1
Oki Management Strategies
July 23, 2002
Oki Electric Industry Co., Ltd.
http://www.oki.com/
* The projections and plans on this material are subject to change depending upon the changes of business environments and other conditions.
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Contents
• Financial Overview of 1st Half for FY ending March 2003• IP Network Solutions• System LSIs, Application Specific-LSIs• Financial System Solutions• (Reference) Introduction of New Color Printers
Strategies on Prioritized Businesses
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Financial Overview of 1st Half for FY ending March 2003
153.9 140.0
52.045.0
66.458.0
17.717.0
0
100
200
300
FY Mar 02 FY Mar 03
Others
Electronicdevices
Telecom.Systems
Info.Systems
(billion yen)
290.0260.0
(9.5)
0.9
(10)
(5)
0
5(billion yen)
< 1st Half Projections > (Announced on April 26, 02)
(Projection)
• Steady growth in financial and information solutions industries
• Printers affected by strong yen• In total, the targeted sales and operating income
will be achieved.
• Still sluggish movement in existing carriers like NTT
• Inquiries for IP network solutions are active, but investment decisions are slow.
• Slight decrease in both sales and operating income.
• Inventory adjustment in the market is completed, and growth is expected.
• Slight increase in 1Q, and break-even in operating income is expected for the 1st half in Silicon business
• Stagnated optical components business
• Net sales and operating income are expected to be as planned in April
Info
rmat
ion
syst
ems
Tel
ecom
syst
ems
Ele
ctro
nic
devi
ces
Ove
rall
Net Sales
Operating income (loss)
(Consolidated)
4
Direction of Business Structure Reforms
Phoenix 21
Continuous improvement of
management quality,Achieve stable profit
and growth
Stablyearning
generation
Top-tiercompany
FY ended Mar. 00-02
Business structure reform
Reconfirm and accelerate focus
on quality of management
FY ended Mar. 02Phoenix 21-Sky High
On-going Business Reform Measures
Stabilize the base
FY ending Mar. 03 - 06
Unable to achieve due to drastic environmental change
Cut down of legacy telecom business, and thorough focus on IP NWbusiness (Shift approx. 1000 personnel). Expand skill business and related service business. Make communication LSI business independent and self-supporting
Speed-up business structure reform by positioning system LSI as a core, and decoupling development/design and production
Further enhance the strong business area and accelerate profitability by separating financial business to an independent in-house company
Make an in-house manufacturing company of system hardware products as an independent separate company (Enhance global EMS business and its independency)
Domestic production
Info. systems
Telecom systems
Electronic devices
Prioritized strategic business areas
5
Growth Strategies in Telecommunications Segment(Concentrate on IP network business)
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Thorough Focus on IP Network Business
Oki’s Unique Products
• CTI (CTstage): No.1 share in Japan• Top share in enterprise VoIP (CenterStage)• To establish No.1 brand in VOD motion picture distribution platform (MediaServer)
Offers suitable solutions related to IP network with competitive products as cores
Offers suitable solutions related to IP network with competitive products as cores
Expanding various broadband services
NTT is moving to all IP NW.
Increasing IP in enterprise NWs
Expanding IP in individuals & SoHos
Widely expanding VoIP introductionOffer appropriate solutions from products to services meeting customers various needs
-Consultations-Network construction-Maintenance, operation-Call centers etc.
Cut down legacy telecom business in this fiscal year
Related servicesVOD CTI
VoIP
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Expanding IP Telephony Market
(Source: Yano Research Institute)
3041,583
2,4193,642
4,967
6,513
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000(K lines)
2000 2001 2002* 2003* 2004* 2005*
Number of IP telephony lines(Individuals, SOHOs)
1,2002,450
3,9005,650
7,75010,400
14,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
(No. of companies)
1999 2000 2001 2002* 2003* 2004* 2005*
Number of enterprise users(excluding carriers)
*: estimation
CY 01 !!!! 05Growth ratio: 42% per year
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Shift of Telecommunications Businesses to IP Areas
(%)
0
25
50
75
100
125
FY ended Mar.00
FY ended Mar.01
FY ended Mar.02
FY ended Mar.03
FY ended Mar.06
Legacy phone NW IP NW Broadband (Optical access, xDSL)
(Billion yen)
0
20
40
60
80
100IP + Broadband ratio
Legacy phone ratio
• Sales of legacy telephone network (Core NW) decreases to 10% of total Telecom Systems’sales in the fiscal year ending March 06.
