Financial Results for the Fiscal Year ended March 31, 2005 April 28, 2005 Oki Electric Industry Co., Ltd. 1 Table of Contents 1. Financial results for FY ended Mar. 2005 1) 2) 3) 2. 4) Cash Flow Condition 5) Segment Information (previous segments) 6) Projections for FY ending Mar. 2006 Mid Term Business Strategies (FY ending Mar. 2006 & 2007) 1) 2) 3) 4) 5) 3. Overview Profit & Loss Outline Balance Sheet Outline Reorganization of Business Segments Organization Reform to Enhance Info-Telecom Converged Business Info-Telecom System Business (1) Financials (2) Telecom carriers (3) Public (4) Enterprises Semiconductor Business Printer Business Mid Term Business Plan (FY ending Mar. 2006 & 2007) 1) 2) Business Target (new segments) Capital expenditures, R&D, head counts * The projections and plans on this material are subject to change depending upon the changes of business environments and other conditions. 2 Overview of FY ended Mar. 05 Net sales achieved 688.5 B yen, increased by 34.3 B yen (5.2%) on a year-on-year basis Net income reached to 11.2 B yen, 9.9 B yen increase on a year-on-year basis Resume 3 yen dividend Operating income and recurring income increased by 5.6 B yen (2.6%) and 8.7 B yen respectively on a year-on-year basis (Billion yen) Mar. 04 Result (A) Mar. 05 Result (B) Variance (B-A) Mar. 05 Oct. 28 projection (C) Variance (B-C) Net sales 654.2 688.5 34.3 710.0 (21.5) Operating income 21.6 27.2 5.6 29.0 (1.8) Recurring income 12.5 21.2 8.7 21.0 0.2 Net income 1.3 11.2 9.9 10.0 1.2 2.17 yen 18.27 yen 16.10 yen 16.33 yen 1.94 yen Total assets 609.6 608.0 (1.6) - - Shareholders’ equity 110.5 124.8 14.3 - - 180.66 yen 204.11 yen 23.45 yen - - 291.4 265.2 (26.2) - - Net income per share Shareholders’ equity per share Interest-bearing debt 3 Profit & Loss Outline for FY ended Mar. 05 < Comparison of consolidated P/L> Mar. 04 Mar. 05 (Billion yen) Variance 654.2 688.5 34.3 (74.1%) (73.2%) (+0.9%) Cost of sales 484.4 504.3 19.9 SG&A 148.2 157.0 8.8 Operating income 21.6 27.2 5.6 Other income (9.1) (6.0) 3.1 Recurring income 12.5 21.2 8.7 9.9 4.2 (5.7) Net sales (Cost of sales ratio) Extraordinary income Extraordinary loss Income before taxes 20.1 6.9 (13.2) 2.3 18.5 16.2 Income taxes 1.0 7.3 6.3 Net income 1.3 11.2 9.9 (Billion yen) Consolidated net sales Info sys Telecom Devices Others Mar.04 360.3 104.6 132.2 57.1 Mar. 05 335.8 135.3 150.7 66.7 Variance (24.5) 30.7 18.5 9.6 Consolidated operating income Info sys Telecom Devices Others Corp. & eliminates Mar.04 24.0 3.4 2.3 2.8 Mar. 05 14.3 7.9 12.0 4.0 Variance (9.7) 4.5 9.7 1.2 (10.9) (11.0) (0.1) Main items in extraordinary income/loss Gain on sale of securities Gain on sale of fixed assets Gain on pension fund return Loss on disposal of fixed assets Write down loss of securities Restructuring loss Loss on earthquake damages Mar.04 1.6 Mar. 05 3.0 1.2 8.3 4.9 1.5 7.7 3.3 2.5 1.2 2.4 4 Balance Sheet Outline for FY ended Mar. 05 (1) <Balance Sheet: Assets> Turnover ratio Major turnover ratios improved through measures to improve asset efficiency by FCF as a management indicator Inventory increased by 10.3 B yen on a year-onyear basis, for sales after Apr. 2005 (Billion yen) 800 189.4 651.5 42.4 146.7 400 155.9 34.8 200 Mar. 05 Total assets 1.06 1.13 0.07 improved Notes and accounts receivable 4.02 4.57 0.55 improved Inventory 4.41 4.78 0.37 improved 732.4 52.9 600 Mar. 04 176.7 122.5 148.2 31.9 163.8 118.3 622.9 27.9 169.9 Variance Variance with Mar. 31, 2004 609.6 608.0 55.4 46.6 155.3 146.0 Cash and deposits - 8.8 Notes and accounts receivable - 9.3 Inventories +10.3 + 3.0 157.4 139.0 149.3 27.7 30.1 33.1 Other current assets 136.4 119.7 126.5 Propety, plant and equipment + 6.8 103.6 110.1 106.5 0 Mar. 31, 01 Mar. 31, 02 Mar. 31, 03 Mar. 31, 04 Mar. 31, 05 Investments and other assets - 3.6 5 Balance Sheet Outline for FY ended Mar. 05 (2) <Balance Sheet: Liabilities and Shareholders’ Equity> Amount of interestbearing debt (B yen) Interest-bearing debt ratio improved by 