NEC Announces Structural Reform Plans, Personnel Reduction

Jan 28, 2012 00:00 Mami Akasaka, Tech-On!

NEC Corp announced its structural reform plans including a reduction of 10,000 employees Jan 26, 2012.

Because a rapid improvement of its business environment cannot be expected, the company will form an efficient organization that can turn a profit with the current sales amount, it said. NEC will reduce 7,000 employees (including outsourced employees) in Japan and 3,000 employees outside Japan. Also, the company defines IT services, communication networks and social infrastructures as its main businesses and plans to expand its energy-related businesses.

As a one-time cost for the structural reform, NEC will record an extraordinary loss of ¥40 billion (approx US$519 million) for fiscal 2011. As an effect of the personnel and cost reduction, the company expects to record an extra operating income of ¥40 billion for each of fiscal 2012 and 2013.

Scaling down development, production units of mobile phones

NEC cited its mobile phone business, platform business and NEC Tokin Corp's electronic component business as "problematic businesses." As for the mobile phone business, the sales volume for April-December 2011 turned out to be only about 3.3 million units because of foreign makers' aggressive actions in the Japanese market, its smartphone sales lagging behind expectations and its slow entry into foreign markets.

As a result, NEC revised its prediction of annual sales volume from about 6.5 million units to about 5 million units. From now on, the company intends to scale down its development and production units by using JDM (joint development manufacturer/joint design manufacturer).

As for its platform business, NEC plans to improve its competitiveness through partnerships with other companies, etc and focus on cloud-type platforms. And it will scale down its hardware development and production units, planning to transfer production to foreign countries.

(Continue to the next page)

24 Hours | 7 Days