Financial Results for the
1H ending March 2016
October 30, 2015
Masao Wada, President
NEC Networks & System Integration Corporation(TSE: 1973, NESIC)AgendaI. Results for 1H FY2016/3
II. Forecasts for FY2016/3
III. Strategies for Future Growth

I. Results for 1H FY2016/3
II. Forecasts for FY2016/3
III. Strategies for Future Growth1H FY2015/3 Summary▐ Net sales & incomes decreased year on year The environment for business with telecom carriers
worsened beyond our expectations.
(Bil. ¥)

1H FY15/3 1H FY16/3

ChangeForecasts

as at Apr.28

Diff.

Orders Received

156.4

141.5

-10%

150

-8.5

Net Sales

130.6

127.8

-2%

130

-2.2

4.5

3.5

-1.0

4.5

-1.0

(3.4%) (2.8%)-0.6pt

(3.5%)-0.7pt

1.9

-0.7

2.4

-0.5

(2.1%) (1.5%)-0.6pt

(1.8%)-0.3ptOperating Income(to Sales)

Net Income *(to Sales)
Free Cash Flows

2.7
4.4

13.5

9.1

*Profit attributable to owners of parent
4© NEC Networks & System Integration Corporation 2015

1H FY2016/3 Sales/Orders Received by Segment▐ Orders declined, mainly reflecting a decrease in orders for the FF & DP networks
business (-¥11 bil.) & the impact of investment cuts by telecom carriers (-10).
 Orders from general corporate customers and overseas increased.
▐ Sales remained almost flat, offsetting the impact of investment cuts by telecom
carriers (-7), as the sales of Enterprise NW and Social Infrastructure businesses
increased.
FF: fire fighting, DP: disaster prevention

Orders(Bil.¥)

156.4
138.6

OthersSocial Infra.

2.7

52.3

2.5

Sales
141.5 -10%
2.9

56.8

115.2

51.0 -10%

43.3

34.7 -20%

Enterprises 41.7
Networks

53.8

52.8

1H
14/3

1H
15/3

1H
16/3

Carrier
Networks

541.9© NEC Networks & System Integration Corporation 2015

-2%

130.6

127.8 -2%

2.9

1.9

38.4

39.4

41.2

35.6 -14%

41.3

48.1

51.0

1H
14/3

1H
15/3

1H
16/3

2.3

31.4
40.3

+3%

+6%

1H FY2016/3 Enterprises Networks Business▌ Sales increased as the EmpoweredOffice businessremained strong.
 Sales of EmpoweredOffice business： +10%
 Orders from general corporate increased.
Orders53.8(Bil.¥)

52.8 -2%

41.7
30.5
SI/
Construction

Service

6

Sales

48.1

51.0 +6%

41.3
28.9

23.7

25.4 +7%

21.7

24.5

25.5 +4%

1H
14/3

1H
15/3

1H
16/3

-5%

19.6

21.7

20.0

23.3

23.9

1H
14/3

1H
15/3

1H
16/3

© NEC Networks & System Integration Corporation 2015+3%

1H FY2016/3 Carrier Networks Business▌ Both orders and sales decreased because of the impact
of investment cut by telecom carriers.
 Business for public and corporate customers increased
utilizing assets for telecom carriers. (Order/sales: +15%)
Orders(Bil.¥)

41.9

43.3

SI/
Construction

30.5

35.6

Service

11.4

34.7 -20%
28.0 -21%

1H
14/3
7

Sales

7.7

6.8

1H
15/3

1H
16/3

© NEC Networks & System Integration Corporation 2015

-12%

40.3

41.2

30.9

32.6

9.3

8.6

7.0 -18%

1H
14/3

1H
15/3

1H
16/3

35.6 -14%
28.6 -12%

1H FY2016/3 Social Infrastructures Business▌Sales rose year on year, reflecting increased sales togovernment offices
 Sales remained at high levels as the migration to digitalFF systems progressed toward the May 2016 deadline.
 Orders increased for overseas infrastructure
works (+¥2.5 bil.) and space-related projects (+1.5),
although those for FF&DP systems decreased (-11).