4.2% debt and outstanding balance decreased by 26.2 B yen Interest-bearing ratio (%) Shareholders’ equity increased by 14.3 B yen, Shareholders’ equity ratio (%) which improves its ratio to 20.5% Variance Mar. 04 Mar. 05 291.4 265.2 26.2 decreased 47.8 43.6 4.2 improved 18.1 20.5 2.4 improved (Billion yen) 800 154.6 600 37.1 219.2 200 651.5 120.1 137.3 400 Variance with Mar. 31, 2004 732.4 35.2 148.8 622.9 609.6 116.1 135.8 134.3 126.0 28.8 25.6 608.0 Notes and accounts payable + 8.7 Short-term borrowings + 5.5 Other current liabilities - 7.1 144.5 129.8 135.3 31.1 24.0 221.4 209.4 161.7 129.9 37.6 44.5 40.7 49.5 109.0 101.3 110.5 124.8 0 Mar. 31, 01 Mar. 31, 02 Mar. 31, 03 Mar. 31, 04 Mar. 31, 05 Bond and long-term debts - 31.8 Other fixed liabilities and minority interests + 8.8 Shareholders' equity + 14.3 Bonds due within a year and commercial paper are included in long-term debt and short-term borrowings respectively. 6 Cash Flow Outline While issued 20.0 billion yen Euro CB in Nov. 2004, interest-bearing debt became 265.2 B yen, decreased by 26.2 B yen through reduction of debt (Billion yen) Mar.03 I. Cash flows from operating activities Income (loss) before income taxes Depreciation & amortization Changes in operating assets & liabilities Others II. Cash flows from investing activities Purchases of property, plant & equipment Others Free cash flows (I+II) III. Cash flows from financing activities Bond issuance Redemption of bonds Changes in other interest-bearing debt, etc. Net cash flow (I+II+III) IV. Cash and cash equivalents at the period end V. Interest-bearing debt at the period end Oct. 28 Mar. 04 Mar. 05 Variance announced 0.2 (3.5) 39.9 (33.9) (2.3) 4.3 (23.5) 27.8 4.5 (20.0) 92.3 2.3 33.6 40.1 16.3 (19.2) (24.0) 4.8 73.1 (43.6) (22.7) 2.6 (15.5) 29.3 335.4 (39.9) (3.7) 29.5 58.1 291.4 59.3 18.5 34.2 11.7 (5.1) (41.5) (33.9) (7.6) 17.8 (26.9) 20.0 (15.0) (31.9) (9.1) 49.4 265.2 (33.0) 16.2 0.6 (28.4) (21.4) (22.3) (9.9) (12.4) (55.3) 16.7 20.0 24.9 (28.2) (38.6) (8.7) (26.2) 65.0 16.0 35.0 10.0 4.0 (45.0) (36.0) (9.0) 20.0 (25.0) (15.0) (10.0) (5.0) 53.1 266.4 7 Segment Information for FY ended Mar. 05 Net sales Net sales z Info systems: 24.5 B yen decrease on a YoY basis (Billion yen) 710.0 688.5 654.2 57.1 66.7 70.0 132.2 150.7 155.0 104.6 135.3 130.0 360.3 335.8 355.0 Mar. 04 Results Oct 28 projections Mar. 05 Operating income 21.6 27.2 29.0 • Financial solutions systems (-27.8 B): Decrease of new banknote related demand • Information solutions (-9.6 B): Public investments delay Others by natural disasters. Reduced investment in travel industry • Investment delays in financial institutions’ investment, Devices and fiercer price competition in printers Telecom z Telecom: 30.7 B yen increase on a YoY basis • Stable expansion of investments on IP network Info sys. infrastructures by telecom carriers z Devices: 18.5 B yen increase on a YoY basis • Increase in LCD driver sales due to LCD TV demand expands • Favorable P2ROM sales for amusement use • Increased price down pressure in driver LSIs, etc., in the second half Operating income z Income increase in Telecom and Device segments due to expanded sales z Income decreased in Info sys segment, due to sales decrease and investment for development and sales 8 Premises of FY ending Mar. 06 Projections <Economy forecast> While enterprise production partly recovers due to inventory adjustment completion and demand recovery, overall economy recovery is at a standstill due to stagnation in IT investments. Expected recovery in the second half Concerns include export slow down related to China’s current situation and rising oil price and material costs <Oki’s market trend> Info-telecom: Telecom carriers’ investment increases mainly for FTTH Sign of recovery in financial institutions’ IT investment, particularly for security. Fiercer competition in information areas including financial systems Semiconductor: Market growth stays at bottom in the first half Recovery trend from the