NEC Networks & System Integration Corporation(TSE 1973 / NESIC)- Gear for Growth February 26, 2013
Hiroshi (Hank) Sato, Chief Financial Officer
NEC Networks & System Integration Corporation

My name is Hank Sato, CFO of NEC Networks &System Integration Corporation, we call NESIC.
Thank you for joining us today for this briefing.

0AgendaI. What’s NESIC ?
II. Gear for Growth !

Page 1ⓒ NEC Networks & System Integration Corporation 2013

Here is our agenda, today.
I will provide a summary of our company first , thendescribe the gear for growth.

1

I. What’s NESIC ?

Page 2ⓒ NEC Networks & System Integration Corporation 2013

What’s NESIC?

2

Corporate History
Foundation Era

Growth by Telecom
Engineering BusinessTelecom Engineering+ Network SI & Maintenance

Development of ICT SI &Service Business-Installation
andmaintenance of
telecom switch-Broadcasting system,
submarine cable, radio
communication andOversea business-LAN/WAN business forenterprises-SI for telecom carriers-Expanding service
business using theservice platforms

2013
60th anniversary

2005
Name changed to NEC
Networks & System
Integration Corporation(Net sales:
100 million
yen)
1996
Net sales ¥200 billion

2,500
2,000
1,500

1953
NESIC was founded byspinning off from NEC
telecom engineering
section1988
Net sales ¥100 billion

2011
TSE Industrial Category waschanged from Construction to

Info.& Communication
1,000
500
0

1953

Page 3

1992
Listed on the Tokyo Stock
Exchange, First Section

1980
Name changed to NEC System
Integration & Construction, ltd.

1970

1983
Listed on the Tokyo Stock
Exchange, Second section

1980

1990

2000

2010

ⓒ NEC Networks & System Integration Corporation 2013This chart shows our history.
NESIC was born as a telecom engineering
company 60 years ago.
According to technologies, our business have been
gradually expanded into systems integration andrelated services such as system operation andoutsourcing services.

3

NESIC Business Model
Customers(Private,
Carriers,
Govern’ts)

×

ICT
services×

Facility
managm’t（FM）

60 years experience, primarily in the network field＝
A leading SI’er in the network field in Japan
Page 4ⓒ NEC Networks & System Integration Corporation 2013

Our business model has 3 points:(1)We do business for various customers, privatecompanies, telecom cariiers and governments.
(2) We can provide them a lot of services related
to ICT, such as consultation, system integrations,maintenance operation, and outsourcing services.
(3) We also have comprehensive facility
management knowhow through telecom
construction experience, including office facilities
and design.
We are proud of leading position in the Japanese
network market through the trust, earned throughour experience and know-how accumulated for
sixty years.

4

A Wide Range of Customers
Sales:¥204.7billion
OthersEnterprises
Network

SocialInfrastructure

80.7

64.5

46.7

Carrier
Network

FY 2012/3
Page 5ⓒ NEC Networks & System Integration Corporation 2013

Our sales are well balanced by these 3 segments.

5

Another view of our business model▌Management cycle & ICT services

Own practice of new services

Creation,
evaluation/verification
Supportservices

Contact Centers7-24 Support service
platforms

Page 6SI

Installation/
facility management

Carrier-grade
Carrier-grade
technological
technological reliability
reliability

Data centers

Maintenance bases: over 300
Service engineers: 4,000

Planning/consulting,proposal

NW Operation Centerⓒ NEC Networks & System Integration Corporation 2013

We are able to provide ICT services as amanagement cycle, from consultation, integration,
maintenance services and outsourcing support.
In addition, we also have implementation,verification and proposition of new solutions, fromthe customers viewpoints.
To support our business model, we have more than
300 service and support bases and 4000
engineers working nation-wide.

6

Differentiated Business Model▌Facility management（FM） + ICT capabilities
Differentiated business model
Product sales

ＮＥＳＩＣ

SI

Service104.7（51%）

OtsukaCorp.

Infra.
Construction

71.2（35%）

Creating
Creating new
new businessbusiness using
using
synergysynergy between
between expertise
expertise inin
facility
facility management
management &
& ICT
ICT

26.1（18%）129.0(29%) 79.5(18%) 107.0(24%) 129.1(29%)
Web Sales, etc

CTC

96.5(35%)SCSK

60.0(35%)64.0(23%)115.9(42%)

ICT
NetoneSystems

65.9(39%)86.9(60%)0%45.1(26%)

17.9(12%) 40.6(28%)

50%

100%

Facilities(Office furniture,electricity/
air conditioning,etc.)

