NEC Reports Shrinking Sales

TOKYO and NEW YORK -- Consolidated net sales of NEC for the three months ended June 30, 2002 decreased by 103.4 billion yen, or 9%, to 1,021.2 billion over the previous first quarter ended June 30, 2001. NEC recorded income before income taxes of 19.8 billion yen, an increase of 16.5 billion yen compared to the corresponding period of the previous year. Sales of NEC Solutions slightly increased from the corresponding period of the previous year, due mainly to business expansion in the area of software, services, servers, storage products and workstations, although sales of personal products dropped. Sales of NEC Electron Devices also showed a small increase compared to the corresponding period of the previous year, due primarily to a sales increase in displays including color PDPs (Plasma Display Panels) and the new consolidation of NEC Tokin Corporation. Sales of NEC Networks decreased significantly, compared to the first quarter of the previous year when the sales were favorable. This was due to stagnant conditions in the global communications market, which caused the sales decrease in network infrastructure, and the market deceleration for mobile terminals. NEC Solutions recorded a segment profit due to a sales increase in its software and services businesses, which are a stable source of income for NEC. NEC Electron Devices substantially reduced its segment loss compared to the corresponding period of the previous year because semiconductors market bottomed out and restructuring measures to reduce fixed costs, which were implemented in the previous fiscal year, showed great effectiveness. Despite a dramatic decrease in its segment profit due to a decline in sales, NEC Networks secured a segment profit primarily resulting from improved efficiency brought on by structural reforms to its network infrastructure business executed in the previous fiscal year. As a result, NEC recorded operating loss of 7.0 billion yen in this quarter. Income before income tax increased by 16.5 billion yen over the corresponding period of the previous year mainly due to gain on sale of marketable securities. Although equity in earnings of affiliated companies decreased, net income for this quarter was 7.2 billion yen, an increase of 6.3 billion yen from the corresponding period of the previous year when NEC posted the cumulative effect of accounting change from the application of new accounting standards (* footnote) regarding derivatives and hedge activity. NEC Corp.