second half Printer: The color printer market expands, while price competition further increases <Impact on profit by currency exchange rate> FY ended Mar. 2005 Sales in foreign Actual rate currency FY ending Mar. 2006 projections Projected Sales in foreign Impact on operating rate currency profit by 1 yen change USD 108 yen/$ 760 million USD 105 yen/$ 1.15 billion USD 230 million yen Euro 135 yen/E 590 million Euro 135 yen/E 660 million Euro 350 million yen 9 Profit & Loss Outline for FY ending Mar. 06 < Comparison of consolidated P/L> (Billion yen) Mar. 05 Results Mar. 06 Projections Variance 688.5 720.0 31.5 Operating income 27.2 28.5 1.3 Other income (6.0) (7.0) (1.0) Recurring income 21.2 21.5 0.3 Net sales Extraordinary income (2.7) (3.0) (0.3) Income before taxes 18.5 18.5 0 7.3 7.0 (0.3) 11.2 11.5 0.3 Income taxes Net income Consolidated net sales Info-Telecom Semiconductor Printer Others Mar. 05 373.1 150.7 137.7 27.0 (Billion yen) Mar. 06 380.0 165.0 150.0 25.0 Consolidated operating income Info-Telecom Semiconductor Printer Others Corp. & eliminates Variance 6.9 14.3 12.3 (2.0) (Billion yen) Mar. 05 15.8 12.0 7.8 2.5 Mar. 06 18.5 10.0 8.0 2.5 Variance 2.7 (2.0) 0.2 0 (10.9) (10.5) 0.4 10 Analysis of Changes in Operating Income <Analysis of 1.3 B yen increase in operating income from the previous year> 31.0 B yen income increase from sales growth and procurement cost reduction Procurement cost reduction is expected to be severer Increase of 1.3 billion yen in total, due to price reduction and strategic increase of fixed cost Sales increase Operating income 27.2 B yen +16.0 49.5 billion yen increase excluding price down Increase in fixed cost (18.0) (11.2) +15.0 (0.5) Decrease in Reduction in sales price procurement cost Price down in printers and LSIs FY Mar.05 Effect in currency exchange rate (- 0.5) Operating income 28.5 B yen Others Increase in: Personnel costs Depreciation R&D expenses Other fixed costs 9% reduction of total procurement amount (- 5.0) (- 5.5) (- 0.5) (- 0.2) FY Mar.06 11 Reorganization of Business Segments Reorganize Oki group’s business segments to three pillars 1st pillar: Info-Telecom System Business Focus on info-telecom converged solutions 2nd pillar: Semiconductor Business Focus on system LSIs and deploy fab-free model 3rd pillar: Printer Business Focus on LED-base color NIP and maximize SIDM profit <Previous segments> < New segments> 1st pillar Info-Telecom System Business Enterprises Public Carriers Corporate Products Financials Solutions IP systems System equip. 2nd pillar Semiconductor Business 3rd pillar Printer Business Information systems • Financial system solutions •Information solutions • Printers Telecommunications • Carrier networks •Enterprise networks Electronic devices • LSIs • Optical components 12 Business Groups & Companies Target of Business Group System - Establish strong business flexible to market changes - Form autonomic management for each group (Chairman/ GOO) - Promote agile business operation - Establish Oki-unique business model - Enhance group management (for affiliated companies, and among business groups) Target of “Systems Network Business Group” - Fully utilize Oki-original advantages (collective strength, corporate scale, agility) - Actively deploy info-telecom converged systems and products - Enhance market accessibility (Solutions companies) - Focus on markets for financials, carriers, public, and enterprises. Provide one-stop solutions - Strengthen product planning, development and sales skills (Products Companies) - Strengthen info-telecom converged products, and enhance product development for mechatrnoics products. Strengthen in-direct sales Main structure of Business Groups Chairman, GOO* HQ, administration, shared functions • Strategic Planning Office • Admin.: Accounting, General Affairs • Shared functions Solutions Companies Provide one-stop solutions to customer needs Products Companies Plan and develop products and sell to solutions companies and partners Affiliate Companies, Subsidiaries Design & development Manufacturing Sales, etc. (* GOO: Group Operating Officer) 13 Mid Term Business Plan Info-telecom system, semiconductor, and printer businesses will increase profitability to become an Excellent Growing Company by clarifying its focus, strengthening its product and sales skills, making appropriate investments, and utilizing business strengths. 