What are the numerical targets for FY2008 sales by business segment?

As shown in the presentation materials (slide 11), the average annual growth rates of each business segment compared to FY2005 are the numerical targets for FY2008.

We developed the current Mid-Term Business Plan with a greater commitment than ever to achieving targets. In the past, we formulated Mid-Term Business Plans using a rolling plan system in which we reviewed targets each year. With this plan, we will practice stricter target management by reviewing and providing feedback on progress toward the FY2008 targets.

How do you plan R&D expenses and capital expenditures over the medium term? Also, what is your financial strategy for your balance sheet?

What measures are you taking to improve the gross margin by 5 percent?

About 70 percent of the reduction in cost of sales will come from introducing cost-competitive, high-value-added products. By doing this, in addition to the results of cost-cutting efforts such as consolidating production bases and using electronics manufacturing services (EMS), we are aiming for an overall improvement of about 5 percent in the gross margin, from 47 percent to 52 percent.

The expansion of the Test and Measurement business into the service layer will center on the development of the Service Assurance Division. What are the growth and earnings prospects for this business?

Service assurance currently consists of probe monitoring, but we plan to increase sales by expanding this business into the area of service quality management (SQM). At this point, the business is unprofitable due to up-front R&D expenses, but we are aiming for profitability over the medium term.

What is the current situation, and how far have you progressed toward your first-half targets?

We started the fiscal year off slowly as usual due to seasonal factors. In wireless test and measurement, which is part of the Test and Measurement business, demand for measuring instruments used in mobile phone handset manufacturing has passed its peak in Japan, while demand for measuring instruments for development related to 3G services has remained firm in Japan as well as overseas. Demand is also strong for handheld measuring instruments for base stations and wireless infrastructure. In the area of IP network measurement, demand related to wireline broadband and optical access networks is growing. In service assurance, progress has been somewhat slow.

What effect did Net Test A/S, acquired in the previous year, have on 1st -quarter results?

The management integration of the former NetTest is progressing steadily, and we are already conducting capital and business restructuring. As a result, we are establishing the Service Assurance Division of the former NetTest as an independent sub-segment of the Test and Measurement business, and integrating the optical measuring instruments division into Anritsu's optical and IP network measurement business.

The former NetTest no longer exists in terms of management, but for the sake of comparison, its effect was 1.6 billion yen on net sales and negative 0.6 billion yen on operating income. This includes straight-line amortization of goodwill, which was approximately 0.16 billion yen for the first quarter.