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| Q1: | Please give an overview of business results for the year ended March 2008 |
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| A1: | The year ended March 2008 marked the 90th anniversary of Nikon, and was a year in which we concentrated on realizing our management vision, "Our Aspiration: Meeting needs. Exceeding expectations." Specific initiatives were the core measures of the medium term management plan: (1) strengthen the competitiveness of core businesses by securing superiority in state-of-the-art technologies and developing high-value-added products; (2) boost cost-competitiveness through manufacturing innovations; and (3) create new businesses, beginning with the glass business. We also made further progress with establishing internal controls, and based on the Nikon Corporate Social Responsibility Charter formulated in April 2007, conducted highly transparent management emphasizing CSR. As a result, we reported record-high levels for net sales, as well as for operating income, ordinary income and net income. Nikon's financial position was also strengthened by a positive net cash position (cash and cash equivalents less interest-bearing debt) at the end of the year ended March 2008, reversing the negative position of the previous fiscal year. |
| Q2: | Could you provide an overview by business segment? |
| A2: | We would like to describe an overview of developments in our three main internal companies. In IC steppers and scanners, the Precision Equipment Company began full-scale shipments of the latest cutting-edge model of ArF immersion scanner in Japan and overseas, and introduced the i-line stepper with significantly improved precision and throughput. Unit sales of LCD steppers and scanners were down considerably from the year ended March 2007 as panel display manufacturers scaled back investment in reaction to the year ended March 2007. However, with the positive response to the leading-edge models of IC scanners the Precision Equipment Company posted sales on par with the year ended March 2007, and managed to hold profit decline to a minimum. The Imaging Company strengthened its product lineup with the introduction of the D3 and D300 flagship models, and the entry-level D60 model of digital SLR (single-lens reflex) cameras, successfully opening new markets. Sales of existing models were also positive, particularly the entry-level D40 model, allowing Nikon to capture the top market share for unit sales of digital SLR cameras in Japan for 2007. We also made a strong market introduction for new models of compact digital cameras, recording increases in sales. Camera sales exceeded market expansion as a result, and the Imaging Company posted record levels of sales and operating income. The Instruments Company achieved growth in biological microscopes and measuring instruments, but sales of industrial instruments such as semiconductor inspection equipment and industrial microscopes were sluggish as companies restrained capital investments. Segment sales were on par with the year ended March 2007, but earnings declined. |
| Q3: | Could you provide details on the two reforms Nikon is currently pursuing? |
| A3: | Nikon had in the past posted a net loss for two consecutive years. This was due to an excessive focus on product performance that led to an inability to develop products in a timely manner that matched the speed of change in the business environment, along with a lack of cost consciousness. We followed two main avenues for improvement.  Rapid response to changes in the business climateThe first is a rapid response to changes in the business climate. The business environment affecting Nikon's operations continues to change considerably with device shrinkage of semiconductors and the increasing size of LCD panels, expansion of the digital camera market and ever fiercer competition, as well as advancements in the bioscience market. One of the measures adopted to address these developments is the "weekly report system," under which all supervisory and management employees file regular reports to management, allowing for simultaneous collection of information from all points. We sort through this information and analyze it from various angles, quickly giving us a grasp of market needs. Top management will also issue specific directives to the person making the report as necessary. This system enhances the speed of executive decision-making, and allows us to develop and introduce products in response to market changes. Each of the internal companies—Precision Equipment, Imaging, and Instruments—conducts business at its own discretion. When they encounter important aspects that require a company-wide resolution, however, a Management Reform Committee coordinates the overall response, and issues directives as necessary. Collaboration between marketing and design in product developmentThe other main reform was in our approach to design. Products were formerly created under the direction of the design department, but now the marketing department presents ideas to the designer based on market needs, and the design department responds with practical ideas utilizing new and existing technology. Such "back-and-forth" between the marketing and design allows us to determine what kind of products consumers really want, what technology is to be used in creating them, and how they are presented and sold. As part of this process, we try to utilize modularized and simplified designs, as well as shared components. Simplified design is a means of providing the necessary features at the lowest cost. It includes conducting discussions that transcend the internal and external confines of the company, averting potential problems and improve reliability by utilizing as simple a structure as possible, and eliminating the adjustment and other processes. We also feel that stressing front-loading (enhancing product quality from the initial stages) leaves ample room for further cost reductions. |