Work design

Source : The Company based on “Study of New Business Strategies by SI/NI Vendors of Japan 2012” from Fuji Chimera Research InstitutePage 7ⓒ NEC Networks & System Integration Corporation 2013

The clear differentiation compared to competitors,
lies in our know-how and installation capabilities
for office, electrical and other facilities.
These skills have been built through our
infrastructure construction business, leading to thecreation of new business.
One of such examples is our solution named
EmpoweredOffice, which improves total officeproductivity by combining ICT with office design,
supplies and other facilities. I will explain this indetail shortly.

7

Improving Profitability & Challenging Growth

6.0%

7.0%

7.7%

8.2%
6.3%

5.9%

5.0%

4.8%

4.9%
2.4%
4.2%

2.4%

2.8%

1.2
05.3
Page 8

258.2

06.3

5.0%

OperatingMargin(billion yen)
249.1
217.7

213.7

2.6

4.5%

3.1%

254.6
202.4

4.4%

ROE

3.5
07.3

4.4

08.3

5.2

09.3

217.9

Sales

6.8

5.8

10.3

230.0
204.7

4.7

4.6

Net
Profit11.3

12.3

13.3(forecasts)ⓒ NEC Networks & System Integration Corporation 2013

Next, I explain our financial performance.
For past 10 years, we have been improved our
profitability.
The challenge is sales growth !

8Strong Financial Position▐ Financial strength for growth!
(billions of yen)
50

38.9

40

33.6

30
20

24.1

25.7

11.5

20.3
13.2

ＦＣＦ

7.2
1.0

-2.4

-10
-20

Net *
Cash

19.3
14.8

10
0

24.5

37.1

1H

2H

09／3

4.4

2.0
-4.3

-5.5
1H

2H

10／3

1H

2H

1H

11／3

2H

12／3

1H

13／3

*Net cash means an amount obtained by deducting loans payable from cash and cash equivalents

Page 9ⓒ NEC Networks & System Integration Corporation 2013

We have built solid financial strength throughincreased profitability.
Now it is the time to invest a gear for growth.

9II. Gear for Growth !
(1) Current Actions

Page 10ⓒ NEC Networks & System Integration Corporation 2013

Next, I will explain how we gear for growth.

10Business Opportunities summaryEnterprises▌Matured domestic market & Globalization→Needs to further efficiency & office innovation by ICT+α.
Telecom Carriers▌Network traffic jam by “smart-phones” penetration→Investment to enforce Network→Procuring from global vendors.
Governments▌Needs for the disaster prevention (DP) after “3.11”
Page 11ⓒ NEC Networks & System Integration Corporation 2013

First, our business opportunities,
Enterprise segment is matured in domestic market
and in the middle of globalization.
They need pursue further efficiency and cost cutsby office innovation by ICT +@.
In telecom carriers segment has headache oftraffic jam by smart-phone. They are requested to
enforce network and costs efficiency.
Last, regarding central and local governments needfor the disaster prevention.

11

Gear for Growth: Enterprises NW▌Labor Productivity of JapanDemand for management innovation andoffice productivity improvement increases
1.00

U.S.A
France
Italy
Germany
Canada
U.K.
Japan

0.69
<Productivity comparison among G-7 industrialized counties>(Index of U.S.A. as 1)

Source: Company based on “2011 International Comparison of Labor Productivity” of Japan Productivity Center
Page 12ⓒ NEC Networks & System Integration Corporation 2013For enterprises market, this chart shows current
labor productivity in Japan.
It is the lowest among the seven leading advanced
nations.
Although Japan has high productivity in
manufacturing, thanks to production innovation, theinferior productivity of white-collar workers andoffices drives down total productivity.
Management members have recognized the needs
to improve office productivity as a way tostrengthen competitiveness.