1998 1999 2000 2001 2002 Phoenix 21 plan 2003 2004 2005 2006 Phoenix 21 Sky-High plan Oct. 02 Aug. 01 2nd Reform 3rd Reform Sept. 98 st 1 Reform (Ph21 Urgent plan) (S-H Preparation plan) (Improve quality) Stable profit company 1st phase: Business Structure Reforms Leap up Excellent Growing Company 2nd phase Aim to be a more global company recognized in the world along with realizing an excellent growing company From “Oki Electric” to a more global “OKI” Target: 50% of overseas sales ratio in FY ending Mar. 2011 (approx. 30% in Mar. 05) 14 Info-Telecom System Business: Business Target Basic Policy Deploy business from infrastructures to applications in the broadband ubiquitous network era Create info-telecom converged solutions by market based on AP@PLAT and enhance these solutions sales Create world-class products and expand global sales: Middle-size mechatronics, financial IT systems, carrier network systems, enterprise network systems and media network appliances Target Figures (Billion yen) Operating income target Sales target (Billion yen) 500 400 375.8 373.1 380.0 30 390.0 4.2 Others 300 Enterprises 200 Carriers Governments 100 5.5 4.9 5 .6 (%) 20 10 20.6 15.8 18.5 22.0 Financials 0 0 Mar. 04 Mar. 05 Mar. 06 Mar. 07 Mar. 04 Mar. 05 Mar. 06 Mar. 07 15 Financial Market (1) Market Trends Business Strategies Enhance info-telecom converged solutions Diversifying retail service channel Increase product lineups due to deregulations Security supporting Personal Information Protection Act and measures for card forgery Improving back office work efficiency and cost reduction Outsourcing of contingent business Growing overseas ATM market # of customer contact 1980 Multi-functional ATM “ATM-BankIT” Mobiles Internet Call centers IVRs ATMs Bank branches 1985 1990 based on CTI, Web linkage, and mobile Strengthen e-financial systems (e-payment, Edy, systems connecting banks, etc.) IC cards, ATMs with biometrics Enhance lineups of back office operation concentration system Enhance outsourcing business including ATM centralized monitoring and total network services Enhance China ATM business 1995 2000 2005 2010 (Oki estimation based on TowerGroup material) • Press release on March 23, 2005 • Enhanced security including IC card handling and various biometrics identification • High reliability and low cost operation • Easy and comfortable operation • Flexibility for expansion of new services 16 Financial Market (2) Oki’s financial IT solutions provide “satisfaction” in the e-society Info-Telecom converged solutions Back office operation concentration systems based on Japan No. 1 share in call center systems and broadband IP technologies with excellent image processing technologies and track record (No. 1 share) Money order image processing SS9100 e-financial systems Investment trust image processing Other general Application Provide reliability and entry systems systems satisfaction by security and network ATMs and branch systems enabling e-business and mobiles MobileATM finance ATM linkage Reference/ reservation counter congestion reduction e payment Edy Web-linked transfer service, etc. Edy money charge Edy gift with abundant track record and security functions compliant to Personal Information Protection Act and card forgery High reliability High security - Improvement of - Standard spec for IC cards - Various biometric identifications banknote handling ATM Bank branch monitoring terminals Consul Station Reception system 17 Telecom Carrier Market (1) Market Trends Expansion of broadband access market - Saturated ADSL, rapid growth of FTTH