NEC's Chairman Tadahiro Sekimoto resigned yesterday in connection with a scandal that has enveloped the Japanese computer and communications equipment vendor.
In a statement, 71 year old Sekimoto said he felt regret about the scandal in which two NEC subsidiaries overbilled Japan's Defense Agency and in turn offered jobs and favors to former agency officials. He said for moral reasons he decided to leave his post at "my beloved NEC and NEC Group."
At a conference Sekimoto stressed that he did not take responsibility for the scandal and was resigning because it is considered the right thing to do in Japanese society.
Though Sekimoto appears to have had no direct connection with the scandal, Japanese officials traditionally resign to take responsibility for troubles at their companies.
Sekimoto, who joined the company in 1948 as a researcher, will become an advisor to NEC and a member of the company's board. Sixty-four year old Hisashi Kaneko will remain president of NEC. The position of chairman will stay open.
The resignation marks a major milestone in NEC's history. Chairman since June 1994 and before that NEC's president for 14 years, the cantankerous Sekimoto has been a fixture on Japan's business scene. Though the position of chairman in many Japanese companies is more titular than functional, Sekimoto has maintained a strong influence over the company's course in recent years.
So strong is the NEC patriarch that in an interview company President Kaneko once joked that he exercises his own urge "to do something" by building wooden furniture and playing handyman at home.
The open question now is whether NEC will change following Sekimoto's decision.
"I'd love to see some aggressive restructuring," said one analyst who asked not to be named "Maybe this gives NEC an excuse to rethink all their product lines."
Sekimoto was widely viewed both inside and outside NEC as overstaying his usefulness. Many of the missteps the company has made in recent years were at the direction of the stubborn septuagenarian.
The more than US$1.5 billion NEC has sunk into ailing U.S. PC vendor Packard Bell grew from the relationship between Sekimoto and Jean-Marie Descarpentries, chairman of French computer maker Groupe Bull.
Bull, a recipient of NEC investment, was a minority owner of Packard Bell. Descarpentries introduced the U.S. company to Sekimoto who encouraged his officials to dish out the first $170 million [M] to Packard Bell in 1995. Though many of his lieutenants opposed the Packard Bell marriage, they continued supporting the company at Sekimoto's behest, they said in interviews.
Sekimoto's reverence for the past has also hurt NEC, analysts said. Long after Japanese PC vendors switched to IBM-compatible machines earlier this decade, NEC continued to exclusively sell its proprietary PC-9800 systems in Japan. Only this year did NEC make the switch to industry standard machines based on Intel 's PC 98 specification.
At least one analyst said he hopes NEC uses Sekimoto's resignation as an opportunity for the company to decide whether it should sell off Packard Bell-NEC, as the company has been called since NEC merged most of its non-Japanese PC business with Packard Bell last year.
"Here is a chance for NEC to actually see if Packard Bell is going to perform or not," said Peter Wolff, an analyst at ING Barings Securities (Japan) Ltd. "If this new guy can't turn it around, it's a risk for the whole company," he added, referring to Alain Couder, who was tapped to be PB-NEC's CEO in July. See "Packard Bell NEC Names New CEO," July 1].
NEC also announced today that for the fiscal half year ended Sept. 30, 1998 it had a consolidated net loss of 19.7 billion [B] yen (US$168 million [M]). Its revenues for the period fell 11 percent from the same period last year while consolidated operating income dropped to 15.2 billion [B] yen, an 86 percent drop compared the same period last year.
For the full year, which ends March 31, 1999, NEC said it expects revenues to stay at a level unchanged year-on-year at about 4.9 trillion yen. The company expects a consolidated net loss of 35 billion yen, its first full-year net loss since fiscal 1993.
NEC, based in Tokyo, is at +81-3-3791-6511 or at http://www.nec.co.jp/.