common stock
Capital surplus
Retained earnings
Treasury stock
Total
Valuation difference
on available-for-sale
securities
Deferred gains or
losses on hedges
Foreign currency
translation
adjustments
Remeasurements
of defined
benefit plans
Total
Non-
controlling interests
Total
net assets
Profit attributable to owners of the parent . . . . . . . . . . . . . . . . . . . .
Cash dividends paid, $0.04 per share . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in treasury shares of parent arising from transactions
with non-controlling shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change of scope of equity method . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net changes in items other than
shareholders’ equity during the year . . . . . . . . . . . . . . . . . . . . . . . . . .
613,830
(92,821)
268
(18)
3,054
(500)
36
613,830
(92,821)
(500)
18
3,054
268
613,830
(92,821)
(500)
18
3,054
268
—
(95,313)
(11,196)
(124,732)
(574,375)
(805,616)
(1,259)
(806,875)
BALANCE, MARCH 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,546,420
$1,330,661
$2,369,678
$ (27,473)
$7,219,286
$327,767
$ (13,616)
$ (10,491)
$(450,696)
$(147,036)
$539,295
$7,611,545
Conforming to separate financial statements, total translated amounts seem to be inconsistent with calculation in some cases.
See notes to consolidated financial statements.
61
62
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Corporate Data
Consolidated Statements of Cash Flows
NEC Corporation and Subsidiaries
Years Ended March 31, 2014, 2015 and 2016
CASH FLOWS FROM OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Profit before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 83,961
¥ 96,737
¥ 77,922
$ 695,732
Purchases of property, plant and equipment . . . . . . . . . . . . . . . . . . .
¥ (89,458)
¥ (42,461)
¥ (32,522)
$ (290,375)
Millions of Yen
Thousands of
U.S. Dollars (Note 1)
2014
2015
2016
2016
Millions of Yen
Thousands of
U.S. Dollars (Note 1)
2014
2015
2016
2016
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of long-term prepaid expenses . . . . . . . . . . . . . . . . . .
Impairment losses on property, plant and equipment,
and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in allowance for doubtful accounts . . . . . . .
Decrease in product warranty liabilities . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in provision for loss on
construction contracts and others . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in provision for
business structure improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in provision for contingent loss . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in provision for
loss on repurchase of computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and dividends income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of affiliated companies . . . . . . . . . . . . . . . . . . . . .
Gain on change in equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sales of property, plant and equipment . . . . . . . . . . . . . . . .
Gain on sales of investment securities . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on sales of investment securities . . . . . . . . . . . . . . . . . . . . . . . . .
Write-off of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
76,977
4,972
15,934
17,085
(4,163)
(1,220)
78,717
5,126
8,932
16,814
(11,030)
(979)
73,026
4,947
10,645
11,839
2,038
(3,288)
652,018
44,170
95,045
105,705
18,196
(29,357)
Proceeds from sales of property, plant and equipment . . . . . . . .
Acquisitions of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of investment securities . . . . . . . . . . . . . . . . . .
5,440
(12,327)
(995)
14,907
13,790
(8,974)
(1,367)
8,729
Disbursements for acquisitions of
shares of newly consolidated subsidiaries . . . . . . . . . . . . . . . . . . . . .
(806)
(10,518)
Proceeds from acquisitions of
shares of newly consolidated subsidiaries . . . . . . . . . . . . . . . . . . . .
116
(6,634)
(5,763)
1,971
17,598
Proceeds from sales of shares of
subsidiaries being excluded from the consolidation . . . . . . . . . . .
42,504
9,086
10,476
1,583
(6,251)
10,036
(2,719)
(365)
(368)
(2,698)
23
1,738
392
787
(464)
(5,658)
10,066
(8,126)
—
(3,276)
(2,216)
10
1,044
(1,706)
—
(74,822)
(21,830)
5,665
16,668
21,635
(7,518)
672
(1,687)
(5,916)
9,760
(4,562)
—
(445)
(4,977)
21
104
(673)
138
43,771
7,693
5,245
(44,723)
(48,621)
(67,125)
6,000
(15,063)
(52,821)
87,143
(40,732)
—
(3,973)
(44,438)
188
929
(6,009)
1,232
390,812
68,688
46,830
(399,313)
(434,116)
Disbursements for sales of shares of
subsidiaries being excluded from the consolidation . . . . . . . . . . .