| Q4: | Despite all the reforms, are there some things that will remain constant? |
| A4: | There are things that Nikon will never change. The most fundamental of these is reliability, and at the same time the integrity not to betray the expectations of customers with regard to technology. For example, in our long tradition of camera creation we have carefully maintained those ineffable sensations that do not appear in product specifications. We have preserved those traditions that allow us to be recognized as a camera maker of distinction, such as the feel of the camera in the hands, its texture, and the sound of the shutter. We believe it is important to respect the idea that customers have certain expectations when they purchase a Nikon, and that we meet them. We will also maintain the world-class level of Nikon's core optical and precision technologies. A flexible response to change while holding steady those things that must not be changed—that is the Nikon style. |
| Q5: | What are the competitive advantages of Nikon's technologies? |
| A5: | The source of Nikon's technological capability is the Core Technology Center, which develops advanced elemental technology and conducts basic research. Optical and precision technologies have up to now mainly been used for IC steppers and scanners, but it is increasingly possible to employ these for digital cameras, microscopes and other applications. The fruits of such research are mediated by the Core Technology Center, allowing them to be employed across each internal company. Image processing in particular is a key technology for a wide range of products, which along with optical technology acquired over Nikon's long tradition helps to enhance our leading position. |
| Q6: | What is your basic stance toward CSR? |
| A6: | Nikon made "CSR-oriented management" one of its priority measures in the medium term management plan announced in March 2006, and developed a variety of measures based on it. We consider our business activities themselves to be the essence of CSR, and have adopted as the basic principle of our CSR philosophy "Earnestly create good products to benefit society and customers, foster a workplace that allows the diverse people who work there to have a sense of motivation and purpose, and give the results back to shareholders." One manifestation of this ideal is that should a production line stop due to some sort of disaster, we are willing to take whatever steps possible, and have conducted regular drills and training, so as to minimize as much as possible any interruption to the supply of products. We seek to be worthy of the trust placed in us by customers, society and all stakeholders, and will continue to conduct business with integrity and soundness, and create value that exceeds expectations. Adhering to this conviction, we will continue to face new challenges. Nikon formulated the "Nikon Basic Environmental Management Policy" in 1992, and under the guidance of the Environmental Committee has pursued environmental conservation measures based on the principles of recycling and coexistence with nature. In October 2007, we established a Global Warming Prevention Project Team to directly address issues related to global warming, setting specific numerical targets for energy conservation, reductions in CO2 emissions and other environmental indices, and actively implementing these throughout the Group. |
| Q7: | What are your policies for shareholder returns, and dividend plan for the year ended March 2008? |
| A7: | Nikon has increased its shareholder returns in recent years in response to the strengthening of its financial structure. More specifically, our present goal is to provide a total return ratio of 25% or more. To achieve this, we make proactive investments for future growth, while also paying a stable dividend that increasingly reflects consolidated performance. At the same time, we acquire treasury stock to improve capital efficiency and allow for the conduct of a flexible capital policy. In accordance with a decision by the meeting of the Board of Directors on May 12, 2008, we acquired 3,713 thousand shares of stock with a total value of 11,997 million yen. Year-end dividends for the year ended March 2008 were ¥13.50 per share, which combined with the interim dividend of ¥11.50 per share comprises a full-year dividend of ¥25 per share. This represents an increase of ¥7 per share over the previous year-end. |
| Q8: | What are your forecasts and planned initiatives for the year ending March 2009? |
| A8: | We expect conditions for IC steppers and scanners to be difficult during the year ending March 2009 due to restraints on capital investment, but anticipate a recovery for LCD steppers and scanners due to growth in the market for LCD televisions. We expect the digital camera market to continue to expand, but remained concerned over economic slowdown and lagging consumption due to the impact of the subprime loan crisis in the United States and the earthquake in Sichuan, China, and so anticipate sluggish market growth and increasingly fierce competition. Business conditions are becoming harsher in the year ending March 2009, but we are seeking to realize further increases in revenue and earnings through greater product competitiveness and cost reductions. Nikon will retain a sense of alertness in its business and organizational operations, seeking quick and accurate responses to the drastically changing business environment, as it works to establish a "Strong Nikon" able to produce sustainable growth. Specifically, we will move forward with the principles of the medium term management plan:
In the three years through the year ending March 2011, we plan to carry out capital investments totaling 160 billion yen and R&D spending totaling 220 billion yen to produce next-generation products, develop core and basic technologies, and improve productivity. Thank you for your continued support of Nikon. |
<This article, based on a previous interview, was produced on July 18, 2008.>