Internet contracted lines (Million lines) 30 Transition to optical IP telephony service 20 Concretizing all-IP 10 - NTT-G: Plans of 30 million optical subscribers and network migration KDDI-G: Integrated service network plan - 0 2002 2003 ADSL TEPCO TDD method TU-KA 2G mobile NTT-C 3G mobile NTT E/W SBB-G POWEREDCOM Local telephone ADSL/FTTH NTT Docomo - IP Centrex service for enterprises Fixed Mobile Convergence (FMC) service - NTT Mobile Centrex - KDDI OFFICE WISE New application services including video Long distance IP telephony NTT Com. KDDI - International IP telephony KDDI-G JAPAN TELECOM Provisioning of various services NTT-G Yahoo! BB KDDI-G and SBB-G participation of fixed phone direct service 2004 2005 2006 2007 FTTH CATV Dial-up Telecom carrier map au, DION, Hikari plus, VPN Fiercer competition to gain subscribers - Source: Fuji Chimera 40 18 Telecom Carrier Market (2) Oki’s Strengths Focus Area Hold core technologies and know-how - Optical access: System & optical component technologies for GE-PON etc. - CPE: Platform technologies (video, optical, VoIP) - Network migration: Existing network technologies, IP/server technologies Application servers Platforms Backbone Broadband IP network (Core & edge routers) Strategies by carriers Maximize profitability of existing products and create next-gen. products and services - - - NTT-G: Expand sales of existing network products and services. Create new products for next-gen. IP network KDDI-G: Expand sales of equip. for CDN network. Entry to fixed/mobile integrated network SBB-G: Expand solutions for new services and infrastructures Network migration -Phone service migration -Dedicated line service migration CPE Enterprise/SOHO (ONUs, VoIP-GWs) PSTN service Optical access network (GE-PONs) Home (VoIP routers/gateways, Video reception terminals, ONUs, IP phone, IP video phones) Broadband IP NW services NW service (IP-VPN, Internet) (Dedicated lines, VPN) 19 Public Sector Market Trends Business Strategies Full scale deployment of e-Japan II Initiative e-government e-government solutions solutions Central Government Introduction of EA with e-government establishment plans Reexamine system upgrade with administrative reform plan Deploy e-government solutions with security and network as a core Local Governments - Shared operations between ministries (Personnel wage system, etc.) - Government network - Large scale project Progress in IT system installation as municipalities merge Increase in renewal demand for strengthened disaster prevention measures and wireless digitalization ITS Promote “Second stage deployment scenario” Expansion in services with public and private partnership Disaster Disaster prevention prevention solutions solutions Continuing growth in the infotelecom converged area - Disaster prevention information system - Fire control digital radio transmission - Terrestrial digital broadcasting Shared Operation Security Security Network Network EA/PM EA/PM Ministries Ministries Large project Network ITS ITS solutions solutions Deploy ITS systems as road traffic such as ETC and VICS advance 避難 勧告 - Communication among vehicles Location information service DSRC gate, link with customer info Solutions supporting autonomous moves 20 Enterprise Market Cultivate customers by cross-providing products to system and telecom based customers Business Strategies Market Trends Manufacturing industry Automobile-related and machinery companies remain steady in market with ups and downs Transportation industry Steady investment in automation in railroad industry Recovery trend in airline industry Retail industry Severer competitions including trend of multi-stores and complex stores Steady in amusement industry and e-transactions Triple Triple play play solutions solutions - For factories - For sales and maintenance support, etc. Support linkage between customers’ core business and new services by IC card payment, Department e-tickets, etc. with store “satisfaction” - Payment integration