Operating income of the Test and Measurement business increased during the fourth quarter. What were the reasons for this?

In addition to favorable sales of testers for 3.5-generation (3.5G) development, we received large-scale orders for handheld and other highly profitable measuring instruments from major communications companies in the United States and for measuring instruments for testing GSM handsets from handset manufacturers in China and Taiwan.

Isn't your fiscal 2006 outlook for the Test and Measurement Business somewhat conservative?

We anticipate 5 percent growth in the market for measuring instruments in fiscal 2006, and have set our net sales forecast 5 percent above the fiscal 2005 level as well. We expect to maintain an operating margin of 11 percent, the same as in fiscal 2005.

Two factors lie behind these figures. First, we expect startup costs in connection with many new products scheduled for launch during fiscal 2006. Second, as our efforts progress in the service assurance business related to the next-generation network (NGN), we plan to undertake forward-looking investment in development.

What were net sales at Anritsu A/S in fiscal 2005 and what is the outlook for fiscal 2006?

Net sales for fiscal 2005 were 4.9 billion yen (this represents a half-year of sales since it was included in the scope of consolidation from October 2005). Of the businesses acquired, the optical measuring instruments business is scheduled to be fully integrated with our Japanese division within the first half of fiscal 2006. Consequently, it will be difficult to discuss the businesses we have acquired separately in the future. However, calculated on a pre-integration basis, we forecast sales of 10.0 billion yen in fiscal 2006.

What about its results and forecast for operating income?

Anritsu A/S had an operating loss of 1.3 billion yen in fiscal 2005. We forecast an operating loss of 1.5 billion yen in fiscal 2006, including 0.6 billion yen for goodwill, to be amortized equally over nine years. Of the total 1.5 billion yen loss, 1.2 billion yen is forecast for the first half of the fiscal year and the remaining 0.3 billion yen for the latter half. The first-half forecast includes a negative 0.3 billion adjustment to account for the difference between book and market value, which must be amortized within one year under business combination accounting. In the second half, we expect Anritsu A/S to break even, excluding the 0.3 billion yen regular amortization of goodwill.

What are the results and outlook for R&D expenses?

The former NetTest A/S had R&D expenses of 1.2 billion yen for the second half of fiscal 2005. For fiscal 2006, we forecast full-year R&D expenses of 2.2 billion yen.

In the United States, the access and metro network markets are strong. What effect has this had on Anritsu's business results?

We expect effects to be positive, of course, but we have not yet received a substantial order.

How is the 3G market in China?

Our TD-SCDMA^*1 signaling testers have attracted considerable interest from China, and we are undertaking development in collaboration with government institutions. Of course, we also offer advanced technological capabilities in W-CDMA and CDMA2000, and aim to establish Anritsu as the 3G brand of choice.

What are you doing in areas such as 40 Gbps^*2 and IMS^*3?

As traffic on core networks mounts, moves to upgrade to 40 Gbps are beginning to take shape. In fiscal 2006, Anritsu also plans to launch new products in this field. Because IMS is software, it is doubtful that we will offer measuring instruments for this software itself. However, we plan to provide performance testing solutions for the point where network is connected to this software platform.

What R&D does Anritsu plan to undertake during fiscal 2006?

As mentioned above, NGN is a key part of our growth strategy. In the future, IP and high-speed digital technologies will become increasingly important. In the service assurance business, we intend to expand our business realm beyond current monitoring systems and position ourselves as a service quality management (SQM) solutions provider responsible for managing subscriber satisfaction levels.

Which have greater growth potential, optical or IP measuring instruments?

It depends on how each category is defined. For example, 40 Gbps measuring instruments, which have high growth potential, employ an optical interface, but Anritsu classifies them as IP measuring instruments. Optical measuring instruments are also used for access networks, but because unit price is low, we do not expect substantial growth in this area.

At the same time, if the overall trend toward IP-based networks continues, including the increase in IP-based connections between 3.5G base stations and networks, we would expect more growth potential in IP measuring instruments.

[ The Information and Communications Business ]

Are you confident that the Information and Communications business can be made profitable?

Previously, we had worked to achieve operating profitability in the Information and Communications business by expanding net sales. Under our recent management restructuring, however, our aim is to make the business profitable by reducing fixed expenses, based on a careful examination of the net sales amount required to reach a break-even point. We are confident that this new approach will be successful.