I. Consolidated Financial Results

Consolidated Financial Results for the Fi rst Half of the ... from accounting principles generally ... Securing a stable profit foundation based on sy...

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Amendment to Announcement of November 21, 2006 Press Release - Media Contacts: Diane Foley/Makoto Miyakawa ***** For immediate use December 22, 2006 *****

TEL: 03-3798-6511

Consolidated Financial Results for the First Half of the Fiscal Year Ending March 31, 2007 I. Consolidated Financial Results Six months ended Six months ended September 30, September 30, 2006 2005 In billions of yen

Net sales Operating income Ordinary income (loss) Net income (loss)

In billions of yen

2,221.6 7.5 (11.8) (9.9) Yen

Net income per share (loss): Basic Diluted

(4.94) -

As of September 30, 2006

-2.7 +50.0 -

Yen

Yen

As of September 30, 2005

3,694.5 156,545

%

2,283.8 5.0 (19.3) (0.3)

(0.16) -

In billions of yen

Total assets Number of employees

Change

-4.78 -

Change

In billions of yen

3,748.7 155,617

%

-1.4 -

(Notes) 1. NEC has changed the accounting principles for preparing its consolidated financial statements from accounting principles generally accepted in the U.S., or U.S. GAAP, to accounting principles generally accepted in Japan, or Japan GAAP. Results for the first half of the fiscal year ended March 31, 2006 have been presented under Japan GAAP for comparison purposes. 2. Number of consolidated subsidiaries and affiliated companies accounted for by the equity method is as follows:

Consolidated subsidiaries Affiliated companies accounted for by the equity method

As of September 30, 2006 365

As of September 30, 2005 327

68

68

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II. Management Policy 1. Fundamental Management Policy

Information technology (“IT”) and network technology have become indispensable to our daily lives, enterprises, and national and local governments.

In addition, various

convergences are now occurring, such as the convergence of IT and network technologies. Due to such convergences and advancements in broadband (high speed, large capacity networks and related services) and mobile (accessibility via mobile information terminals) technology, a “ubiquitous networked society” is being realized, in which necessary information can be exchanged anytime, anywhere through various information and telecommunication devices.

Furthermore, companies are beginning to construct

next-generation networks (“NGNs”) to enable higher-speed, more convenient, and safer and more secure network environments, aiming to create new services integrating telecommunications with financial services or broadcasting.

The combination and

integration of IT and network technologies is key to realizing these kinds of networks and services.

In order to enable individuals to spend safe, happy and rich lives, and corporations to enhance their competitiveness and management efficiency by utilizing IT and networks in this new society, the NEC Group, under the corporate slogan “Empowered by Innovation,” intends to contribute to realizing the new potential of people and society through continuing innovation for “improved customer satisfaction.”

In addition to its IT/Network Solutions and Mobile/Personal Solutions Businesses, the NEC Group also aims to provide solutions of true value for its customers and to contribute to the

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realization of a “ubiquitous networked society” through its Electron Devices Business, including semiconductors.

Finally, the NEC Group aims at sustained growth of society and enterprises by fulfilling its social responsibility as a good corporate citizen. At the same time, the NEC Group is working to increase its corporate value acknowledging its duty toward its stakeholders including its shareholders, customers, and employees.

2. Fundamental Policy on Distribution of Profits

In addition to moving forward with the restructuring of its businesses, a flexible fiscal policy is essential for NEC in order to better respond to the rapidly changing business environment. In light of these business requirements, NEC considers, among other factors, the following factors in determining its cash dividends: the profits earned in the relevant fiscal period; the financial outlook for the following fiscal periods, the dividend payout ratio, and the internal demand for funds such as capital expenditures.

NEC will pay an interim dividend of 4 yen per common share for the six months ended September 30, 2006, and expects to pay an annual dividend of 8 yen per common share (including the interim dividend) for the full year ending March 31, 2007.

Furthermore, NEC’s dividend system has not changed since the Company Law became effective. Dividends will be paid twice annually, with the record dates of March 31 and September 30, as in the past.

3. Company's Principles and Policies on Reducing the Number of Shares in a Trading Unit

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Reducing the number of shares constituting one "share unit" (tan-gen kabu) is recognized as an effective way to increase the number of individual investors and enhance stock liquidity. However, such transaction will entail a substantial expense. When it is judged necessary NEC will respond appropriately taking into account, among other issues, the stock price levels, the number of shareholders, the shareholder composition, cost effectiveness, and NEC's financial condition.