IC card Personal identification Mobile payment Point system, etc. Credit card Station Convenience Points store e-money Bus stop e-ticket Amusement Airport Cash Cash management management solutions solutions Mission critical systems Support process efficiency Business process by strong links among end users, factories, designs and IP telephony maintenances by converg- Video conferencing ing realistic sound, video, Voice Contact center and data Seamless Payment Payment & & security security solutions solutions Video Linkage Data Video distribution Web system Security / network Deploy highly secured and efficient solutions to retail market, utilizing know-how in financial system solutions - Cash management of shop sales including changes - Shared-solutions among multiple shops Withdraw changes Filling changes Deposit sales Neighbor shops 21 Semiconductor Business: Business Target Basic Strategy Deploy value added business with system LSI for the personal & mobile markets Enhance the creation of top-class products, development speed and production flexibility through partnership strategy and fab-free strategy (vertical integration with fabless) Expand unique differentiating technologies (low power consumption, high voltage process, SOI/SOS, mixed digital analog) Target Figures (Billion yen) 200 132.2 Operating income target Sales target 150.7 165.0 180.0 (Billion yen) Optical device System memory Logic LSI 100 System LSI 0 (%) 7.2 1.7 10 12.0 5 0 Mar. 04 Mar. 05 Mar. 06 Mar. 07 8.0 15 6.1 10.0 13.0 2.3 Mar. 04 Mar. 05 Mar. 06 Mar. 07 22 Semiconductor Business Strategy Deploy marketing and product development activities for personal and mobile market, focusing on 3 areas: telecom, information appliances, and in-vehicle markets Expect 9% business expansion in CAGR by providing competitive products to the following active and steady demand applications in the FY ending Mar. 06 to 07: - Focus applications: FPD, amusement, wireless, in-vehicle - Focus products: TFT drivers, P2ROM, PHS Baseband LSIs, Sound generator LSIs, ZigBee LSIs, VFD drivers, Organic EL drivers Prevent lowering profitability through high value-added products and controlling costs Deploy speedy and flexible development and production through fab-free strategy <Oki’s fab-free strategy> Fab-less business IDM business High value added products by providing solutions (hardware, software, and services) Sound Info Telecom LSI, appliance generator, in-vehicle LSI LSI Custom LSI High value added products by differentiated process Partners Fabs (GSMC, UMC, etc.) SOI/SOS P2ROM Driver (Low consumption (OTP） (Hi voltage) / RF) Foundry business High value added production with differentiated process Hi voltage process, Power chip Oki’s Fabs (Miyazaki Oki, Miyagi Oki) 23 Product Segment Balanced business with 3 areas for 3 product segments based on differentiated technologies (system, circuits, software, process, etc.) - System LSI Create high market added value, cooperating with partners and customers - Logic LSI Expand sales and profitability, particularly drivers, with Oki’s advanced process and development skills - System memory Expand sales and profitability , particularly P2ROMs, with Oki’s advanced process and development skills Areas System LSIs -µPLAT - Low power consumption - Communication & RF tech - SOI/SOS/FeRAM Product segments Logic LSIs - High voltage process - Sound generator, voice tech System memories - P2ROM process - Graphics technology - Low power consumption Telecom - PHS-baseband - VoIP LSIs - EC/NC Information appliance - Digital AV - ARM MCU - SOI MCU In-vehicle - In-vehicle MCU - ITS, navigation - TPMS Wireless / Radio controlled watch Organic EL drivers - Sound generator LSIs - TFT drivers - Voice synthesis LSIs - Integrated LSIs - VFD drivers P2ROM/Video-LSI AS-DRAM - FiFo memories 24 Printer Business: Business Target Basic Strategy Global business deployment by clarifying strategy for each market and with OKI unique products Target to hold No.2 market