52.3

Service<Orders>

56.8<Sales>23

1H 15/3

Orders(Bil.¥)

SI/
Construction

FF&DP system business(Bil.¥)

12

12

12

1H 16/3

1H 15/3

1H 16/3

Sales

51.0 -10%

41.8

46.4

10.6

10.4

10.2

1H
14/3

1H
15/3

1H
16/3

40.8 -12%

-2%

38.4

39.4 +3%30.0

31.4 +4%

8.2

8.4

8.0

1H
14/3

1H
15/3

1H
16/3

31.4
23.2

-4%

FF: fire fighting, DP: disaster prevention
8© NEC Networks & System Integration Corporation 2015

1H FY2016/3 Operating Income by Segment(Bil.¥)

4.2（3.6%）

Others0.3

1.8Social Infra. (5.8%)
Carrier
2.9
Networks (7.2%)
Enterprises 2.9
Networks (7.0%)

Elimination

-3.8

4.5

（3.4%）

0.1

2.5(6.6%)

2.9(7.1%)

3.0

3.5（2.8%）

0.2

2.6(6.6%)

1.4(4.0%)

3.4(6.3%)(6.7%)-4.1-4.1▌Operating income declined due to a fallin sales of the Carrier Networks
business, although the Enterprises
Networks & Social Infrastructurebusinesses posted higher income.

Social Infrastructure
・Income rose on increased sales.

Carrier Networks

・Income declined on decreased sales
and the delay in cost cutting
to adapt to rapid changes in thebusiness environment.

Enterprises Networks
・Income rose on increased sales.

1H
14/3
9

1H
15/3

1H
16/3

© NEC Networks & System Integration Corporation 2015

1H FY2016/3 Balance Sheet (End of September, 2015)▌Owner’s equity ratio improved 3.8% mainly because of a reduction in total
assets through the collection of accounts receivables and payment ofaccounts payables.
End of 15/3
39.0
113.9
10.1
8.1

Noncurrent Assets

171.1
30.9

End of 15/9
52.3
82.8
11.7
10.0

156.7
31.1

-14.3
0.2

Assets

202.0

187.8

-14.2

48.7
6.2
53.0

36.1
8.0
49.0

-12.6
1.8
-4.0

Cash and cash equivalents
Notes & accounts receivable
Inventories
OthersCurrent Assets

Notes and accounts payable
Loans
OthersLiabilities
Shareholders' equity
Accumulated othercomprehensive income
Non-controlling interests

13.3
-31.2
1.5
2.0

107.8

93.0

-14.7

-1.9

-1.7

0.2

1.6

1.6

0.0

94.4

94.8

0.3

Liabilities & Net Assets

94.2
202.0

94.8
187.8

0.6
-14.2

Owner's Equity Ratio

45.8%

49.6%

+3.8ptNet Assets

10

Diff.

© NEC Networks & System Integration Corporation 2015

(Bil.¥)

1H FY2016/3 Cash Flows▌Improved FCF by recouping cashfrom large projects at the end of last fiscal year
20.3

(Bil.¥)

2.0

14.6
-4.3

-5.5

4.1

13.5
3.2

4.4

FCF

-5.9

-9.2

50
40
30

38.8

20
10
0

25.7
1H

19.3
2H

FY11/3

1H

33.5

36.6

2H

1H

FY12/326.2
2H

FY13/3

37.0

38.0

1H

2H

FY14/3

45.7

1H

32.8

2H

FY15/3

44.3

Net *
Cash

1H
FY16/3※Net Cash = Cash & cash equivalent – interest bearing debt
11

© NEC Networks & System Integration Corporation 2015

I. Results for 1H FY2016/3
II. Forecasts for FY2016/3
III. Strategies for Future Growth2H FY2016/3 Business Environments▌Market conditions for telecom carriers will be severe,
but those for the Enterprises Networks and Social
Infrastructure businesses will remain solid.
 Enterprises Networks

・ICT investments by companies, centered on those in the retail,service and manufacturing sectors, will remain firm.
・Demand for the renewal of voice network systems is a positive
factor.

 Carrier Networks

・Telecom carriers are likely to continue curbing their investments.
・Areas of new services such as IoT/M2M are promising.

