fy2002 first-half results and direction of structural reforms · • management resources —human,...
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FY2002 First-Half Results and
Direction of Structural Reforms
October 31, 2002
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FY2002 First-Half Results
Yoshiki YagiExecutive Vice President and Director
Hitachi, Ltd.
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FY2002 First-Half Results
3,916.4
45.8
（99％）
（－） 130.0 （－）
8,050.0（101％）
FY2002 Forecasts
：
：
：
：
61.6： （－） ： 150.0 （－）
24.6 （－） 61.0 （－）： ：
(billion yen)
12.8 （－） 36.0 （－）： ：
Net salesOperating incomeIncome before income taxes and minority interestsIncome before minority interests
Net income
Summary of Operating Results
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3,916.4878.2766.4
1,068.1597.6613.0700.6293.3
（101％）
（100％）
（96％）
（103％）
（98％）
（99％）
（104％）
（99％）
1,865.01,555.02,255.01,225.01,270.01,395.0
585.0
（102％）
（105％）
（99％）
（105％ ）
（102％ ）
（97％）
（103％）
8,050.0（101％）：
(billion yen)
61.642.1(7.9)11.1
5.79.01.4
18.6
（290％）
（－）
（42％）
（－）
（－）
（20％）
（91％）
（－）
88.0(16.0)
49.014.013.0
7.031.0
（246％）
（－）
（89％）
（－）
（－）
（215％）
（83％）
150.0 （－）：
Information & Telecommunication SystemsElectronic DevicesPower & Industrial SystemsDigital Media & Consumer ProductsHigh Functional Materials & ComponentsLogistics, Services & OthersFinancial Services
FY2002 First-Half Results FY2002 ForecastsNet sales
Information & Telecommunication SystemsElectronic DevicesPower & Industrial SystemsDigital Media & Consumer ProductsHigh Functional Materials & ComponentsLogistics, Services & OthersFinancial Services
Operating income (loss)
Summary of Operating Results
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Direction of Structural Reforms
Etsuhiko ShoyamaPresident and Director
Hitachi, Ltd.
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Further structural reforms are predicated on a difficult operating environment moving forward.
• No expectation for full-fledged Japanese economic recovery in medium term.
• Competition is intensifying on a global basis.
• No hope of expanding operations and raising profitability with portfolio focused on existing businesses.
Operating Environment and Necessity for Further Structural Reforms
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Market
World WideSocieties
Businesses
Households
Information Systems Services
Social Infrastructure Systems
Key hardware, software, high
functional materials and components
×High
Profitability
－Financial services, IT for industry, e-government, Ubiquitous Metropolis,
biotechnology, etc.
－Power generation, transportation, building, manufacturing plants, environmental, etc.
TargetHigh-growth global markets
Hitachi’s Strengths• Technology, knowledge, experience• Management Resources
—human, brand equity, financial strength
Provide hardware and software leveraging advanced technological capabilities
Become a global supplier of total solutions, offering IT- and knowledge-based Information Systems Services and Social Infrastructure Systems together with key hardware and highly functional materials and components.
The Direction of Structural Reforms under the“i.e. HITACHI Plan”
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Information Systems Services
Social Infrastructure Systems
Key hardware, software, high
functional materials and components
Provide hardware and software leveraging advanced technological capabilities
i.e. Social Systems
Personal
Industrial
Public sector
Markets
Concentrate on “i.e. Social Systems,” new-era lifelines wedding information system services and social infrastructure systems.
The Direction of Future Structural Reforms
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Reexamine and realigning the business portfolio
Create new businesses that stimulate new demand
Promote a new Group management drive
Achieve positive FIV as soon as possible
FIV (Future Inspiration Value) is a proprietary value-added evaluation index based on economic value added in which the cost of capital is deducted from after-tax operating profit
Key Structural Reform Measures
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Structural reforms since fiscal 1999Implemented approx. 80 measures
Alliances
Joint ventures
Acquisitions and divestitures
Internal Group restructuring
Clarified FIV-based investment and exit standards (February 2002)Investment criteria : Profitable within 3 years and eliminate accumulated losses
within 5 years.Withdrawal criteria : 2 consecutive years in the red: warning issued
After warning, if the rebuilding plan is not approved or if within 2 years business does not become profitable: withdraw or sell .
Portfolio Reexamination and Realignment
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U.S.-Registered Patents (No.)
Search Parameters: Applicant and G11B (information storage) not (tape or optical)
Source: United States Patent and Trademark Office
(As of February 5, 2002)
113 144
564 579
9021,132
1,717
IBMHitachi
SeagateFujitsuToshibaWD Maxtor
World-Class Technologies
Integration of operations with IBMStrengthen competitiveness by fusing world-class technologies
Example 1: Hard Disk Drive business (1)
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99 00 01 02 03 04 05 06 07 08 09 10
Notebook computers
CRT
LCD2.5"
AV, iVDR
3.5"
3.5" 1.8"
Desktop computers
PC1.8"
0
120
240
360
480
600
2.5"
PDAs, portable audio, video cameras, iVDR
Digital information
& CE
Car navigation systems, car audio, iVDR
New markets for digital consumer electronics
1.0"
1.8"2.5"
Progress in digitalization of homes driven by digital broadcasting and broadband communications spells rapid growth in the HDD market for non-PCs and digital consumer electronics.
iVDR: Information Versatile Disk for Removable usage
Example 1: Hard Disk Drive business (2)N
o. o
f Uni
ts (M
illion
Uni
ts/Y
ear)
Year
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Establishment of joint venture company, Renesas Technology Corp., with Mitsubishi Electric Corporation (Planned for April 2003)
Aiming to establish a leading position in mobile, network, automotive, and digital consumer electronics fields
DRAM joint venture company, Elpida Memory, Inc., with NEC Corp. (Established in December 1999)
Will take over Mitsubishi Electric’s DRAM operations (Planned for end of March 2003)Planned alliance with Powerchip Semiconductor Corp. in Taiwan.