• Sales of broadband and IP NW increases to approx 90% of total Telecom Systems’ sales.• To make recovery of business scale in the FY ending March 06
• Sales of legacy telephone network (Core NW) decreases to 10% of total Telecom Systems’sales in the fiscal year ending March 06.
• Sales of broadband and IP NW increases to approx 90% of total Telecom Systems’ sales.• To make recovery of business scale in the FY ending March 06
Telecom sales composition dramatically changing
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Concentration of Resources on IP Network Businesses
• Concentration of resources on a network solution business which collaborates with applications divisions, putting network infrastructure and multimedia messaging as basis
• Enhance solution business: Approx. 100 personnel for sales to carriers and enterprises• Enhance product development: Approx. 150 personnel for VoIP, CTstage, MediaServer
businesses• Enhance service business: Approx. 350 personnel in all Oki group.
• Concentration of resources on a network solution business which collaborates with applications divisions, putting network infrastructure and multimedia messaging as basis
• Enhance solution business: Approx. 100 personnel for sales to carriers and enterprises• Enhance product development: Approx. 150 personnel for VoIP, CTstage, MediaServer
businesses• Enhance service business: Approx. 350 personnel in all Oki group.
Legacy Telecom Business
Product Development Business(VoIP/CTstage/MediaServer)
Solution Sales Business
Service Business
To Carriers
Approx. 150 personnel
Approx. 100 personnel
To Enterprises
Approx. 300 personnel
IP Network Business
External companies
Approx. 350 personnel
Communication system LSI
design company
Approx. 100 personnel
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IP Telephony Promotion Center
Total support for offering high quality IP telephonyTotal support for offering high quality IP telephony
" Provide comprehensive service first and sole in Japan#### Integrating the network construction technology offered by leading VoIP provider, Oki, and the measurement technology compliant with the international standards, by Agilent
Measure and assess voice quality of IP telephony, and make improvement proposals#### Oki offers solutions with satisfied level
" Further increase Oki’s VoIP share by providing total services and supports of advanced IP telephony
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Growth Strategies in Electronic Devices Segment(System LSIs, AS-LSIs)
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Oki’s Electronic Devices Business Structure
• Centering customers and markets, offer Oki’s unique system LSIs and AS (application-specific) LSIs.
• Establish business structure capable of prompt actions at niche markets.• Decouple development/design and production, and expand multiple alliances
globally.
• Centering customers and markets, offer Oki’s unique system LSIs and AS (application-specific) LSIs.
• Establish business structure capable of prompt actions at niche markets.• Decouple development/design and production, and expand multiple alliances
globally.
Foundry vendor
UMC
ARMDevelopment & design company
Electronic devices manufacturing company
GSMC
Utilize capacity of advanced process
µPLAT
Oki’s excellent customersExpand customer base
µPLAT united
partners
ARM partners
Tool vendorsMentor
CadenceSynopsys
Circulation of IPs
Enhance unique device Enhance unique device technologiestechnologies
• Low voltage• SOI• W-CSP• Short TAT
Place world dePlace world de--facto facto (ARM) as a core(ARM) as a core
• Deploy µPLAT• Circulate IPs• Enhance software
and services
Expand customer base
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Deployment of System LSI Business
SPASPAEffective design system based upon Effective design system based upon platformsplatforms
Realize system LSIs for various applications by computer
hardware and software on siliconTotal solutions composed by Total solutions composed by
hardware, software, and supporthardware, software, and support
PersonalMobile
Communications (Bluetooth, PHS, VoIP, Wireless LAN),commercial use (digital camera, radio controlled watch),
sound source/voice, PC peripherals, automotive applications
Low power consumption device Low power consumption device technologytechnology SOI, MTCMOS, WSOI, MTCMOS, W--CSPCSP
ARM partnerARM partnerCore Core IPsIPs such as communications such as communications and voiceand voice
Assure to have advanced volume Assure to have advanced volume production linesproduction lines
•• Collaborate with leading foundriesCollaborate with leading foundries•• Unique own fabrication processesUnique own fabrication processes
Customers those who are leaders in the industries
Customers those who are leaders in the industries
“Development and design company” offers total solutions of system LSIs with µPLAT as a pillar“Development and design company” offers total solutions of system LSIs with µPLAT as a pillar
µPLATCollaborate with important customersCollaborate with important customers
Strong development and design specialized companies group
Areas to focus
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Deployment of Electronic Devices Manufacturing Company
“Electronic devices manufacturing company” has its uniqueness in advanced and differentiated processes and ATP technologies, focuses on joint development with customers and comprehensive services provision, and holds flexible and appropriate production capacity working with external fab’s when necessary.