4. Mid- to Long-Term Business Strategy

Positioning “IT/Network Solutions,” “Mobile/Personal Solutions” and “Electron Devices” as its core business domains, the NEC Group strives to enhance its corporate value by pursuing business and technology synergies between these domains while allowing them to develop their respective strategies in accordance with their individual business characteristics.

The NEC Group set forth its mid-term growth strategy in October 2003, and has been implementing the strategy since that time. By leveraging the advanced, world-leading broadband and mobile infrastructure available in the Japanese market into overseas markets, the NEC Group aims to create and acquire new growth opportunities in the upcoming, full-scale ubiquitous networked society.

Outline of Mid-Term Growth Strategy in IT/Network Solutions and Mobile/Personal Solutions Domain 1. Securing Stable Profits and Consistent Growth Focused on the Japanese Market (1) Securing a stable profit foundation based on system integration (2) Expanding the network solutions business through integration with IT business (3) Revitalizing the product business 2. Capturing New Growth Opportunities (1) Expanding global business

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(2) Strengthening measures to prepare for an upcoming, full-scale “ubiquitous networked society” in Japan 3. Combining NEC Group Core Competencies to Support Growth

Recently, the NEC Group has been confronted with certain issues that need to be addressed, such as the rapidly changing business environment starting with accelerating competition in the mobile handset market, increasing capital requirements, and complexity relating to new technology development. On the other hand, the NEC Group is presented with new business opportunities arising from the shift to NGNs and increasing demands for software/services in various areas.

The NEC Group is enhancing its capabilities to respond to these market conditions, striving to focus on rapidly growing areas in IT/Network Solutions markets, and endeavoring to achieve performance recovery of its mobile handset and semiconductor businesses. Furthermore, the NEC Group is pursuing global expansion with a focus on IT/Network Solutions businesses and aims to accomplish mid-term growth.

5. Challenges to Be Addressed by NEC Group

In Japan, broadband and mobile infrastructures are expanding significantly. Drastic changes in consumer behavior have led to rapid growth and expansion of the e-commerce market for individual consumers, in particular the “mobile commerce market” that utilizes mobile handsets. In addition, with the expansion of these markets, new services have emerged that integrate telecommunications with financial services or broadcasting, such as the addition of e-money and credit card functions to mobile handsets and the start of what is referred to as “one segment broadcasting.”

We are approaching the realization of a true “ubiquitous networked society” in which communication via phone or e-mail is possible anytime, anywhere, enabling the use of a

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variety of services and the exchange of information, and accelerated development in this field is anticipated. At the same time, companies are increasingly taking measures to strengthen the systems that act as their service platforms in order to respond promptly and precisely to diversifying market needs. One of these initiatives entails the construction of NGNs based on internet protocol technology and platforms that provide integrated services linked with NGNs by domestic telecommunications and service carriers.

Taking advantage of the changes in this business environment, the NEC Group will strive to achieve growth by offering total solutions, leveraging its world-class technological excellence in the fields of IT/Network Solutions, Mobile/Personal Solutions and Electron Devices.

As part of its strategy, the NEC Group will provide IT/Network Solutions that incorporate leading technology including electron devices and IT/network platform technology. The NEC Group will take an active role in creating new businesses and markets by (1) aiding its customers to utilize information communication technology strategically, and enhancing the reliability and stability of information systems that are already fundamental to society, and (2) providing platforms that enable flexible and timely response to diversifying service content.

In addition, the NEC Group will strive to create products and solutions that are competitive by strengthening its value chain (the process flow from product planning, development, and design to manufacturing and maintenance), thereby promoting the accumulation of technology within the NEC Group and enhancement of its development structure for key components.

Furthermore, to strengthen measures for growth, the NEC Group will increase its global expansion focusing on its IT/Network Solutions business. It will also strive for an early recovery of the mobile handset business by promoting structural reform of its overseas

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business and efficiency in development activities, and of the semiconductor business by strengthening its sales efforts and strategic alliances.

By continuously pursuing its business strategies, the NEC Group aims to develop into a global and innovative corporate group, achieving business growth and enhanced profitability.

Finally, NEC will manage its internal control system more strictly within NEC Corporation and NEC Group companies, enforce additional cross check functions, and strengthen the level of cooperation with the statutory auditors and internal auditing divisions of NEC Group companies for more effective internal audits. NEC is committed to emphasizing legal compliance by the executives and employees of NEC Corporation and NEC Group companies through compliance seminars and educational training.

III. Business & Financial Review 1. Change in Accounting Principles for Preparing Consolidated Financial Statements

Historically, NEC has prepared consolidated financial statements required under the Securities and Exchange Law of Japan and the Company Law of Japan in accordance with U.S. GAAP. Effective for the first half of the fiscal year ending March 31, 2007 (the six months ended September 30, 2006) and thereafter, NEC has changed the accounting principles for preparing its statements to Japan GAAP.