12Gear for Growth: Enterprises NW▌Office Innovation “EmpoweredOffice”
Proposal of innovated Working-style
・ICT + Facility management（FM） + Consultation
・To improve productivity, cost-efficiency,
environmental responsiveness“Empower”“Economy”“Ecology”

From SI to providing services
・Cloud and BPO services
photo : Tomoyuki Kawabata

Page 13ⓒ NEC Networks & System Integration Corporation 2013

From senior management down, we have focusedon this demand and have been working on theoffice innovation solution “EmpoweredOffice” as a
critical field for enterprises.
To enhance office productivity, we combine thestrength of ICT and our facilities managements, andprovide the following 3E solutions to enhance thecorporate value of our customers: Empowering
creativity of each worker, and realizing an
Economical and Ecological work style.
We have implemented the solution for ourselves,
which was effective in reducing floor space by
40% and the power consumption by half, as well asin speeding up management and facilitating
information sharing, among other benefits.
We have invited customers, especially senior
management, to discover the effectiveness forthemselves by watching around our offices. As aresult, the EmpoweredOffice brand has gradually
been penetrating to our customers.
13

Gear for Growth: Enterprises NW▌Expanding customers acceptance of ”EmpoweredOffice”
EmpoweredOffice (EO) related orders received
Cumulative
visitors of EO
exceeded
Nikkei New10,000
office Award(2nd time).
Head-office relocation
Adoption of companywide EO .

(billions of yen)

40
30
20
10

Started EO solution
Began in-housepractice partially

Nikkei Newoffice Award.

0
08.3

Page 14

09.3

10.3

11.3

12.3

13.3

(Forecast)ⓒ NEC Networks & System Integration Corporation 2013This chart shows the trend in EmpoweredOfficerelated orders received.
Since the launch of the EmpoweredOffice six years
ago, related orders have increased markedly every
year.
As a background, we got the Nikkei New-officeAward, twice in 2009 & 2011.
The Award recognizes cutting-edge offices and is
one of the most prestigious prizes in Japan,
supported by the Ministry of Economy, Trade andIndustry.
Visitors to our office have exceeded 10 thousands
centering on management, and this and other facts
make us feel that our concept is becoming
established among customers.

14

Gear for Growth: Carrier NW▌Technical outsourcing for telecom carriersProviding comprehensive services for the productsof global vendors
・Acceptance inspections, adjustments, support services...
・Using existing strengths as a NEC group company
・World-class technologies
・Nation-wide service basis

Improving efficiency in Telecom carriers’ operations+ Expanding the Company’s business domain
Page 15ⓒ NEC Networks & System Integration Corporation 2013

Next, gear for growth of Carrier Network business.
We have accumulated world-class technologies asa member of the NEC Group. In other words,
through the experience for years , we have alreadyestablished a quality service system and service
infrastructure to meet telecom carriers’ demand.
By using these platform, We are focusing ourefforts on providing comprehensive services for
global vendors. These services include productacceptance inspections, equipment
adjustments/customization, and support service
after installation, which help carriers to achieve
efficient total cost of ownership (TCO)..

15

Gear for Growth: Social Infrastructure▌Fire-fighting(FF) network... digitalization

A directives/communications system to quickly deploy
appropriate resources corresponding to fire/emergency call.
Investments are increasing sharply with the end of analogue
fire and emergency radio in 2016.
Investment scale (FF systems)

Orders Received<Total size: ¥350 billion>(FF and DP community wireless)Yen

17 bill.

Doubled
8.5

10

11

12

13

14

*Company estimated (based on delivery timing)

Page 1615 （FY）

9M
12/3

9M
13/3

ⓒ NEC Networks & System Integration Corporation 2013

Next, I will explain the Social Infrastructure business.
I would like to talk about the fire-fighting network digitalization
business, a particularly active market and we are strong in thismarket.
A fire-fighting system is a network system to rapidly provide
services from responding to fire/first-aid emergency calls andissuing a mobilization order to vehicles for disaster relief
activities, to support operations at a disaster site.
Investment in the digitization has accelerated because of theend of analogue waves in radio networks in 2016 as part of
the national government policy on radio waves. Also demand tointegrate fire headquarters to expand the service area
preparing wide-area disaster is another driver.
The figure on the left shows the market size according to thetiming of delivery. The total market scale is expected to be
350 billion yen and will expand towards 2015. Actual firefighting system related orders received for the current year
have doubled from the previous year as a result of the active
market. We will seize this market opportunity without fail.
16

Results of Current FY ( 9 Months ) for Growth▌Both sales and orders increased in all segments.
Orders received

177.2(Billions of Yen)

＋15%

Others

Sales

154.1

154.1

9.5

8.1

Social Infra. 58.3

51.0 +26%

152.6

35.7 +13% 40.3

Carrier NWEnterprises
NW

53.5

59.4 +5% 62.3

11/3
9M

12/3
9M

13/3
9M

＋14%

140.1

11.0

Others9.1

Social Infra.

