NEC to invest $1.2 billion in Cloud Computing

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NEC Corp., one of the world’s leading providers of Internet, broadband network and enterprise business solutions, has announced that it will be spending 100 billion yen (($1.2 billion) between now and March 2013, mainly in its cloud computing and overseas information technology service operations. The Japanese IT giant seeks new sources of revenue amid sluggish growth in its domestic market.

Senior Vice President Takuji Tomiyama feels cloud computing and overseas businesses will drive the company’s growth.

IT industry players world-wide, such as IBM Corp. and Fujitsu Ltd., are pinning their hopes on the expected widespread adoption of cloud computing—internet-based software and other resources that devices can access on demand—to drive their earnings growth in the coming years.

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The company is working on setting up cloud computing-oriented data centers in five main regions—China; Asia Pacific; Europe, the Middle East and Africa; North America; Japan—by the end of the next fiscal year.

Faced with low growth prospects in Japan, NEC, whose overseas operations accounted for only 16% of its total group revenue in the last fiscal year, aims to raise that percentage to 25% in the fiscal year through March 2013.

The company also said it expects revenue from its overseas IT service operations to rise 100 billion yen by March 2013 compared with the last fiscal year. The company expects revenue from its IT service business to rise to 1.1 trillion yen in the fiscal year through March 2013, with overseas operations accounting for about 15%.

In the last fiscal year, the company generated 866.3 billion yen in IT service revenue, with less than 10% coming from its overseas operations.
To achieve this rate of growth, the company looks to localize its operations through more rigorous local marketing, better service delivery systems and stonger local alliances.

Of the five regions outlined by the company, China and Asia Pacific will account for the largest share of its overseas growth in IT services, Mr. Tomiyama said.

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