As a result, NEC plans to prepare its consolidated financial statements to be filed or disclosed for future financial periods in accordance with Japan GAAP, as required under Japanese laws.

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2. Business Results

<1> Overview of the first half of the fiscal year ending March 31, 2007, and outlook for the full fiscal year ending March 31, 2007

During the first half of the fiscal year ending March 31, 2007, despite a slowdown in consumer spending in the U.S., the global economy continued to witness expanded growth with stable growth in Asia and Europe and sustained continuous high growth in China. There was sustained growth in the Japanese economy also, despite a slowdown in exports. This was principally due to steady domestic consumption mainly from an increase in capital expenditures in the corporate sector, amid an improvement in business results, and moderate recovery in growth of personal consumption in the household sector owing to an improvement in income and employment environments.

In the midst of this business environment, the financial results for the first half of the fiscal year ending March 31, 2007 were net sales of 2,221.6 billion yen, a decrease of 62.2 billion yen (2.7%) as compared with the corresponding period of the previous fiscal year. Despite steady sales growth in mobile communication systems to telecom carriers in the IT/Network Solutions business and an increase in sales in the Electron Devices business, mainly in semiconductors, this decrease was mainly due to a decrease in mobile phones and personal computer (“PC”) sales in the Mobile/Personal Solutions business.

Operating income amounted to 7.5 billion yen, an increase of 2.5 billion yen as compared with the corresponding period of the previous fiscal year. This was mainly due to an improvement in profitability and an increase in sales of mobile communication systems and semiconductors, despite a decrease in sales of mobile handsets, accrual of estimated warranty costs in the first half of the fiscal year ending March 31, 2007, for products already sold, and an increase in research and development costs.

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Ordinary loss was 11.8 billion yen; however, this was an improvement of 7.5 billion yen as compared with the corresponding period of the previous fiscal year. This was due to an improvement in operating income, in addition to an improvement in non-operating income and expenses owing to an increase in interest received.

Income before income taxes for the first half of the fiscal year ending March 31, 2007, was 1.6 billion yen, a worsening of 6.1 billion yen as compared with the corresponding period of the previous fiscal year. Despite an improvement in ordinary loss, this was due to a decrease of 13.6 billion yen in extraordinary income (loss). The decrease in extraordinary income (loss) was principally due to a decrease in gain on sale of investment securities of affiliated companies and expense recorded in accordance with the reorganization of a factory in the Electron Devices business, despite a decrease in appraisal loss of investment securities and gain on change of equity of affiliates as accounted for by the equity method from the allocation of new shares to a third party in a subsidiary.

Net loss for the first half of the fiscal year ending March 31, 2007 was 9.9 billion yen. This was due to the recording of valuation allowance related to the deferred tax assets of some subsidiaries to the extent that there is uncertainty regarding their realization.

With respect to the full fiscal year ending March 31, 2007, NEC expects an increase in sales of fixed-line communication systems and mobile communications systems compared to the previous fiscal year, as well as continuing growth in the market environment of the area of system integration (hereafter “the area of IT Services/System Integration”). In addition, although recovery is expected in the Electron Devices business, the slowdown in demand in the mobile phone market is expected to continue, and NEC completed sale of its European consumer PC business in October 2006. As a result of these factors, NEC is aiming to achieve consolidated net sales of 4,680.0 billion yen for the fiscal year ending March 31, 2007, a decrease of 5.1% as compared with the previous fiscal year.

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NEC is also targeting consolidated operating income of 100.0 billion yen, an increase of 27.5 billion yen as compared with the previous fiscal year, particularly due to the expected recovery in the Electron Devices business and the further promotion of cost reduction that NEC is currently pursuing.

Due to these factors, NEC is targeting consolidated ordinary income of 40.0 billion yen, an increase of 25.0 billion yen as compared with the previous fiscal year, and consolidated net income of 18.0 billion yen, an increase of 28.1 billion yen as compared with the previous fiscal year.