 Social Infrastructure

・ICT investments will remain firm to address objectives such as

safety & security and the improvement of transportation
infrastructures.
・Overseas infrastructure investment markets, centered on Asia, will
be brisk.

13© NEC Networks & System Integration Corporation 2015

2H FY2016/3 Basic Policy▌Actions to deal with changing market environments
 Further efforts to focus on Enterprises Networks and Social
Infrastructure businesses that continue to perform well.
 Improvement of profitability of Carrier Networks business.
・Further cost reductions.
・Streamlining of the structure of support and maintenancebusinesses.

▌Initiatives for future growth Services business, global business, etc.
 Creation of new businesses
・IoT/MVNO, SDN, etc.

14

© NEC Networks & System Integration Corporation 2015

FY2016/3 Forecasts▌No change from the initial forecasts, albeit withvariations in individual business areas.
FY15/3

FY16/3

Forecasts

ChangeOrders Receipts

299.1

300

0%

Net Sales

292.2

295

+1%

Operating Income

16.2

16.5

0.3

(to Sales)(5.5%)(5.6%)+0.1pt

7.8

9.5

1.7

(2.7%)(3.2%)+0.5ptNet Income *(to Sales)(Bil.¥)*Profit attributable to owners of parent(Forecasts as at October 29, 2015)15© NEC Networks & System Integration Corporation 2015

FY2016/3 Forecasts by Segment (Sales & Operating Income)(Forecasts as at October 29, 2015)▌Revised segment forecasts considering environmentchange and progress in 1H
Operating income

Sales(to sales)

YoY

OthersSocialInfra.

Carrier
Networks

Enterprises
Networks

292.2

295

6.4

6

96.8

95

86.2

102.8
FY15/3

16

82

112

FY16/3(Apr.28 forecast)

16.2

16.5

16.5 +0.3

Social9.5
Infra. (9.9%)(10.0%)

9.5+0.8 10.3 +0.8

295 +1%(5.5%)

6

+4

-6

+2

99

76

+2%

-12%

114 +11%
FY16/3(Revised forecast)© NEC Networks & System Integration Corporation 2015

YoY

Carrier
Networks

6.9(8.0%)(5.6%)(5.6%)(10.4%)

6.9

-2.0

4.9

-2.0

8.3

(8.4%)(6.4%)

Enterprises
7.5
Networks (7.3%)(7.4%)+0.7 9.0+1.5

Others/Elimination-8.2 +0.5 -7.7

+0.1

-7.8
FY15/3

FY16/3(Apr.28 forecast)(7.9%)

FY16/3(Revised forecast)Dividend Plan
(Forecast as at October 29, 2015)▌Payment of interim dividend of ¥35 as plannedat the beginning of the fiscal yearNo change in year-end dividend planned
60

Planning increase forthe 9th year in a row

147
7

FY07/3
17

45

25

26

28

13

14

20

22

10

11

14

10

11

11

13

14

08/3

09/3

10/3

11/3

12/3

© NEC Networks & System Integration Corporation 2015

30

64
32

Dividend pershare (¥)

70

Year35 end

26

19
13/3

30

32

14/3

15/3

35 Interim

16/3(Forecast)I. Results for 1H FY2016/3
II. Forecasts for FY2016/3
III. Strategies for Future GrowthStrategies for Future Growth
Aim for further advance and expansion based on the basic strategy of“strengthening and further developing our service and infrastructurebusinesses” and “embarking on new businesses in new markets”,
taking advantage of achievements in the current midterm plan.