“Electronic devices manufacturing company” has its uniqueness in advanced and differentiated processes and ATP technologies, focuses on joint development with customers and comprehensive services provision, and holds flexible and appropriate production capacity working with external fab’s when necessary.
Unique WP• Differentiated processes
(SOI, FeRAM, etc.)• Short TAT
Unique ATP• Differentiated technologies
(W-CSP, MCP, etc.)• Short TAT
Enhance services for customersEnhance services for customers
WPGSMC
UMCATP
vendorsATPSCM
Electronic devices manufacturing company
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Growth Strategies in Information Segment(Financial System Solutions)
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Growth Scenario of Financial Solutions Business
ATMs Bank branch terminals
Positioning Japan top share ATM based upon mechatronics technology and bank branch terminal systems as business cores, expand business and profitability in three directions of “network, system, and software/services”
• Network: VoIP/VPN network, call center• System: Back office center system, channel-link solution “ChannelNavigator”• Software/services: Net payment, ATM outsourcing
Positioning Japan top share ATM based upon mechatronics technology and bank branch terminal systems as business cores, expand business and profitability in three directions of “network, system, and software/services”
• Network: VoIP/VPN network, call center• System: Back office center system, channel-link solution “ChannelNavigator”• Software/services: Net payment, ATM outsourcing
ATM operation
outsourcing (JBO)
Net payment(NBC)
Back office center system
Channel-link solution
“ChannelNavigator”
VoIP/VPN network(NSC)
Call center, “CTstage 4i”
(MMC)
Software/ Services
Software/ Services System
SystemNetworkNetwork
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Domestic ATM Market and Oki’s Position
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
FY endedMar. 99
FY endedMar. 00
FY endedMar. 01
FY endedMar. 02
FY endedMar. 03
ATMs for retailATMs for banks
Acquisition of Toshiba ATM
business
(Units)
• ATMs for banks: Decreasing caused by branch integration and transition to convenience store ATMs, etc. (Oki’s share: approx. 40%)
• ATMs for retail market including convenience stores, stations, and chained stores: Installed units are increasing (Oki’s share: 56%)
• Domestic installed units in FY ending Mar. 06 is unchanged, about 160K units. (150K units in the FY ended Mar. 02)
• ATMs for banks: Decreasing caused by branch integration and transition to convenience store ATMs, etc. (Oki’s share: approx. 40%)
• ATMs for retail market including convenience stores, stations, and chained stores: Installed units are increasing (Oki’s share: 56%)
• Domestic installed units in FY ending Mar. 06 is unchanged, about 160K units. (150K units in the FY ended Mar. 02)
Product base, including OEMs.
Excluding units-offering business.
Double in convenience shops
Rapid increase in stations
and chained stores
Oki’s share
increases.
Installed units of Oki ATM in Japan
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Expanding Use of ATMs
Banks
Postal office
Non-banks
Convenience stores Banks Postal
offices Non-banks
Convenience storesStationsChained
stores
Air ports
Hospitals
• Use of ATMs is expanding from as cash terminals to as information kiosks, and businesses to use ATM and installed places become various.