Consolidated

Target for fiscal year ending March 31, 2007

Comparison with fiscal year ended March 31, 2006

In billions of yen

Net sales

4,680.0

-5.1%

Operating income

100.0

+27.5 billion yen

Ordinary income

40.0

+25.0 billion yen

Net income

18.0

+28.1 billion yen

Non-consolidated

Target for fiscal year ending March 31, 2007

Comparison with fiscal year ended March 31, 2006

In billions of yen

Net sales

2,250.0

-5.1%

Ordinary income

40.0

+12.4 billion yen

Net income

40.0

-1.9 billion yen

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<2> Results by business segment (including inter-segment transactions and profit/loss figures)

Sales and segment profits of NEC’s main segments were as follows (figures in brackets denote increases or decreases as compared with the corresponding period of the previous fiscal year):

IT/Network Solutions Business Sales:

1,264.5 billion yen

(+1.9%)

Segment profit:

55.6 billion yen

(+3.7 billion yen)

Results by business segment (including inter-segment transactions and profit/loss figures) Subsegment

Six months ended

Six months ended

September 30, 2006

September 30, 2005

In billions of yen

In billions of yen

%

IT Services/System Integration

343.9

346.8

-0.8

IT Platforms

312.5

311.1

+0.5

Network Systems

485.2

467.4

+3.8

Social Infrastructure

122.9

115.8

+6.1

1,264.5

1,241.1

+1.9

Total

Change

Sales of the IT/Network Solutions business for the six months ended September 30, 2006 amounted to 1,264.5 billion yen, an increase of 1.9% as compared with the corresponding period of the previous fiscal year.

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In the areas of IT Services/System Integration and IT Platforms, sales amounted to 343.9 billion yen and 312.5 billion yen respectively, amounts in line with those of the corresponding period of the previous fiscal year. In the area of Network Systems, sales amounted to 485.2 billion yen, an increase of 3.8% as compared with the corresponding period of the previous fiscal year. This was due to an increase in sales to communication service providers such as Japanese mobile infrastructure and overseas wireless systems. In the area of Social Infrastructure, sales rose by 6.1% as compared with the corresponding period of the previous fiscal year, amounting to 122.9 billion yen, owing to increased sales, such as in digital broadcasting systems in the Japanese market.

Segment profit amounted to 55.6 billion yen, an increase of 3.7 billion yen as compared with the corresponding period of the previous fiscal year. This was mainly due to an increase in sales in the area of Network Systems.

Mobile/Personal Solutions Business Sales:

499.0 billion yen

(-14.0%)

Segment loss:

37.3 billion yen

(A worsening of 21.6 billion yen)

Results by business segment (including inter-segment transactions and profit/loss figures) Subsegment

Six months ended

Six months ended

Change

September 30, 2006

September 30, 2005

In billions of yen

In billions of yen

%

Mobile Terminals

163.1

219.0

-25.5

Personal Solutions

335.9

361.0

-7.0

Total

499.0

580.0

-14.0

Sales for the Mobile/Personal Solutions business for the six months ended September 30, 2006 amounted to 499.0 billion yen, a decrease of 14.0% as compared with the corresponding period of the previous fiscal year.

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In the area of Mobile Terminals, sales amounted to 163.1 billion yen, a decrease of 25.5% as compared with the corresponding period of the previous fiscal year. This was due to a decrease in the number of shipments in Japan, and in the 2.5G mobile handset business overseas, the introduction of new handsets was stopped in Europe and business was streamlined in China. In the area of Personal Solutions, sales amounted to 335.9 billion yen, a decrease of 7.0% as compared with the corresponding period of the previous fiscal year. This was due to stagnant growth in the consumer PC market in Japan.

Segment loss amounted to 37.3 billion yen, a worsening of 21.6 billion yen as compared with the corresponding period of the previous fiscal year. This was mainly due to a decrease in sales of mobile handsets in Japan and expense recorded in accordance with the reorganization of the Mobile Terminals business overseas.

Electron Devices Business Sales:

427.0 billion yen

(+7.2%)

Segment loss:

4.2 billion yen

(An improvement of 6.1 billion yen)

Results by business segment (including inter-segment transactions and profit/loss figures) Subsegment

Six months ended

Six months ended

Change

September 30, 2006 September 30, 2005 In billions of yen

In billions of yen

%

343.0

312.9

+9.6

Electronic Components & Others

84.0

85.5

-1.8

Total

427.0

398.4

+7.2

Semiconductors

Sales of the Electron Devices business for the six months ended September 30, 2006 amounted to 427.0 billion yen, an increase of 7.2% as compared with the corresponding period of the previous fiscal year.

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In the area of Semiconductors, sales were 343.0 billion yen, an increase of 9.6% as compared with the corresponding period of the previous fiscal year. This was mainly due to an increase in sales in all product areas, including driver integrated circuits for liquid crystal display, and microcontrollers that are used in a diverse range of products, following expansion of the semiconductor market. In the area of Electronic Components and Others, sales amounted to 84.0 billion yen, an amount in line with that of the corresponding period of the previous fiscal year.

