What impact does changing the depreciation method have on income? Provide an estimate.
Changing the depreciation method for property, plant, and equipment decreased operating income by about 800 million yen in the First Quarter of the Fiscal Year ending March 31, 2017. However, overall, we expect to break even for the full Fiscal Year ending March 31, 2017, as stated in the guidance issued at the beginning of this fiscal year. This will be due to the effect of changing the number of years of depreciation along with changing the depreciation method from fixed-rate to straight-line. An increase of several billion yen in operating income is currently expected for the Fiscal Years ending March 31, 2018 and 2019.
Reportedly, it is taking time to acquire Dell Services due to a delay in the paperwork. Did any serious problems or anything unexpected happen? Additionally, acquisition related costs of about one billion yen were charged in the First Quarter of the Fiscal Year ending March 31, 2017. Do I understand correctly that there will be no additional acquisition related costs in the Second Quarter?
The acquisition of Dell Services is not simply one takeover. It involves carving out each of Dell’s affiliations worldwide in consultation with Dell, which is currently ongoing almost as planned. It does not diverge from the plan established when we decided on the acquisition. The acquisition related costs are about one billion yen as of the First Quarter of the Fiscal Year ending March 31, 2017. They will continue to rise in the Second Quarter and are expected to rise after the closing of the acquisition.
The acquisition costs for one billion yen as of the First Quarter of the Fiscal Year ending March 31, 2017 are not insignificant. Do you expect the costs to fall in the Second Quarter and onward, or do you expect them to increase at close at the same rate as in the First Quarter?
We are preparing for a smooth continuation of the business before and after the acquisition. This involves a wide range of tasks. That is why we do not think that the acquisition related costs will fall. We are not sure about the total acquisition related costs at this time, but will need to complete a wide variety of tasks for some time.
Does the financial forecast for the full Fiscal Year ending March 31, 2017 include the acquisition related costs?
The financial forecast for the full Fiscal Year ending March 31, 2017, which was issued in May, does not include the impact of the Dell Services acquisition or the acquisition related costs. Thus, these acquisition related costs have become one reason for the decrease in income for the First Quarter. We will update the financial forecast for the full Fiscal Year ending March 31, 2017 after we close the acquisition of Dell Services, around autumn this year.
Page 17 and later of the material on the financial results explains your company’s initiatives, for example, the launch of the BeSTAcloud, a core banking system for Aozora Bank, as well as an alliance with DENSO CORPORATION to focus on developing in-car software. Do any of these initiatives have a significant impact on the number of new orders received and sales?
We state numerical targets in each press release. For example, when we announced the launch of ANYSENSE, an IoT platform based on water and sewerage, we stated that we aim for 10 billion yen of annual sales from our overall IoT business in the future. However, it is quite difficult to show numeral targets in terms of how much the new service will contribute to sales. The ANYSENSE IoT platform, the alliance with DENSO CORPORATION, and the alliance with Netyear Group Corporation in the Omnichannel area are all examples of the initiatives stipulated in our medium-term Management strategies, "Game-changing Approach " and "Breakthrough Technology." These examples are important topics for us.
You explained the alliance with DENSO CORPORATION with a focus on developing in-car software. Is this the first capital alliance for your company?
Yes, it is the first capital alliance for us. Our company and the Panasonic Group have invested in NTT DATA MSE CORPORATION, one of our subsidiaries. It operates as an IT partner of the Panasonic Group. NTT DATA MSE CORPORATION has many engineers specialized in embedded software, and DENSO CORPORATION took an interest in them. We created the capital alliance after DENSO CORPORATION acquired NTT DATA MSE CORPORATION shares, or 15 percent of its stake. Even after the sale of the shares, our company is the largest shareholder with a 45 percent stake. The three companies, our company, the Panasonic Group, and DENSO CORPORATION, will continue to our cooperation to expand the business in embedded software, which is has growing, high demand in the car industry.