Purchases of investments in affiliated companies . . . . . . . . . . . .
Proceeds from sales of investments in affiliated companies . . .
(Increase) decrease in short-term loans receivable, net . . . . . . . .
Disbursements for loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collection of loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings, net . . . . . . . . . . . . .
Proceeds from long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redemption of bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid to non-controlling interests . . . . . . . . . . . . . . . . . . . .
Others—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(27,693)
26,515
(50)
(169)
247
2,876
(38,893)
(26,745)
138,630
(76,239)
—
(70,000)
(10,378)
(5,218)
(33)
2,746
(8,316)
(892)
7,616
—
36
556
(385)
(4,380)
204
498
(142)
584
2,195
(32,202)
14,790
4,059
(15,827)
50,000
(90,000)
(10,368)
(2,214)
(522)
24,518
(74,250)
(7,964)
68,000
—
321
4,964
(3,437)
(39,107)
1,821
4,447
(1,268)
5,214
19,598
(287,518)
132,054
36,241
(141,313)
446,429
(803,571)
(92,571)
(19,768)
(4,661)
—
33
(3,378)
(7,127)
—
63
(155)
907
2,948
(47,510)
(2,275)
9,875
(46,933)
—
(20,000)
(10,358)
(2,579)
243
126,723
127,382
1,137,339
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
(49,983)
(72,027)
(50,082)
(447,160)
Gain on sales of investments in affiliated companies . . . . . . . . . .
(53,923)
Loss on sales of investments in affiliated companies . . . . . . . . . .
(Increase) decrease in trade notes and accounts receivable . . . .
(Increase) decrease in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in accounts receivable, other . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in trade notes and accounts payable . . . . . .
Others—net (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64
(22,680)
24,327
3,380
(4,034)
(26,937)
127,650
6,216
(8,914)
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(30,828)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . .
¥ 94,124
¥ 87,917
¥ 97,829
$ 873,473
See notes to consolidated financial statements.
5,721
(10,132)
(34,395)
5,845
(10,007)
(25,391)
52,187
(89,348)
(226,705)
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . .
4,257
6,115
(4,354)
(38,875)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,505
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR . . .
197,132
(25,505)
206,637
11,191
181,132
99,920
1,617,250
CASH AND CASH EQUIVALENTS, AT END OF YEAR . . . . . . . . . .
¥206,637
¥181,132
¥192,323
$1,717,170
NON-CASH INVESTING AND FINANCING ACTIVITIES
Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,326
¥781
¥471
$4,205
63
64
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Corporate Data
Non-Financial Section
NEC Corporation and Consolidated Subsidiaries
For the years ended or at year-end of March 31, 2015 and 2016
Corporate Overview
CO2 emissions reduction by
providing IT solutions . . . . . . . . . . .
Improvement in energy
efficiency of products*1 . . . . . . . . .
Greenhouse gas emissions*2
2015
2016
Units
2015
2016
Units
2,540
2,620 Thousand tons
Number of employees
by region Total . . . . . . . . . . . . . . . . . 98,882 98,726
People
91
97
%
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,056 77,455
People
Greater China . . . . . . . . . . . . . . . . . . .
4,882
4,058
People
Asia Pacific . . . . . . . . . . . . . . . . . . . . .
6,926
7,678
People
Company Name
NEC Corporation
Organization Chart
Address
7-1, Shiba 5-chome, Minato-ku,
Tokyo 108-8001, Japan
Established
July 17, 1899
Number of Employees 98,726
President
Board
Business Innovation Unit
(NEC Corporation and consolidated subsidiaries)
(As of March 31, 2016)
System Integration, Services & Engineering Operations Unit
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,540
4,948
People
Total Number of Shares Issued
Scope 1 . . . . . . . . . . . . . . . . . . . . . . . . . . .
58
59 Thousand tons
Scope 2 . . . . . . . . . . . . . . . . . . . . . . . . . . .
337
299 Thousand tons
Scope 3 . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,098
9,286 Thousand tons
Energy usage
Electricity . . . . . . . . . . . . . . . . . . . . . . .
5,626
5,689 Thousand GJ*3
Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,021
1,070 Thousand GJ
Fuel (heavy oil and kerosene) . . . .
86
99 Thousand GJ
Water usage . . . . . . . . . . . . . . . . . . . . . . .