Segment loss amounted to 4.2 billion yen, an improvement of 6.1 billion yen as compared with the corresponding period of the previous fiscal year. This is mainly due to an increase in sales of semiconductors.

(Note) The results for the area of semiconductors are the official public figures of NEC Electronics Corporation, which are prepared in accordance with U.S. GAAP.

3. Financial Condition

Net cash provided by operating activities for the six months ended September 30, 2006 was 106.1 billion yen, an improvement of 64.8 billion yen as compared with the corresponding period of the previous fiscal year. This was mainly due to a decrease in the payment of notes and accounts payable as compared with the corresponding period of the previous fiscal year.

Net cash used in investing activities was 64.9 billion yen, a worsening of 29.3 billion yen as compared with the corresponding period of the previous fiscal year. This was mainly due to proceeds from the sale of stock of Elpida Memory, Inc. in the previous fiscal year. As a result, free cash flows (the sum of cash flows from operating activities and investing activities) were

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cash inflows of 41.1 billion yen, an improvement of 35.5 billion yen as compared with the corresponding period of the previous fiscal year.

Net cash used in financing activities was 56.0 billion yen, due mainly to the redemption of bonds and the payment of loans. As a result, cash and cash equivalents amounted to 439.8 billion yen, a decrease of 12.6 billion yen as compared with the end of the previous fiscal year.

The balance of interest-bearing debt amounted to 877.2 billion yen, a reduction of 158.0 billion yen as compared with the end of the first half of the previous fiscal year. Debt-equity ratio was 0.85 (an improvement of 0.16 points as compared with the end of the first half of the previous fiscal year).

In addition, the balance of interest-bearing debt (net), obtained by deleting the balance of cash and cash equivalents from the balance of interest-bearing debt, amounted to 437.4 billion yen, a decrease of 178.7 billion yen as compared with the end of the first half of the previous fiscal year. Net debt-equity ratio was 0.42 (an improvement of 0.18 points as compared with the end of the first half of the previous fiscal year).

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions of yen, millions of U.S. dollars) Six months ended September 30 Net sales

2006 (AUDITED)

(% of net sales)

2005 (AUDITED)

(% of net sales)

Increase (Decrease)

Fiscal 2006 (UNAUDITED)

2006

(% of net sales)

JPY 2,221,604

(100.0)

JPY 2,283,779

(100.0)

(JPY 62,175)

$18,827

JPY 4,929,970

(100.0)

1,549,243

(69.7)

1,633,629

(71.5)

(84,386)

13,129

3,523,577

(71.5)

Gross profit on sales

672,361

(30.3)

650,150

(28.5)

22,211

5,698

1,406,393

(28.5)

Selling, general and administrative expenses

664,857

(30.0)

645,148

(28.3)

19,709

5,634

1,333,867

(27.0)

7,504

(0.3)

5,002

(0.2)

2,502

64

72,526

(1.5)

14,397

(0.7)

12,392

(0.6)

2,005

122

32,652

(0.7)

1,420

37

6,664

15

4,079

Cost of sales

Operating income Non-operating income  Interest income

4,384

2,964

 Dividend income

1,780

2,369

555

482

73

5

6,195

-

-

-

-

1,042

7,678

6,577

1,101

65

14,672

(3,020)

286

90,223

 Equity in earnings of affiliated  companies  Forein exchange income  Other Non-operating expenses

33,720

(1.5)

36,740

(589)

(1.6)

(1.9)

 Interest expense

7,441

8,497

(1,056)

63

16,810

 Forein exchange loss

2,415

120

2,295

20

-

23,864

28,123

(4,259)

203

73,413

(100)

14,955

(0.3)

237

58,803

(1.2)

 Other Ordinary income(loss)

(11,819)

(-0.5)

(19,346)

(-0.8)

7,527

Extraordinary income

28,046

(1.3)

33,485

(1.4)

(5,439)

 Gain on sale of investment in securities

10,970

9,125

1,845

93

25,189

 Gain on charge of equity

8,630

623

8,007

73

2,909

 Gain on transfer of marketable securities to the pension

6,534

-

6,534

55

-

1,805

687

1,118

15

860

107

2,369

(2,262)

1

4,590

-

20,681

(20,681)

-

23,220

-

-

-

-

2,035

8,201

123

22,023

10,777

91

1,681

(4,086)

13

10,540

Reversal of provision for recycleing expenses of personal computers  Gain on sale of fixed assets  Gain on sale of stock of affiliated companies Gain on transfer of substitutional portion of employees’ pension funds Extraordinary loss

