CLOUD

TOKYO, JAPAN -- Consolidated net sales for the three month period ended December 31, 2001 decreased by Yen 117.9 billion, or 9.5%, to Yen 1,125.0 billion, over net sales for the previous third quarter ended December 31, 2000. NEC recorded a loss before income taxes of Yen 253.0 billion, a decrease of Yen 258.5 billion compared to the corresponding period of the previous year in which NEC posted an income before income taxes of Yen 5.4 billion. These results were the outcome of a continued slowdown in the semiconductor market for memory and system LSI (Large Scale Integrated Circuit), together with the accelerated worsening of both the network infrastructure market and small Liquid Crystal Display (LCD) market for mobile handsets. Despite the expansion of its software and service businesses including systems integration (SI) service business, sales of NEC Solutions were largely unchanged from the corresponding period of the previous year due to a large decline in demand for personal computers (PC). Sales in NEC Networks showed a decrease compared with the corresponding period of the previous year, due to weakening of demand for network infrastructure in Japan and overseas countries except the United States in the second half of this fiscal year. Sale of NEC Electron Devices showed a dramatic decrease reflecting a sharp decline in demand for mobile handsets and communications infrastructure equipment, coupled with the fall in memory unit price. With respect to segment profit, NEC Solutions recorded a profit increase due to a sales increase and an improved profitability for its software and service businesses offsetting a negative impact caused by a decrease in shipments of PCs. NEC Networks saw a large profit decrease resulting from a decline in demand for fiber optic network systems, poor business performance at its Brazil operations and the tightening of investment controls by domestic telecommunications carriers. As for NEC Electron Devices, the slowdown in demand for mobile handsets and communication infrastructure equipment as well as the continued fall in memory and LCD prices resulted in a segment loss. NEC recorded a loss before income taxes due to an overall operating loss and restructuring charges especially for its semiconductor business. Further, reflecting equity in losses of affiliated companies, NEC's net loss was Yen 155.0 billion, a decrease of Yen 163.4 billion compared with the corresponding period of the previous year in which NEC recorded a net income of Yen 8.3 billion.