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.