57.2

41.4 +20%

Carrier NW

30.3

33.6 +17%Enterprises
NW

56.1

56.5

11/3
9M

12/3
9M

8.6

64.4

32.8

Page 17

159.9

10.3

+6%

49.6

39.2

60.1
13/3
9M

ⓒ NEC Networks & System Integration Corporation 2013

The charts show results for the first three quartersof the past three years.
For the current fiscal year, the results exceeded
the year-ago levels in all segments thanks to theinitiatives explained, which underscores our steadyprogress towards re-growth.

17II. Gear for Growth !
(2) Direction for Business GrowthPage 18ⓒ NEC Networks & System Integration Corporation 2013

Next, I would like to explain the direction for our
future business growth.

18

At the Start of New 60-year Cycle▌Next growth based on a stronger profit structure tocoincide with our 60th anniversary toward an SI’er withbrand strength.
Toward next growth

Enhancingcompany value

Intensified profit
structure

2013
2013
60
60thth anniversaryof founding
30thth anniversaryof listing

ListedListed in 1983
*Sixty-years is
a Japanese traditional calendar cycle

EstablishedEstablished inin 1953
1953
Sales
1953
Page 19

1983

2013

ⓒ NEC Networks & System Integration Corporation 2013This year marks the 60th anniversary of our
foundation and the 30th anniversary of our listing.
In Japan, 60years means a cycle of life and we will
be reborn to start second life.
To coincide with these anniversaries, we will gearfor next growth and enhance our own brand andcorporate value.

19

Basic Policies for Growth▌Expansion of Service Business
Becoming a system integrator providing totalsolution (ICT+BPO)

Strategic Investment(Priority investment in growth areas and M&A)

Reinforcement of Business Platforms(ICT technical, Support service & Construction/FM platform)

Page 20ⓒ NEC Networks & System Integration Corporation 2013

Our basic policy for next growth is to expand
service business.
We will seek to differentiate our company from its
competitors by positioning ourselves as a total
systems integrator offering a wide range ofservices, combining ICT and BPO.
To do that, we will make strategic investment into
growth area and seek M&A. And also bolster ourbusiness platforms for service provision.

20

Basic Concept for Growth

Customers
Expansion of Service Business(Providing ICT and BPO as a total service)

・・・

Alliance
Use/Strengthening of Business Platforms
Construction/FM
platform
Page 21

ICT
technical
platform

Supportservice
platform

Investment

Proposal, Planningand Sales Capabilities

・・・ⓒ NEC Networks & System Integration Corporation 2013This chart shows our basic concept for growth.
As I have explained, we are the company to have awide range of platforms.
These platforms include the construction or facility
platform , first of all, and the ICT platform, and thena range of service platforms such as the support
service platform and the cloud computing service
platform.
We will strengthen these platforms throughaggressive investment and alliances with partners,
thereby providing customers with a comprehensive
new service of ICT and BPO.

21

Direction for Business Towards GrowthHigh

New business / Making efforts existing business

EmpoweredOffice concept
From SI
Technical Outsourcing
to service DC/Cloud

Infrastructure
LTE

Market growth rate

DigitalizedFF

Enhancing/expanding

Expansionof service
business

International

Multi-vendor

Contact center
Environment
and Energy

OfficeMaintenanceand Operation

Collaboration and enforcementof service platforms

Existing business

CRM

Further cultivation

Contact Center

DC
nTOC
pDOC
*nTOC: Network total operation center, pDOC: Parts delivery center

Flow

ServiceBusiness model

Page 22ⓒ NEC Networks & System Integration Corporation 2013This chart shows key growth areas.
First, for the infrastructure business, we will focus
on areas with medium-term growth potential, suchas the digitalization of fire-fighting systems andLTE. In addition, we believe that we must expand
new service businesses with an eye to the future.
By bolstering our service platforms such as thedata centers, parts delivery center and network
total operation center, and also strengthening
collaboration among them, we gear for growth.
We will expand the new ICT and BPO services,
including the contact center service and technicaloutsourcing, not only for companies but also fortelecom carriers and governments.
* Base transceiver station (BTS)

