Increase in Revenues and Earnings in our 30th Year of Operation
In fiscal 2006, ended March 31, 2006, business conditions in Japan and overseas were characterized by a soft recovery. Buoyed by steady growth in the United States and Asia, the global economy experienced gradual improvement. On the domestic front, an increase in capital investment fueled by growth in corporate earnings contributed to overall positive conditions. In partnership with the electronics industry (one of Zuken’s primary customer bases), we strove to deliver total solutions, from electronics monozukuri infrastructure to management support, which enhance the efficiency of the overall design and production process. Under these conditions, consolidated net sales for the fiscal year under review were ¥16,799 million, an increase of 6.5% compared with the previous fiscal year. On the earnings front, operating income climbed 1.6% year on year to ¥1,951 million, marking a year of increased revenues and earnings. Accounting for a gain on the sale of investment securities, net income rose 12.2% to ¥2,452 million.
Top Business Topics
On April 1, 2005, the Company undertook a substantial reorganization. Historically, Zuken had engaged in business activities across four clearly defined solution areas: electronic design automation (EDA), product lifecycle management (PLM), 3D solutions, and System-on-Chip (SoC) solutions. In recent years, however, industry needs have continued to shift from sub-optimization to total optimization. Most notably, demands have increased for the integration of EDA and PLM solutions. Accordingly, from fiscal 2006, the sales and R&D functions of both EDA and PLM Solutions businesses have been centralized to form the Company’s Sales Head Office and R&D Center. Driven by an emphasis on synergy, we are endeavoring to establish and develop a structure capable of advancing more comprehensive development and proposal solutions. In the context of the Company’s product development capabilities, Zuken announced its new CR-5000 Lightning high-speed design solution in June 2005. Standing at the forefront of technological innovation, the electronics industry is placing increased emphasis on high-speed design environments, the key to appealing products and competitive advantage. CR-5000 Lightning was created to meet this need, through the integration of technologies fostered separately in Japan, the United Kingdom and Germany.
EDA systems, a mainstay business since the Company’s founding, are an integral component of design and manufacturing infrastructure. CR-5000 Lightning provides a powerful platform in establishing infrastructure. Looking ahead, Zuken will pursue continuous technology enhancements to maintain CR-5000’s superior functionality and quality on a global scale. Turning to the Company’s overseas activities, Zuken was prominent throughout the fiscal year under review. In Asia, we established a local company in Taiwan, while in Europe we acquired CIM-TEAM GmbH, a Germany-based electrical/electronic computer-aided engineering software design company with significant expertise in wire harness design solutions.
Top Software Packaging Business Revisited
Zuken’s business over the past four to five years has remained strong, but by no means are we satisfied with results or prepared to rest on our laurels. A true measure of satisfaction is the Company’s ability to fully and continuously address the electronics industry’s infrastructure needs of a growing number of customers both in Japan and overseas, and to provide solutions that our competitors are unable to replicate. In reality, however, we believe there are a number of issues that have yet to be addressed. In short, there is much more scope for growth. Looking ahead, I believe the Company is yet to take full advantage of the operating environment that offers significant business opportunities. A problem that needs to be addressed by the industry is the wide range of individual proposals that require common use and standardization. To address this problem, I believe a change of business model for software packaging is essential and have put forward the need for a new package business approach.
This new package business should not be equated with conventional packaged software. I refer more to an industrybased total solutions package that encompasses complete software systems including CAD technology, support and management consulting. Our goal is to provide our customers with packages that embrace optimal monozukuri solutions for use in automobiles, mobile phones and digital cameras. This is indeed a business that we have continued to promote in recent years. Historically, we have provided customized products and services, a method that could be characterized as “spot” business. In the future, Zuken must adopt a more strategic “line” and “surface” approach. Getting a head start on its rivals, I am confident the Company is well positioned to pursue this unique business model.
Top Zuken’s 30th Anniversary
December 2006 marks Zuken’s 30th anniversary. Founded in 1976 with just five employees, Zuken was the first Japanese company to successfully develop a CAD/CAM system for electronic equipment use. In the Company’s formative years, Zuken leveraged its expertise in analog design functions—a key component in audio equipment development— to meet the needs of its customers and steadily expanded sales. Entering the 1980s, however, the Company confronted its first major hurdle with the market entry of competing U.S. systems based on a digital format. Faced with more than 12 months’ work to successfully develop a fully competitive alternative, Zuken worked tirelessly to analyze this new technology. As a result of these efforts, the Company developed value-added products based on the digital format. In addressing the needs of engineers in Japan and enhancing operability, Zuken embarked on a path of fully fledged growth. Over time, as electronic products have become more sophisticated, Zuken’s role has gradually evolved. From a supplier of systems, to partnering with its customers, and now as a solutions provider that addresses a broad spectrum of issues, from circuit design through product commercialization. Focusing on solutions as an engineering consulting company has provided the backbone for Zuken as it is positioned today.
In more recent times, manufacturers from around the globe have increased their focus on electronics. From industrial growth founded on automobile machinery design, business has truly entered the electronics era. Following this path, 6 Zuken Inc. the expectations placed on the Company have grown in relative proportion, and while proud of our achievements over the past 30 years, Zuken must look to the challenges ahead with the knowledge that there remains a great deal to do, rather than dwelling on its past.
Top Enhancing Our Role as a Trusted Partner
BAs a pioneer in its field, there has been no other company on which Zuken could model itself upon. Since its foundation, the Company has relied on in-house solutions and innovation as the means to overcome problems. At the time of its public listing and industry classification, Zuken placed an emphasis on electrical machinery as opposed to services. This emphasis was founded on the unwavering desire to become a long-term trusted partner of the global electronics industry. Through our efforts over the past 30 years, manifested in the cutting-edge CR-5000 Lightning EDA solution, Zuken has indeed become an accepted and trusted business partner over the long term, attracting high praise from the world’s leading electronics manufacturers. By leveraging the know-how and technical expertise accumulated from business activities in many markets including consumer sectors for companies specializing in the design of digital consumer electronics, mobile phones and game consoles, Zuken will continue to pursue horizontal development across a broad range of industries. This will include focusing on the automotive industry and securing tangible growth on the back of new business opportunities. Going forward, Zuken will strengthen its technical and consulting prowess and promote different solutions businesses to enhance efficiencies across the entire manufacturing process, from design through production. As an integral partner to the global electronics industry, Zuken will actively pursue investment in key areas as a part of its continued unwavering efforts.
To increase the value of the Zuken Group, the Company will also reinforce corporate governance and bolster its organizational structure through highly capable human resources. Zuken recognizes the increased importance of its management philosophy based on the principles of soundness, vigor and dignity. Distinguished from the IT and financial sectors, Zuken has always focused on its mainstay businesses and worked in close partnership with customers. In the future, we will continue along the same path, in the belief that our bond with customers provides the lifeblood and energy for future growth and mutual prosperity.
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Makoto Kaneko
President and Representative Director
For more information, please download the Zuken 2006 Annual Report
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