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Meet the New NEC, a Lean Internet Machine? New President Koji Nishigaki is putting a cyber-spin on the Japanese electronics giant NEC Corp. President Koji Nishigaki doesn't waste time. Since taking over the high-tech conglomerate last March, he has restructured half a dozen of its businesses and inked a deal with rival Hitachi Ltd. to merge their money-losing chip operations. Now, he's set to reinvent NEC, Japan's leading chip and computer manufacturer, as a lean, Internet company. "We're focusing on the most effective business area," says Nishigaki. "And that's the Internet." On Sept. 28, he unveiled long-awaited plans to overhaul NEC's corporate structure -- a task that he has devoted himself to for the past half-year. By next April, according to Nishigaki, the 150,000-employee NEC will be transformed into a company offering Internet-related services in the areas of mobile communications, digital broadcasting, and home computing. It will boost investment in BIGLOBE in hopes of creating a multifunction operation, with both corporate and consumer e-commerce that can rival Fujitsu Ltd.'s Nifty ISP, currently Japan's largest. BIGLOBE now has 2.7 million subscribers, but NEC aims to cater to 10 million business and consumer users by 2002. To globalize its operation, it has just inked a deal to connect its ISP to Intel Corp.'s Online Services. By mid-2000, the two companies plan to offer a large-scale e-commerce platform for corporations in Japan. In the current business year, ending next March, Nishigaki predicts that Internet-related services will generate 20%, or $10.5 billion, of expected sales. By March, 2002, Internet-related sales are expected to total $30 billion. MAJOR SHIFT. It took a crisis to wake NEC up to the Net's potential. The company posted its worst-ever loss in fiscal 1998, ended last March, totaling some $1.3 billion, because of the Japanese recession and intense global competition. The board quickly drew up an initial reorganization plan that called for cutting 15,000 jobs over the next three years. And it passed over senior execs high on NEC's succession list in favor of Nishigaki as new president. Previously, most NEC leaders have come from the elite telecom division, but the appointment of Nishigaki, who oversaw computer operations and helped build up the company's systems-integration business, was the first indication of a major policy shift. Nishigaki has already spun off or integrated six businesses and in the next few months will break up NEC Home Electronics, a maker of CD-ROM drives and other devices that has been hard-hit by Taiwaneses and Korean competition. On the management side, he also plans to reduce by 50% NEC's board of directors, who now number 37. "This way, we can speed up decision-making and concentrate on management strategy and the overseeing of the overall direction of our business," says Nishigaki. For now, Packard Bell NEC's operations will remain unaffected by the shake-up in Tokyo, even though Japanese investors are clearly concerned about NEC's $1.6 billion investment in the troubled U.S. subsidiary. "If the PC business doesn't pick up, NEC will have to think of some concrete steps," says Yoshiharu Izumi, industry analyst at Warburg Dillon Read. "So far, though, it has made progress with its restructuring program." Change won't be cheap. Nishigaki revealed that NEC would assume a special loss of $950 million in the current year to cover the costs of restructuring. The company will also consider securitizing its landmark 43-story headquarters to raise funds. The NEC Super Tower, as it is known, was built at the peak of the Japanese economic bubble in 1990, when excesses abounded, for an astounding $570 million. As Nishigaki sees it, NEC doesn't need a lot of brick and mortar in the Internet age. By Irene M. Kunii in Tokyo
EDITED BY DOUGLAS HARBRECHT
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