2,375
2,294 Thousand m3
Industrial waste
Emission volume
(general waste + industrial waste) . .
32
35 Thousand tons
Resource reuse rate . . . . . . . . . . . . .
83.3
87.2
%
North America . . . . . . . . . . . . . . . . . .
2,502
2,495
People
Latin America . . . . . . . . . . . . . . . . . . .
1,976
2,092
People
Ratio of outside directors to
all directors*4 . . . . . . . . . . . . . . . . . . .
Number of female managers*4
(As of April 1 of each year) . . . . . . . . . . . . . . . . .
Ratio of female managers*4
(As of April 1 of each year) . . . . . . . . . . . . . . . . .
Ratio of employees
with disabilities*4
(As of June 1 of each year) . . . . . . . . . . . . . . . . .
Number of people of
utilizing childcare leave*4 . . . . . .
Number of people of
utilizing nursing care leave*4 . .
45.5
45.5
%
386
374
People
5.2
5.4
2.03
2.07
%
%
388
395
People
16
19
People
Average age of employees*4 . . . .
42.7
42.9
Years old
Average length of
employment*4 . . . . . . . . . . . . . . . . . .
Response rate of employees’
survey (Domestic) *5 . . . . . . . . . . .
Response rate of employees’
survey (Overseas) *6 . . . . . . . . . . .
Labor accidents and
disasters*7
18.5
18.6
Years
84
83
77
—
%
%
Frequency rate . . . . . . . . . . . . . . . . .
0.27
0.25
Severity rate . . . . . . . . . . . . . . . . . . . .
0.00
0.00
*1 Compared with fiscal 2006
*2 Greenhouse gas refers to CO2 (carbon dioxide), CH4 (methane), N2O (nitrous oxide), HFCs (hydrofluorocarbons), PFCs (perfluorocarbons), SF6 (sulphur hexafluoride),
and NF3 (nitrogen trifluoride). Greenhouse gas emissions are calculated based on the following categories stated by the Greenhouse Gas Protocol (GHG Protocol).
Scope 1: Direct GHG emissions from sources that are owned or controlled by the Company
Scope 2: Indirect GHG emissions from consumption of purchased electricity, heat or steam
Scope 3: Other indirect emissions covering corporate upstream and downstream processes not included in Scope 2
*3 Gigajoules
*4 Scope: NEC Corporation
*5 Scope: NEC Corporation and 27 domestic consolidated subsidiaries
*6 Scope: Overseas subsidiaries in 30 countries overseen by the Global Business Unit.
The survey for employees at overseas subsidiaries is conducted every other year. It was not conducted during the fiscal year under review.
*7 Scope: NEC Corporation
Frequency rate: Number of deaths and injuries due to industrial accidents divided by total working hours times one million
Severity rate: Number of lost working days divided by total working hours times one thousand
2,604,732,635 shares (As of March 31, 2016)
Stock Exchange Listing Tokyo (Securities Code: 6701)
Shareholder Register Administrator
Sumitomo Mitsui Trust Bank, Limited
1-4-1, Marunouchi, Chiyoda-ku, Tokyo
Classification of Shareholders (Shareholding Ratio)
(As of March 31, 2016)
Japanese Individuals and Others
29.25%
Japanese Government and
Local Government
0.00%
Number of
Shareholders:
195,536
Financial Institutions
28.89%
Securities Companies
2.79%
Other Corporations
3.08%
Foreign Investors
35.99%
Supply Chain Management Unit
Corporate Sales and Sales Operations Unit
Branch Offices
Global Business Unit
Regional Headquarters (RHQs)
Public Business Unit
Enterprise Business Unit
Telecom Carrier Business Unit
System Platform Business Unit
Central Research Laboratories
Corporate Staff
Major Shareholders (Top 10) (As of March 31, 2016)
Name of Shareholders
Number of Shares Held
(Thousands of Shares)
Shareholding Ratio
(%)
Japan Trustee Services Bank, Ltd. (Trust Account)
The Master Trust Bank of Japan, Ltd. (Trust Account)
The Chase Manhattan Bank, N.A. London Special Account No.1
NEC Employee Shareholding Association
Nippon Life Insurance Company
Japan Trustee Services Bank, Ltd. (Trust Account No. 4)
Sumitomo Life Insurance Company
Trust & Custody Services Bank, Ltd. (Trust Collateral Account)
Japan Trustee Services Bank, Ltd. (Trust Account No. 9)
Japan Trustee Services Bank, Ltd. (Trust Account No. 7)
Note: The shareholding ratio is calculated by excluding the number of treasury stock (5,995,679 shares).
