Please provide details for the year-on-year increase in revenue in the Test and Measurement Business.

In the second quarter, there was an increase in demand for measuring instruments used for production of the third-generation (3G) mobile terminals, which underpinned the sales of mobile terminals-related field. In general, NGN and infrastructure-related field and general purpose measuring instrument field have been growing as a whole. The figures by sub-segment are not being disclosed.

How is the Service Assurance Business performing?

In the first half, we have experienced steady growth of orders due to the success of sales force improvement. Judging from the current situation, we expect that we can operate profitably before goodwill amortization in the second half as planned. In order to achieve this, we are taking measures for strengthening project management and have hired a capable and experienced general manager to ensure long-term growth.

How is the NGN-related Business performing?

The domestic demands for measuring instruments for FTTx-related construction have been increasing steadily so far. While there may be some increase or decrease in the final number of subscribers, the impact on our company sales will be small. In addition, investments in FTTx are picking up in the U.S., thus we are not concerned about these instruments.
With respect to the mobile phone infrastructure business, we are aware of some information, including reports on poor business results of major communications equipment vendors, as well as possibility of shared network among European operators and inter-continental consolidation of vendors. In the long run, operators would be expanding their investments to ensure improved network service quality, thereby realizing differentiation. We envisioned this situation, and believe our entry into the service assurance business through the acquisition of NetTest to be in synchronization with this movement.

What do you think of the trends in WiMAX in North America?

For use of developing communication terminals and related parts, we offer general-purpose signal generators and signal analyzers combined with measuring software for WiMAX. WiMAX signal evaluation is also possible with our hand-held measuring instruments for base stations. Moreover, we are working on the functional improvement of the signal analyzers which are capable of integrating multiple functions and can be used alone as a measurement system.
However, while it is reported that North American carriers are adopting mobile WiMAX, it will take time before it becomes widely used, and thus the future sales growth of mobile WiMAX-related business remains unclear at this point. In addition, in Europe LTE* is expected to be the winning next generation wireless communication standard, rather than mobile WiMAX, therefore we are proceeding with the development for both standards.

* LTE (Long Term Evolution):A communication standard evolving further from 3.5G, currently being standardized.

Please provide details for decrease in the operating income in "Service and Others".

There was a sales shift in the device business from special-purpose highly value-added products to general-purpose products. we also experienced some product issues and delays in new product releases regarding solder paste inspectors. But we are confident that the situation will improve in terms of sales through the second half with the autumn release of our new products.

What are the factors for the increase in non-operating losses for devaluation and disposal of inventories?

The factor for the increase in inventory devaluation and disposal losses is mainly due to the demonstration units used for sales promotion of measuring instruments. The amount of loss is around 2% of sales per each fiscal year, though there are some fluctuations depending on the new product cycle.
For FY2007, the figure is expected to be 2 billion yen, an increase of 300 million yen from 1.7 billion yen of FY2006.
The valuation losses are posted in accordance with the accounting procedure agreed upon with the auditing firm, and we have not acted arbitrarily such as preparing for the new accounting standard (lower of cost or market method) before its adoption.

What is the expected level of impact on inventories due to the change in the accounting standard to the lower of cost or market method?

It's still too early to comment on the impact of the change in the accounting standard, as we are now discussing the assessment procedure with the auditing firm in implementing the lower of cost or market method. We may be using conservative methods for some areas as our accounting standard, so we do not expect the figures to rise for all types of inventories.