14,583

 Restructuring charges

(0.7)

6,382

(0.3)

10,777

-

 Loss due to devaluation of investment  in securities

1,545

5,631

 Impairment loss on fixed assets

1,283

482

801

11

661

978

269

709

8

560

-

-

-

-

8,581

Pension and severance costs  Product warranties cost Income before income taxes Provision for income taxes Minority interest in income of consolidated subsidiaries Net loss

(0.5)

1,644

(0.1)

7,757

(0.3)

(6,113)

14

51,735

(1.0)

11,218

(0.5)

7,048

(0.3)

4,170

95

73,149

(1.5)

353

(0.0)

1,040

(0.0)

(687)

(11,352)

(-0.3)

(0.0)

(JPY 9,596)

(JPY 10,062)

(-0.2)

(JPY 9,927)

(-0.4)

(JPY 331)

(Note) *US dollar amounts are translated from yen, for convenience only, at the rate of US$1 = 118 yen.

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3 $(84)

CONDENSED CONSOLIDATED BALANCE SHEETS (In millions of yen, millions of U.S.dollars) September 30, 2006(AUDITED) Current assets

September 30, 2005(AUDITED)

March 31, 2006 (UNAUDITED)

Increase (Decrease)

Increase (Decrease)

JPY 2,004,951

JPY 1,983,249

JPY 2,099,343

(JPY 94,392)

$16,992

Cash and deposit

347,815

387,889

(40,074)

404,303

(56,488)

2,948

Notes and accounts receivable, trade

732,616

696,702

35,914

858,328

(125,712)

6,209

93,303

31,509

61,794

49,242

44,061

791

Inventories

550,643

564,672

(14,029)

492,414

58,229

4,666

Deferred tax assets

109,092

117,197

(8,105)

106,243

2,849

Other current assets

181,908

195,340

(13,432)

198,430

(16,522)

Current marketable securities

Allowance for doubtful notes and accounts Long-term assets Property, plant and equipment

(10,426) 1,689,581

JPY 21,702

(366)

(9,617)

(809)

1,765,477

(10,060)

(75,896)

1,703,432

(13,851)

925 1,541 (88) 14,318

682,422

703,870

(21,448)

677,269

5,153

5,783

Buildings

241,504

251,348

(9,844)

244,534

(3,030)

2,047

Machinery and equipment

216,595

214,541

2,054

197,839

18,756

1,836

Tools and other equipment

102,057

110,819

(8,762)

104,861

(2,804)

865

Other Property

122,266

127,162

(4,896)

130,035

(7,769)

1,035

237,224

250,339

(13,115)

236,345

879

92,976

76,129

16,847

79,397

13,579

144,248

174,210

(29,962)

156,948

(12,700)

1,222

Intangible assets Goodwill Other intangible assets

2,010 788

769,935

811,268

(41,333)

789,818

(19,883)

6,525

Investment securities

253,214

236,662

16,552

266,040

(12,826)

2,146

Stock of Affiliated companies

103,605

105,368

(1,763)

110,319

(6,714)

Deferred tax assets

223,524

254,423

(30,899)

214,525

8,999

1,894

Other

215,246

244,262

(29,016)

229,845

(14,599)

1,824

Allowance for doubtful notes and accounts

(25,654)

(29,447)

3,793

(30,911)

5,257

Investments and other assets

Total assets Current liabilities

878

(217)

JPY 3,694,532

JPY 3,748,726

(JPY 54,194)

JPY 3,802,775

(JPY 108,243)

$31,310

JPY 1,627,077

JPY 1,525,223

JPY 101,854

JPY 1,675,308

(JPY 48,231)

$13,789

Notes and accounts payable, trade

761,633

721,307

40,326

826,335

(64,702)

6,455

Short-term borrowings

118,155

163,027

(44,872)

136,756

(18,601)

1,001

40,000

71,000

(31,000)

35,000

5,000

339

Bonds payable (within one year)

146,418

59,270

87,148

129,268

17,150

1,241

Accounts payable, other and accrued expenses

269,762

266,135

3,627

284,502

(14,740)

2,286

Commercial Paper

Provision for bonus to directors Current product warranty liabilities Other current liabilities Long-term liabilities Bonds payable Long-term borrowings Accrued pension and severance costs Provision for loss on repurchase of computers Long-term product warranty liabilities Provision for recycling expenses of personal computers

145

-

24,924

3,744

145

-

21,180

11,229

145

1

13,695

211

266,040

240,740

25,300

252,218

13,822

2,255

828,725

974,739

(146,014)

