NEC Corporation (NEC) experienced flat growth in revenues in FY 2008, was broadly in line with our expectations. This was due to weak performance across all business segments, except the IT/Network Solution business. Operating income and margin outperformed our expectations, driven by better than expected performance from the IT/Network Solutions business. Adjusted2 net income was above our expectation mainly due to better than expected operating income and lower than expected income taxes. Going forward, we expect revenue growth to gradually improve, considering various contracts awarded to the company in its key business, IT/Network Solutions. The revenue growth will be further supported by constant efforts by the company to consolidate its Mobile/Personal Solutions and Electron devices segments through the introduction of new and innovative products. However, we remain concerned regarding demand for the company’s products due to the ongoing downturn in the US and its repercussions on developed economies such as Japan, the largest contributor to revenues (as of FY 2008). Therefore we have a mixed outlook for the common stock.

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