Current midterm plan（～FY16.3）
EO business

FY13/3 ⇒ FY16/3e (Bil.¥)◆Strengthen service business53 ⇒ 82• Market expansion and further penetration• Market recognition (won prestigious awards,
visitors have exceeded 20K)

• Managed service, BPO• Next generation EmpoweredOffice◆Expand infra. businessTechnical outsourcing business27 ⇒ 31• Strengthen BPO service (established sDOC)• Multilingual services (established a JV)Infrastructure business

AdvanceExpansion

30 ⇒ 40• Fire-fighting info digitization, LTE base stations

Overseas business11 ⇒ 16• Expanded Thai and Saudi Arabia business• Entered into Myanmar business

19© NEC Networks & System Integration Corporation 2015

Next midterm plan（～FY19.3）• Strengthen and further develop
infrastructure business in Japan(4K/8K, DPl, traffic infrastructure, etc.)◆Expand global business• Carrier/social infra. businesses and
JOC business mostly in ASEAN region◆Embark on new business• Create new services such as IoT/MVNO

Strengthen Service Business (EmpoweredOffice Business)▌Market environment▌Examples of initiatives for growth◆Increase the use of ICT as an operational ◆EO business development
From points to a surface
infra. for domestic and overseas
branches and mobile work

• Increase the use of cloud computing• Increase the security level

UC cloud market forecasts
2018：Approx. ¥120 bill.
<1.6 times growth from 2014>

Source: Fuji Chimera Research◆Workplaces and work styles
are to increasingly diverse.

(Work-life balance, women/senior contribution...)Current EO<Each Office>

Office space reform＋

Work style innovation

ICT infra.

<1.4 times growth from 2014>Source: NRI

Next Generation EO(cloud)Forecasts for information
security service market
2018：Approx. ¥350 bill

●From work-style innovation in the office paceto the creation of work styles and work environments
beyond the boundaries of spaces/places●Achieve diverse work styles ＋increase corporate strength

Government goals (KPI for 2020)・Companies adopting

telecommuting systems(over 30% of all companies)▌Strategic direction◆EO business development(to next generation EO)◆Strengthening outsourcing bus.
20

Outside offices,
Working from home,satellite offices

Telework

・Teleworkers(over 10% of total working population)

Domestic and overseas
branches

Operation system
ICT tools (UC, teleconferences,thin clients, etc.)

NW (SDN・MVNO)

Security

Common platform service

that supports seamless operation© NEC Networks & System Integration Corporation 2015

Customer and resident service offices(unmanned stores,
unmanned windows at pubic offices)

Seamless collaborationand information sharing
without restrictions of locations(workplace creation business)

Provide ICT resources essential for customer operation
through common platform services (all cloud computing)Expand Infrastructure Business (4K, 8K, etc. and broadcasting / CATV business)▌Market environment◆Investment in infra. is increasing fora safe, secure, and comfortable society

ICT market forecasts in
key industries(estimates for our business areas)◆National resilience andregional revitalization¥400 bill/year◆Electric power-related business¥200 bill (total of 14 through 18)◆Economic effects of Tokyo 2020
¥300 bill (total of 14 through 20)◆Broadcasting related capex¥250 bill (total of 14 through 18)◆CATV related capec¥200 bill (total of 14 through 18)▌Strategic direction◆Further develop
existing markets◆Expand business areas• Strengthen the seamless services
from construction to the design& SE area

21▌Examples of initiatives for growth◆Advanced broadcasting such as 4K/8K,
entering the area of imaging technology application●Response to increasingly advanced broadcasting infrastructure• CATV: development to 4K/8K, strengthen FTTH development
expansion of business areas• Broadcasting: Expand the market by taking advantage of the strengths of
the NEC Group, which has a large market share
2015
CATV

Start 4K

CS

Start 4K

4K/8K
scheduleBS

CATV
Update 4K/8K
facilities
FTTH
development

2016

2018

Start experimental
activities for 8K

Test 4K/8K
broadcasting

Studio master renewal

2019

Start 4K/8K (earlier
than planned)●Achieve fullFTTH installation

Regional stations: Studio
master renewal

Switch AM radioto FM radio●Strengthen the area of imaging technology application• Strengthen the video monitoring and security business towards 2020

© NEC Networks & System Integration Corporation 20152020

Start 8K

FTTH installation
HFC and reduction of cell size (extensionof HFC life)
Burying transmission lines underground(remove utility poles)

BroadcastingStations in Tokyo:
stationIncreasing
demand forrenewing
broadcasting
facilities

2017Expand Global Business (ASEAN Business)▌Market environment◆Growth of ASEAN infra. market• Rapid economic growth: Increasing
measures to deregulate foreign
capital, etc.