22

Recent Measure: Acquisition of BTS Business▌Seamless services for telecom carriers.
 Acquired BTS business (mainly are design,
maintenance) from NEC Mobiling
1. Complete BTS business chain
2. Optimal proposal capability for overall infrastructure(core NW and access NW) of telecom carriers
２

Access NW (Base station)

Core NWNESIC (post integration)

NESIC

NEC Mobiling

NESIC

△

○

○

△

Testing

○
○
○

○

○

○
○
○

Maintenanceservices

○

△

○

○

DesignConstruction

Page 23１ⓒ NEC Networks & System Integration Corporation 2013This chart shows recent measure. We acquired BTS
business platform from NEC mobiling to achieve
seamless service for telecom carriers, such as area
surveys/optimization, and maintenance services, which
is a growth area in the infrastructure business domain.
Traditionally, we have enjoyed a particular edge inconstruction in the mobile base stations business. The
acquisition has enabled us to reinforce the value chain
for business related to base stations. We will also
become the only company that can provide seamlessservices for all networks from the base stations andbackbone networks.

23

Expanding Shareholder Value

Page 24ⓒ NEC Networks & System Integration Corporation 2013

Finally, I will explain our basic idea to expand
shareholders value.

24

Dividends*Forecasts as of January 31, 2013

▌Continuing to increase direct return to shareholders,
while focusing on boosting corporate value throughgrowth investment
38
Cash dividends
per share ofcommon stock
(yen)

20
12
6

14

14

7

7

6

7

7

05/3

06/3

07/3

Page 25

10

22
11

25
14

26
13

10

11

11

13

08/3

09/3

10/3

11/3

28

19 Year-end

14

14

12/3

19

Interim13/3 Forecastⓒ NEC Networks & System Integration Corporation 2013

We have gradually increased dividends in step with
our improved profitability, while focusing on stabledividends. We planned a significant dividend
increase because the cash position for the current
fiscal year has improved considerably.
We understand the need to increase returns toshareholders. However, we are currently focusedon boosting corporate value through investment ingrowth. By balancing returns to shareholders withinvestment, we aim to generate an overall returnthat satisfies all shareholders.

25

At the End
We pursue further growth & profitability(Bill. Yen)

Information & Communication

NESIC

Otsuka Corp.

Sales

230

516

355

315

280

160

YoY

12.4%

7.9%

5.8%

5.8%

39.8%

1.8%

Operating Income

11.5

28.3

45.0

27.0

20.0

11.3

to Sales

5.0%

5.5%

12.7%

8.6%

7.1%

7.0%

Net Income

6.8

16.3

28.0

16.0

15.0

6.9

to Sales

3.0%

3.2%

7.9%

5.1%

5.4%

4.3%

ROE

8.3%

13.3%

10.3%

10.3%

15.0%

11.4%

PER(times)

12.8

16.4

16.7

15.2

11.9

12.1

PBR(times)

1.1

2.1

1.7

1.6

1.7

1.4

NRI

CTC

SCSK

Netone*Source: FY12.3 forecasts and B/S at the end of the third quarter (except for Otsuka: FY12.12).
PER, PBR based on the price at the end of February 8, 2013
Page 26ⓒ NEC Networks & System Integration Corporation 2013

Ultimately, the table shows a performance andstock valuation comparison with other system
integrators.
Our PBR is 1.1, and PER is 12.8 which arecomparatively low among systems integrators.
However we will gear for sales growth and aim tofurther improve profits.
We hope that you will continue to follow ourprogress.
Thank you very much for your attentions.

26

Cautionary Statement
Forecasts of results mentioned in this document are future estimates andare thus inclusive of risks and uncertain factors since they are not based on
definite facts. Please be aware that a variety of factors could cause actual
results to differ significantly from those projected. The major factors
affecting actual results include the economic climate and social trends
surrounding the business of this Company’s group, consumer trends vis-avis systems and services provided by this Company’s group, as well aspressure to lower prices and ability to cope with the market in response tointensified competition.
Factors affecting results are not limited to the ones mentioned above.

Page 27ⓒ NEC Networks & System Integration Corporation 201327

http://www.nesic.co.jp/english/ir

Page 28ⓒ NEC Networks & System Integration Corporation 201328