112,282
109,174
75,831
50,626
41,977
41,113
41,000
38,765
37,321
36,115
4.32
4.20
2.92
1.95
1.62
1.58
1.58
1.49
1.44
1.39
65
66
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016Corporate Data
The information contained in Annual Report 2016 is also available on NEC’s website.
NEC home page
http://www.nec.com
Corporate Social Responsibility
http://www.nec.com/en/global/csr
NEC discloses corporate social responsibility (CSR) information in line with
ESG issues and constantly strives to enhance presentation of this
information on its website.
Division
in Charge
CSR Promotion and Social Contributions Office,
Corporate Communications Division
Investor Relations
http://www.nec.com/en/global/ir
Posted on the NEC Investor Relations (IR) website are IR presentation
materials and other documents, NEC’s financial position and business
results, stock and bond information, and much more. NEC constantly strives
to enhance the disclosure on this website.
Division
in Charge
Investor Relations Office,
Corporate Strategy Division
68
Cautionary Statement with Respect to Forward-Looking Statements
This material contains forward-looking statements regarding estimations, forecasts, targets and plans in relation to the results of operations, financial conditions and other overall
management of the NEC Group (the “forward-looking statements"). The forward-looking statements are made based on information currently available to NEC and certain assump-
tions considered reasonable as of the date of this material. These determinations and assumptions are inherently subjective and uncertain. These forward-looking statements are
not guarantees of future performance, and actual operating results may differ substantially due to a number of factors.
The factors that may influence the operating results include, but are not limited to, the following:
• Effects of economic conditions, volatility in the markets generally, and fluctuations in foreign currency exchange and interest rate
• Trends and factors beyond the NEC Group's control and fluctuations in financial conditions and profits of the NEC Group that are caused by external factors
• Risks arising from acquisitions, business combinations and reorganizations, including the possibility that the expected benefits cannot be realized or that the transactions may result
in unanticipated adverse consequences
• Developments in the NEC Group's alliances with strategic partners
• Effects of expanding the NEC Group's global business
• Risk that the NEC Group may fail to keep pace with rapid technological developments and changes in customer preferences
• Risk that the NEC Group may lose sales due to problems with the production process or due to its failure to adapt to demand fluctuations
• Defects in products and services
• Shortcomings in material procurement and increases in delivery cost
• Acquisition and protection of intellectual property rights necessary for the operation of business
• Risk that intellectual property licenses owned by third parties cannot be obtained and/or are discontinued
• Risk that the NEC Group may be exposed to unfavorable pricing environment due to intensified competition
• Risk that a major customer changes investment targets, reduces capital investment and/or reduces the value of transactions with the NEC Group
• Risk that the NEC Group may be unable to provide or facilitate payment arrangements (such as vendor financing) to its customers on terms acceptable to them or at all, or risk that
the NEC Group's customers are unable to make payments on time, due to the customers' financial difficulties or otherwise
• Risk that the NEC Group may experience a substantial loss of, or an inability to attract, talented personnel
• Risk that the NEC Group's ability to access the commercial paper market or other debt markets are adversely affected due to a downgrade in its credit rating
• Risk that the NEC Group may incur large costs and/or liabilities in relation to internal control, legal proceedings, laws and governmental policies, environmental laws and regulations,
tax practice, information management, and human rights and working environment
• Consequences of natural and fire disasters
• Changes in methods, estimates and judgments that the NEC Group uses in applying its accounting policies
• Risk that the NEC Group may incur liabilities and losses in relation to its retirement benefit obligations
The forward-looking statements contained in this material are based on information that NEC possesses as of the date hereof. New risks and uncertainties come up from time to time,
and it is impossible for NEC to predict these events or how they may affect the NEC Group. NEC does not intend to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
Trademarks
• NEC is a registered trademark of NEC Corporation in Japan and other countries.
• All other names may be trademarks of their respective owners.
67
NEC Corporation Annual Report 2016NEC Corporation Annual Report 2016 7-1, Shiba 5-chome, Minato-ku, Tokyo 108-8001, Japan
Telephone: +81-3-3454-1111
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