884,817

(56,092)

7,023

473,504

612,524

(139,020)

519,791

(46,287)

4,013

62,576

94,087

(31,511)

76,268

(13,692)

204,466

191,948

12,518

197,434

7,032

17,689

23,265

(5,576)

19,532

(1,843)

723

620

840

(117)

6

5,044

5,089

6,137

(1,093)

43

103 (45)

530 1,733 150

Long-term deferred tax liabilities

11,422

239

11,183

9,661

1,761

Other

53,301

46,967

6,334

55,154

(1,853)

451

(JPY 104,323)

$20,812

Total liabilities

97

JPY 2,455,802

JPY 2,499,962

(JPY 44,160)

JPY 2,560,125

Shareholders' equity

961,836

969,345

(7,509)

949,915

11,921

8,151

Common stock

337,822

337,821

1

337,821

1

2,863

Additional paid-in capital

464,924

441,268

23,656

441,155

23,769

3,940

Retained earnings

162,050

192,985

(30,935)

173,808

(11,758)

1,373

Treasury stock Valuation and translation adjustments Unrealized gains (losses) on marketable securities Unrealized gains (losses) on hedging Foreign currency translation adjustments Share subscription rights

(2,960)

(2,729)

71,335

53,488

17,847

79,892

(8,557)

605

66,461

58,624

7,837

78,128

(11,667)

563

9 4,865 66

(231)

-

(2,869)

9

(5,136)

-

10,001

-

1,764

66

-

205,493

225,931

(20,438)

212,843

Total net assets

JPY 1,238,730

JPY 1,248,764

(JPY 10,034)

Total liabilities and net assets

JPY 3,694,532

JPY 3,748,726

(JPY 54,194)

JPY 877,202 437,410 1,033,171 28.0 26.0 0.85 0.42

JPY 1,035,203 616,127 1,022,833 27.3 25.9 1.01 0.60

(JPY 158,001) (178,717) 10,338 0.7 0.1 (0.16) (0.18)

Minority interests

Interest-bearing debt Net interest-bearing debt (*1) Owner's equity (*2) Owner's equity ratio (%) (*3) Shareholders' equity ratio (%) (*3) Debt-equity ratio (times) (*4) Net debt-equity ratio (times) (*4)

(25)

9

0

3,101

42

66

1 1,741

JPY 1,242,650

(JPY 3,920)

$10,498

JPY 3,802,775

(JPY 108,243)

$31,310

JPY 935,103 482,733 1,029,807 27.1 25.0 0.91 0.47

(JPY 57,901) (45,323) 3,364 0.9 1.0 (0.06) (0.05)

$7,434 3,707 8,756

Net interest-bearing debt is interest-bearing debt less cash and cash equivalents. Owner's equity is total net assets less share subscription rights, minority interests. Owner's equity ratio is owner's equity divided by total assets. Shareholders' equity ratio is shareholders' equity divided by total assets. Debt-equity ratio and net debt-equity ratio are interest-bearing debt and net interest-bearing debt divided by owner's equity, respectively.

17

(91)

(7,350)

(Notes) *1 *2 *3 *4

September 30, 2006

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (AUDITED) (In millions of yen)

Shareholders' equity Common stock

Balance as of March 31,2006

Additional paid-in capital

337,821

Retained earnings

441,155

173,808

Treasury stock

△ 2,869

Total

949,915

Changes in Six months ended September 30 Increase by stock-for-stock exchange Conversion of convertible debt and other

24,382

24,382

1

2

1

Bonus to directors Dividends Net income

△ 200

△ 200

△ 5,979

△ 5,979

△ 9,927

Disposal and purchase of treasury stock, net

△ 9,927

△ 67

Changes in the scope of equity method

△ 91

Others

4,348

△ 547

△ 547

Net changes in item other than those in shareholder's equity Total changes in Six months ended September 30 Balance as of September 30,2006

1

23,769

△ 11,758

△ 91

11,921

337,822

464,924

162,050

△ 2,960

961,836

Valuation and translation adjustments Unrealized gains Unrealized gains Foreign currency (losses) on (losses) on translation marketable hedging adjustments securities

Balance as of March 31,2006

△ 158

4,348

78,128

-

1,764

Share subscription rights -

Minority interests 212,843

Total net assets 1,242,650

Changes in Six months ended September 30 Increase by stock-for-stock exchange

24,382

Conversion of convertible debt and other

2

Bonus to directors

△ 200

Dividends

△ 5,979

Net income

△ 9,927

Disposal and purchase of treasury stock, net

△ 158

Changes in the scope of equity method

4,348

Others Net changes in item other than those in shareholder's equity Total changes in Six months ended September 30 Balance as of September 30,2006