share by strengthening compact and high-speed color NIP product competitiveness (development TAT, product timing, quality, cost, etc.) and by increasing sales for hardware and consumables Expand SIDM market share and maximize profitability through business improvement Target Figures (Billion yen) 200 124.8 Operating income target Sales target 137.7 150.0 (%) (Billion yen) 165.0 6.4 5.7 7.9 5.3 10 100 Others 13.0 8.0 Color NIP 0 Mar. 04 Mar. 05 Mar. 06 Mar. 07 7.8 8.0 0 Mar. 04 Mar. 05 Mar. 06 Mar. 07 25 Printer Market Trend 18% annual growth in color NIP/ MFP (hardware shipment amount base) Color NIP penetration reached over 16% in CY 2004, with continued expectations of growth (The 16% Diffusion of Innovation Theory, E.M. Rogers) Low price trend for color NIP continues, Billion $ 50 CAGR = -8% 40 SIDM CAGR = 1% Inkjet 30 CAGR = 0% 20 10 0 assisting a 40% annual growth in unit based hardware shipment 2003 2004 Mono NIP/MFP Color CAGR = 18% NIP/MFP 2005 2006 2007 by JEITA Color NIP shipment by region Tandem-type (Oki method) color NIP progresses, outstripping 50% in the CY2002 Printer Market Billion $ 4.0 ROW Though overall SIDM market shrinks, stable 3.0 Japan sales in specific businesses. China market expands 2.0 US 1.0 WE 0.0 2001 2002 2003 2004 2005 2006 by IDC 26 Color NIP Business Strategy Target - Provide top-of-the-line value to worldwide customers with semiconductorbased LED tandem single pass technology - Target to hold 20% of the shipment units in FY Mar. 07 Measures - Prioritize in improving customer satisfaction - Provide superior cost performance products - Keep advantages in high resolution and high-speed with LED technology - Establish low cost, high quality production - Form long term relationship with mutual trust with channel partners - Establish global service structure LED technology Enabling high resolution, high quality and low price High speed printing with LED technology and Single Pass Global supply chain Global production structure Channel partnership in 120 countries and global service structure 27 Mid-term Business Target <Sales/ Operating income ratio> 5.3 4.0 4.0 688.5 720.0 21.4 124.8 27.0 137.7 25.0 150.0 25.0 165.0 132.2 150.7 165.0 180.0 3.3 (Billion yen) 654.2 (%) 760.0 Others Printers Semiconductors 375.8 373.1 Mar. 04 Mar. 05 Net Sales Operating income Net income ROE D/E ratio (net) 390.0 380.0 Mar. 06 (Projections) Info-telecom systems Mar. 07 (Target) FY Mar. 07 (Target) FY Mar. 04 (Result) FY Mar. 05 (Result) 654.2 B yen 21.6 B yen 688.5 B yen 27.2 B yen 720.0 B yen 28.5 B yen 760.0 B yen 40.0 B yen or more 1.3 B yen 11.2 B yen 11.5 B yen 20.0 B yen or more 1.2 % 9.0 % 8.5 % 13% or more 2.1 times 1.7 times 1.5 times 1.1 times or less FY Mar. 06 (Projections) 28 Oki Mid-term Business Plan Perspective To achieve mid-term target for the FY Mar. 07, steadily implement following measures during the FY Mar. 06: Commit to autonomy operation for the three business groups Enhance Corporate’s group management function and review functions of affiliated companies Develop and expand sales for info-telecom converged products and systems Strengthen profitability of Strategy Business Units (SBU) in each business group Commit in developing major new competitive products and creating new businesses Achieve targeted financial indicators (FCF, interest-bearing debt ratio, ROE, etc.) Implement activities to establish the image of a more global OKI Enhance CSR (Corporate Social Responsibility) and compliance activities 29 Financial Indicators Main business challenge is to maximize cash flows and decrease interest- bearing debt ⁃ Decrease interest-bearing debt to 40% or lower in the FY Mar. 07 Mar. 04 Mar. 05 Mar. 06 Mar. 07 Cash flows from operating activities 92.3 59.3 68.0 72.0 Cash flows from investing activities (19.2) (41.5) (48.0) (45.0) 73.1 17.8 20.0 27.0 (43.5) (26.9) (22.0) (27.0) 58.1 49.4 47.4 47.4 Free cash flows Cash flows from financing activities Cash and cash equivalents at the period end (Billion yen) 47.8 400 Interest-bearing debt balance 43.6 39.5 300 (%) 50.0 35.3 30.0 200 100 40.0 291.4 265.2 245.0 0 Mar. 04 Mar. 05 Mar. 06 20.0 220.0 10.0 0.0 Mar. 07 (Target) Interest-bearing debts Interest-bearing debt ratio 30 Capital Expenditure Main items for capital expenditure Acquisitions of property, plant and equip. (Billion yen) 50 (FY March 06) 37.8 38.0 3.6 6.0 3.5 <Info-telecom systems> 38.0 Others 8.5 Printers 25 Semiconductors 23.1 18.0 5.1 8.0 Mar. 05 Mar. 06 0 Info-telecom systems Mar. 07 (Billion yen) 50 - Development equipment for next generation financial terminals - Production equipment for GE-PON production - Equipment for lead-free production <Semiconductors> - Improve productivity and increase production at Miyagi plant - Increase production for driver LSIs (high voltage process) at Miyazaki plant <Printers> 25 25.5 30.0 0 30.0 - Production equipment for new products (metal mold, etc.) - Equipment for lead-free production Depreciation 31 R&D Expenses Main items for R&D expenses R&D Expenses (FY March 06) (Billion yen) <Info-telecom systems> 30 25.0 15 22.0 22.5 Others 3.1 3.2 Printers 4.0 Semiconductors 5.3 Info-telecom systems 4.9 5.2 - Develop next generation financial systems - Develop integrated recognition process technology - Develop new info-telecom converged products <Semiconductors> - Develop telecom/wireless LSIs - Lower costs for large TFT drivers - Newly develop large capacity P2ROM <Printers> 8.8 - Develop new color NIP products (highspeed, MFP) 10.0 - Low cost SIDM (horizontal printers) 0 Mar. 05 Mar. 06 Mar. 07 32 Personnel Plans <Major personnel measures> Maintain number of domestic employees until the end of FY Mar. 07 Flexibly change overseas staff number responding to business deployment (enhance design, development, software & marketing) Improve marketing and technical skills by recruiting mid-career staff Enhance development, design and SE skills. Improve efficiency of indirect departments 25.0 Number of employees (consolidated) (Thousands) 21.0 20.0 Overseas 5.6 15.0 2.2 5.0 20.4 5.7 1.4 2.1 Devices 5.0 2.7 2.6 Telecom 10.0 Domestic 15.4 5.0 20.4 Others 11.1 Mar. 04 Printers 5.0 Semiconductors 14.7 10.7 Info sys. 0.0 4.9 Flexibly change in overseas Previous segment Mar. 05 Maintain numbers in Japan 9.1 14.7 Info-telecom New segment Mar. 07 33 Glossary P4 P5 P8 P9 P12 P14 P16 P18 P19 SG&A FCF IP LCD LSI P2ROM IT FTTH LED NIP SIDM Ph21 S-H ATM IVR CTI ADSL VPN CATV TDD GE-PON CPE VoIP CDN SOHO ONU GW PSTN Selling, General and Administrative expense Free Cash Flow Internet Protocol Liquid Crystal Display Large Scale Integration Production Programmed Read Only Memory Information Technology Fiber To The Home Light-Emitting Diode Non-Impact Printer Serial Impact Dot Matrix Phoenix 21 plan Sky-High plan Automated Teller Machine Interactive Voice Response Computer and Telephony Integration Asymmetric Digital Subscriber Line Virtual Private Network Cable Television Time Division Duplex Giga-bit Ethernet Passive Optical Network Customer Premises Equipment Voice over Internet Protocol Contents Delivery Network Small office / Home office Optical Network Unit Gateway Public Switched Telephone Network P20 P22 P23 P24 P25 P26 P33 EA ITS PM ETC VICS DSRC SOI SOS FPD TFT PHS VFD EL IDM OTP RF FeRAM EC NC AV MCU TPMS AS-DRAM FiFo TAT MFP ROW SE Enterprise Architecture Intelligent Transport System Project Management Electronic Toll Collection Vehicle Information Communication System Dedicated Short Range Communication Silicon on Insulator Silicon on Sapphire Flat Panel Display Thin Film Transistor Personal Handy-phone System Vacuum Fluorescent Display Electro Luminescence Integrated Device Manufacturer One Time Programmable Radio Frequency Ferroelectric Random Access Memory Echo canceller Noise canceller Audio Visual Microcontroller Tire Pressure Monitoring System Application Specific Dynamic Random Access Memory First-in First-out Turn Around Time Multi Function Printer Rest Of World System Engineer 34