• Total installed units are unchanged, due to providing customers with convenience by various usage style.
– Decreased installed units in existing banks, post offices, and non-banks.– Double increase of installed units in convenience stores by 2005. Rapid increase in
stations and chained stores.• Expanding Oki’s share: Enhanced product line-ups, expanded overseas production,
and provision of total services– Increase in share by becoming de-facto both in hardware and software, and by
preparing various price ranges and line-ups
• Use of ATMs is expanding from as cash terminals to as information kiosks, and businesses to use ATM and installed places become various.
• Total installed units are unchanged, due to providing customers with convenience by various usage style.
– Decreased installed units in existing banks, post offices, and non-banks.– Double increase of installed units in convenience stores by 2005. Rapid increase in
stations and chained stores.• Expanding Oki’s share: Enhanced product line-ups, expanded overseas production,
and provision of total services– Increase in share by becoming de-facto both in hardware and software, and by
preparing various price ranges and line-ups
Expanding functions
Expanding fields
2 tendencies
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Expand business by a New Mechatronic Product
Currently900 units
3,300 units inFY ending
Mar. 06
Installed units estimation ofopen cash management terminal
(for financial institutions)
• Expansion of financial-related mechatronic business: Introduction of open cash management terminal.
# Start shipment of open cash management terminal “CM21”• Expect to ship 3000 sets in 3 years• 10 billion yen business per year• Expand the system to other industries (Various chained stores, etc.)
• Expansion of financial-related mechatronic business: Introduction of open cash management terminal.
# Start shipment of open cash management terminal “CM21”• Expect to ship 3000 sets in 3 years• 10 billion yen business per year• Expand the system to other industries (Various chained stores, etc.)
CM21
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New System Solutions
• Released “ChannelNavigator,” the channel-link solution for financial institutions in June, 2002
• The solution enables to integrate and collaborate various channels including ATMs, banking terminals, and Internet, and to improve CRM.#### Increases customers efficiency, and allows banks to have the advanced customer strategies
• Deploy the system to banks and other industries
• Released “ChannelNavigator,” the channel-link solution for financial institutions in June, 2002
• The solution enables to integrate and collaborate various channels including ATMs, banking terminals, and Internet, and to improve CRM.#### Increases customers efficiency, and allows banks to have the advanced customer strategies
• Deploy the system to banks and other industries
ChannelNavigatorChannelNavigator
ATMs
Bank teller machines
Call centers
Customers’ DB
Customers' usage styles are networked.(Diverse products offered by banks)Various locations to use the system other than from banks
Customers' usage styles are networked.(Diverse products offered by banks)Various locations to use the system other than from banks
InternetSystem
Network
Software/Services
Collaboration
Collaboration
Collab
oratio
n
Collab
oratio
n
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Glossary
P2. IP-NW Internet Protocol-NetworkLSI Large Scale Integrated circuit
P3. IP Internet ProtocolP4. EMS Electronic Manufacturing ServicesP6. VoIP Voice over Internet Protocol
SOHO Small Office/Home Office VOD Video On DemandCTI Computer Telephony Integration
P8. xDSL Digital Subscriber LineP12. IP Intellectual Property
SOI Silicon On InsulatorW-CSP Wafer-level Chip Size PackagingTAT Turn Around Time
P13. SPA Silicon Platform ArchitectureIP Intellectual PropertyMTCMOS Multi-Threshold Complementary -
Metal Oxide Semiconductor
P14. ATP Assembly and Test ProcessWP Wafer ProcessFeRAM Ferro electric Random Access MemoryMCP Multi-Chip PackageSCM Supply Chain Management
P16. VPN Virtual Private NetworkATM Automated Teller MachineNSC Network System CompanyMMC Multimedia Messaging CompanyJBO Japan Business Operations Co., Ltd.NBC NetBusiness Solutions Company
P17. OEM Original Equipment ManufacturerP20. CRM Customer Relationship Management
DB Data Base
* The projections and plans on this material are subject to change depending upon the changes of business environments and other conditions.
