The total of interest-bearing liabilities in the third quarter of the fiscal year ending March 2017 rose to some 600 billion yen from the about 400 billion yen recorded in the previous fiscal year. Does this mean that the expenses related to the borrowing interest rate are estimated to be 1.5 times higher in the fourth quarter onward?
Of some 350 billion yen required for the acquisition of Dell Services, about 140 billion yen came from our cash reserves and the remaining some 210 billion yen was from borrowing. This 210 billion yen is the reason for the rise in interest-bearing liabilities.
We are currently discussing the methods of how to turn short-term loans payable into long-term loans payable. However, since the financing environment has become significantly better than it used to be for the borrowing of currently accumulated interest-bearing liabilities, we don’t expect that the expenses related to borrowing interest rate will necessarily become high as the amount of liabilities becomes large. At the present time, we are optimistic that we will be able to borrow at advantageous rates, but we still need to carefully control our borrowing given the uncertain financial market situation.
Let me clarify one thing about the transfer of Dell Services’ IT systems: Is it possible to integrate systems into existing systems, or would you need to newly set up separate systems for the integration?
Whether we can integrate Dell Services’ system into NTT DATA, Inc.’s existing systems, or vice versa, varies from system to system.
Mostly, we are using the 450 systems that have already been acquired by and transferred to us on an as-is basis. Of the remaining 250 systems for which we have concluded the TSA for the period of 18 months after the closing on November 2016, some systems cannot be integrated with the systems of NTT DATA, Inc. in a short period. Basically, we are going to use the current systems of NTT DATA Inc. However, there are indeed some cases in which it is structurally impossible to substitute the systems of NTT DATA Inc. Personnel systems fall under such a case because NTT DATA Inc. and Dell Services have totally different organizational structures.
On the other hand, other systems, such as financial and accounting systems, would work more effectively if integrated into the systems of NTT DATA Inc. We will certainly integrate that type of system.
As for the projected amount of extraordinary losses of the entire fiscal year ending March 2017, we calculated it after sorting out the method of system transfer as I have just mentioned.
Dell Services has been promoting offshore development. With the Trump administration coming in, are there any matters that require particular attention?
Not only Dell Services but also other companies in the U.S. are now in the same situation. With the U.S. reigning as the largest IT market, we will remain committed to our global strategies with a focus on North America. We will continuously work to improve our local presence in North America through the “Game-Changing Approach,” or further development of remarketing, by utilizing every opportunity that may arise from changes in governmental policies.
The change of the U.S. administration has not yet affected NTT DATA Group’s business much. However, we are paying close attention to the following three points:
The first point is whether there will be any move to ban the entry of people of certain nationalities or any changes in visa issuance requirements because these changes could lead to imposing limitations on people’s free movement and hampering companies’ efforts to secure human resources. In addition, we also need to monitor any move to accelerate the trend toward protectionism, which might put restrictions on our offshore outsourcing. In the North American market, we have established a global delivery structure centered on India. About half of the staff of our North American group companies are delivery personnel at our offshore bases including India. In addition, some of our U.S. staff are on short-term visas. Given these circumstances, we will closely watch future developments.
The second point is the impact of foreign exchange. A weaker dollar would only have a slight effect on our operating income, but it would severely affect our new orders received and net sales. Furthermore, a depreciation of the dollar might also hinder the business performance of our group’s clients, which could indirectly and adversely affect us because they might refrain from making IT investments. We will keep a close eye on this point, too.
The last point, in contrast to the previous two points, which is likely to turn into business opportunities. This is the potential IT investments in the healthcare area due to possible system changes accompanying the large-scale tax cut, public works investment, and the review of Obamacare planned by the Trump administration. Some economy watchers are estimating that IT investment will indeed grow, so we need to monitor the situation as not to lose any business opportunities.