▌Examples of initiatives for growth◆Strengthen and expand businesses
in the growing ASEAN area

Forecasts for investment in
ASEAN telecom. infra.
(related to installation)

Approx. ¥600 bill/year

NESIC estimates based on the forecasts of Asian Development Bank

◆Investment in Asian railroad
infra. is also increasing
Forecasts for railroad infra.
market in ASEAN region(related to railroad communication andsecurity systems such as video monitoring)

Approx. ¥100 bill/year

NESIC estimates based on MLIT data and media information▌Strategic direction

Increase infrastructuredevelopment forcommunication, railroads,
airports, harbors, etc. in each
ASEAN country• Develop collaboration between
infra-related companies
with local subsidiaries.
• For the time being, strengthen
and enhance the carrier andrailroad communication business.
(Base station antennas)◆Full-scale entry into the Burmese market●Received orders for carrier/energy-related
projects< Carrier-related projects >• Mobile base station (150 stations)development project• Satellite communication project◆Expand business area in ASEAN region• Carrier business development< Energy-related projects >• Expand social infra. business• Solar power system project for villages whichused to be no-electric-power villages

22© NEC Networks & System Integration Corporation 2015

(Solar power system)

Embark on New Business (IoT Business)▌Market environment◆Domestic IoT market is
growing rapidly

Forecasts for domestic IoT market(related to network and service infra)¥500 bill ⇒（2014）

approx. ¥1.5 trill（2018）

Source: NESIC estimates based on information provided
by IDC Japan▌Strategic direction◆Strengthen IoT service
targeting B2B industries• Manufacturing, distribution
services, etc.
• Government offices, publicbusiness operators, etc.

◆Promote verticallyintegrated IoT business◆Exert strengths as
a MVNO operator• Differentiation by providing
flexible network operation services

23▌Examples of initiatives for growth◆Entry into IoT business●Start vertically integrated IoT services covering SI, MVNO, andoperations (Oct. 2015)< Model of providing IoT service >Industry

Manufacturing

Expected Model
Production line management for factories
Vending machine management (sales data, machine statusmanagement)

Distribution and service Inventory management at stores and warehouses, etc.
Digital signage, information distribution, etc.
industries
Building facility management (BEMS, elevators, etc.)
Security andmaintenance industries Security (smart lock, home security)

Government offices,public services

Disaster monitoring (torrential rain, earth/sand and rivermonitoring, etc.)
Infra. facility monitoring (obsolescence, error detection, etc.)●Promote partner alliance for service & sales channel enhancement－MVNO partner program started(currently participated in by 50 partners (sales partners and devices vendors))●Create new services through university-industry collaborations－Under execution of verification experiments for push technology-based
information distribution service for passengers such as tourist information
linked to bus location information< Sep. 2015 – Mar. 2016 >© NEC Networks & System Integration Corporation 2015

In Closing

Achieve full-year targets and takestrategic steps forward for growth.

Business
GrowthOrganizational
GrowthHuman
GrowthConduct business giving top priority to compliance

Enhance shareholders value
24© NEC Networks & System Integration Corporation 2015

Cautionary Statement
Forecasts and targets 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-a-vis systems and services provided by this Company’s group, as well aspressure to lower prices and ability to cope with the market in response to intensifiedcompetition.
Factors affecting results are not limited to the ones mentioned above.

The Group implemented the realignment of domestic subsidiaries to facilitate theefficient management of group companies, such as the integration (absorption-typemerger) of Toyo Networks & System Integration Co., Ltd by NEC Magnus Communications,Ltd. As a result, changes were made to the consolidated financial results from the firstquarter under review, such as the inclusion of Toyo Networks & System Integration Co.,
Ltd, which had been included in the “others” segment previously, in the “Carrier Networks”
segment, which includes NEC Magnus Communications, Ltd.
Segment information for the fiscal years ended March 2014 and 2015 has been changed
to reflect the change in the content of business segments.

25© NEC Networks & System Integration Corporation 2015

NEC Networks & System Integration Corporationis committed to increasing customer value byredesigning future communications from the user’s
perspective.

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27© NEC Networks & System Integration Corporation 2015