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Hitachi Announces Net-Focused Business Plan

Hitachi has announced that it intends to restructure its operations to focus on Internet-related businesses.

Hitachi joins fellow electrical/electronics equipment manufacturers Fujitsu and NEC in declaring a corporate Net focus.

The firm described the "i.e. [information electronics] Hitachi Plan," announced on Friday, as "a medium-term business plan aimed at using the company's wealth of knowledge and IT as a basis for utilizing the Internet to become a 'best solutions partner.'"

The plan calls for allocating funds for acquisitions, alliances, and equity stakes in information systems-related companies; expanding Internet-based solutions businesses for both corporate and individual customers; and prioritizing management resources and investing in internal IT infrastructure to achieve a return-on-equity of 8 percent.

"We understand the value of being a manufacturer," said Hitachi president Etsuhiko Shoyama, "but the era when the market values you for simply making good products is over."

"Our plan for returning to a high level of profitability is to carefully listen to our clients' needs [and] thereby transform Hitachi from a manufacturer who makes good products into a corporation that provides good solutions."

"The Internet-based provision of diversified solutions will be a core business," he added. The i.e. Hitachi Plan has been under development since spring, when Shoyama took over as president. It covers the period through fiscal year (FY) 2002 (ending March 31, 2003).

At an early stage of the plan's implementation, Hitachi will allocate some 300 billion yen (US$2.8 billion) for strategic acquisitions, equity participations, and alliances.

Hitachi said that "80 percent or more of this total will go to information-related business sectors," adding that "some 60 such items are currently being studied."

Among other strategic tie-ups, Hitachi's Software Engineering subsidiary last week announced an agreement with Microsoft Japan to jointly offer solution services for Internet-related systems, including e-commerce and knowledge management.

Hitachi also said it will invest 50 billion yen (US$470 million) to establish a new Internet services company early next year. Unlike competitors Fujitsu and NEC, which operate Japan's two largest Internet services providers (@nifty and Biglobe, respectively), Hitachi has only a minimal business-to-consumer Internet presence.

Hitachi will seek to beef up both its business-to-consumer and business-to-business offerings, and is targeting FY 2003 Internet services-related annual sales of 140 billion yen (US$1.3 billion) -- 100 billion yen (US$940 million) from the business-to-business sector and 40 billion yen (US$375 million) from the business-to-consumer sector.

Hitachi said it will also invest some 200 billion yen (US$1.9 billion) over the next four years in upgrading its own information technology infrastructure, about twice its level of IT-related investment over the past four years. Hitachi top management will also evaluate the group's existing businesses to identify poor-selling products to prune, in preparation for moving out of unprofitable business sectors.