Strengthening competitiveness as an independent, specialist companyUsing semiconductors as core components to support solutions
Example 2: Semiconductor Business
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Hitachi, Ltd.
Acquisition of Unisia JECS Corporation (October 2002).
•Technologies for motor actuator and engine control
•IT and electronics technologies
Concentrate on electric power-train, etc.
Example 3: Automotive Products Business
•Technologies for braking and steering
Unisia JECS Corporation
＋
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Electric power-trains
Lithium ion rechargeable batteries for vehicles
SAN/NAS storage solutions
Hard disk drive businessFinancial solutions
Business reform solutions
Cutting-edge medical equipment
Outsourcing of bio analysis
Total security solutions
Plasma and projection TVs
Information Systems Services
IT-basedQ
uality Life
Sustainable Environm
ental
Advanced H
ealthcare
Intelligent M
anagement
“i.e. Social Systems”
mu-chip
Muster the Collective Strengths of Hitachi’s DNA
Broadband-based train control systems
Nanotechnology
System LSIs
Social Infrastructure Systems
“Inspire the Next” Domains
Creating New Businesses That Stimulate New Demand
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1 trillion yen/ year
0.3 trillion yen/ year
Hard disk drives
SAN/NAS storage solutions
Urban redevelopment solutions
Bio andMedical businesses
Automotive products(Electric power-trains)
Comprehensive IT outsourcingsolutions
Management reform solutions with financial services
IT-based Quality Life
Advanced HealthcareSustainable
Environmental
Intelligent Management
Concept diagram of business size in fiscal 2005
Examples from “Inspire the Next” Domains
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Upstream consulting and IT assessment(Research and specialist groups)
Establish joint venture
Transfer hardware and software assets
Provide outsourcing services(Data centers at 9 locations in Japan)
Customers Hitachi
Example 1: Comprehensive IT outsourcing solutions business
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Technology, product and solution groupings that support bio and medical businesses
Biotechnology
DNA analysis
PET testing
Hospital information
systems
Insurer and NHI system
Medical supplies
Proton beam therapy systems
Genomics research
Noninvasive diagnostics
Expansion of services businesses
Nursing care services
Health information management
Medical imaging
Diagnosis
Information
Medical treatment
Surgery support
DNA chips
DNA analysis support systems
Finance
Tissue engineering
Home diagnosis Outsourcing of
bio analysis
Pharmaceutical products
Example 2: Bio and Medical Businesses
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Promote integrated management of the Hitachi GroupClarifying the framework for group management① “Consolidated Group Management”— Accounted for approximately 60% of the
Group’s 1,200 subsidiaries and affiliates, and accounted for around 70% of gross sales in fiscal 2001.
– Companies that function both strategically and operationally in step with the Hitachi Group
② “Consolidated Vision and Brand”—Accounted for approximately 40% of the Group companies and generated roughly 30% of sales..
– Companies that share a common management vision and brand as members of the Hitachi Group
③ “Consolidated Finances”—Represented only several percent of the total, both in terms of the number of companies and sales.
– Companies that are managed autonomously as independent entities
Promoting a New Group Management Drive
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• Concentrate on “i.e. Social Systems,” which wed information system services and social infrastructure systems.
• Create new businesses by using technological capabilities and allocating resources.
• Reexamine and realign the business portfolio using FIV.
• Promote a new Group management drive.
Highly profitable company
Main points of Hitachi’s structural reforms
This document contains forward-looking statements which reflect management’s current views with respect to certain future events and financial performance. Words such as “anticipate,” “believe,” “expect,” “estimate,” “intend,” “plan,” “project” and similar expressions which indicate future events and trends identify forward-looking statements. Actual results may differ materially from those projected or implied in the forward-looking statements and from historical trends. Further, certain forward-looking statements are based upon assumptions of future events which may not prove to be accurate.Factors that could cause actual results to differ materially from those projected or implied in any forward-looking statements include, but are not limited to, rapid technological change, particularly in the Information & Telecommunication Systems segment and Electronic Devices segment; uncertainty as to Hitachi’s ability to continue to develop products and to market productsthat incorporate new technology on a timely and cost-effective basis and achieve market acceptance; fluctuations in product demand and industry capacity, particularly in the Information & Telecommunication Systems segment, Electronic Devices segment and Digital Media & Consumer Products segment; increasing commoditization of information technology products, and intensifying price competition in the market for such products; fluctuations in rates of exchange for the yen and other currencies in which Hitachi makes significant sales or in which Hitachi’s assets and liabilities are denominated, particularly between the yen and the U.S. dollar; uncertainty as to Hitachi’s access to liquidity or long-term financing, particularly in the context of restrictions on availability of credit prevailing in Japan; uncertainty as to Hitachi’s ability to implement measures to reduce the potential negative impact of fluctuations in product demand and/or exchange rates; general economic conditions and the regulatory and trade environment of Hitachi’s major markets, particularly, the United States, Japan and elsewhere in Asia, including, without limitation, continued stagnation or deterioration of the Japanese or other East Asian economies, or direct or indirect restriction by other nations of imports; uncertainty as to Hitachi’s access to, or protection for, certain intellectual property rights, particularly those related to electronics and data processing technologies; Hitachi’s dependence on alliances with other corporations in designing or developing certain products; and the market prices of equity securities in Japan, declines in which may result in write-downs of equity securities Hitachi holds.These factors listed above are not exclusive and are in addition to other factors that are stated or indicated elsewhere in this report, or in other materials published by the Company.