△ 547 △ 11,667

9

3,101

66

△ 7,350

△ 15,841

△ 11,667

9

3,101

66

△ 7,350

△ 3,920

66,461

9

4,865

66

205,493

1,238,730

18

CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions of yen, millions of U.S. dollars) Six months ended September 30

2006 (AUDITED)

2005 (AUDITED)

2006

Increase (Decrease)

Fiscal 2006 (UNAUDITED)

I. Cash flows from operating activities: Income before income taxes and minority interests

JPY 1,644

JPY 7,757

(JPY 6,113)

$14

JPY 51,735

Adjustments to reconcile income before income taxes and minority interests to net cash provided by (used in) operating activities: Depreciation and amortization

93,011

95,036

(2,025)

788

198,956

12,851

15,802

(2,951)

109

34,750

4,164

2,874

1,290

35

6,021

(Decrease) increase in allowance for doughtful accounts

(4,651)

4,560

(9,211)

(39)

5,098

Increase in product warranty liabilities

13,470

3,228

10,242

114

Decrease in provision for loss on repurchase of computers

(1,843)

(1,109)

(16)

(4,467)

(6,266)

58

21,432

(52)

(10,743)

63

16,810

  Amortization of long-term prepaid expense Goodwill amortization

Increase in accrued pension and severance costs Interest and dividend income Interest expense Equity in earnings of affiliated companies Gain due to stock issuances by subsidiaries Gain on sale of fixed assets Loss due to devaluation

6,805

13,071

(6,164)

(5,333)

7,441

8,497 (482)

(73)

(5)

(6,195)

(8,630)

(623)

(8,007)

(73)

(2,909)

(107)

(2,369)

(1)

(4,590)

(10,970)

Loss due to devaluation of investment in securities

1,545

Gain on sale of stock of affiliated companies



Settlement and compensation for damages

(831) (1,056)

10,739

(555)

1,283

Gain on sale of investment in securities

(734)

482 (9,125)

2,262 801

11

(1,845)

(93)

5,631

(4,086)

13

(20,681)

20,681



10,540 (23,220)

863

5,427

(4,564)

Decrease (increase) in notes and accounts receivable

135,752

76,567

59,185

Decrease (increase) in inventories

(54,707)

(38,850)

(15,857)

(464)

34,878

Increase (decrease) in notes and accounts payable

(66,728)

(84,854)

18,126

(565)

14,650

(10,088)

17,139

61

6,811

65,793

65,732

1,115

278,211

Other, net

7,051

Sub-total

131,525

Interest and dividends received Interest paid Payment of settlement and compensation for damages Income taxes paid Net cash provided by operating activities

1,150

19,126 (76,683)

6,151

5,344

(7,336)

(8,645)

1,309

(8,478)

(2,206)

(6,272)

(72)

(7,828)

(15,783)

(18,983)

3,200

(134)

(38,042)

41,303

64,776

899

225,804 (159,432)

106,079

807

7

661 (25,189)

52

10,760

(62)

(17,297)

II. Cash flows from investing activities: Acquisitions of property, plant and equipment Proceeds from sales of property, plant and equipment Acquisitions of intangible assets

(92,502)

(85,871)

(6,631)

(784)

43,401

33,027

10,374

368

69,442

(18,760)

(21,813)

3,053

(159)

(47,635)

(32)

(12,584)

Payment for purchases of investments in securities

(3,806)

(4,498)

Proceeds from sales of investments in securities

17,478

14,462

(1,630)

(2,093)

Payment for purchase of subsidiaries' shares, resulting in change of consolidation scope Proceeds from sales of subsidiaries' shares, resulting in change of consolidation scope

39

Payment for purchases of stock of Affiliated companies

(10,955)

Proceeds from sales of stock of Affiliated companies

56

Payment of loans receivable

(10,576)

Collection of loans receivable

12,162

Other, net Free cash flows (Ⅰ+Ⅱ)

463

10,588

(10,549)

(2,594)

(8,361)

28,728

(28,672)

(4,566)

(6,010)

148

36,271

(14)

(3,608)

0 (93) 0 (89)

14,604 (11,946) 29,052 (16,338)

3,152

9,010

103

(4,202)

4,358

2

(64,937)

(35,680)

(29,257)

(550)

(84,687)

41,142

5,623

35,519

349

141,117

(18,279)

(22,052)

3,773

(155)

(81,326)

15,073

(10,217)

(22,548)

2,005

156

Net cash used in investing activities

692 3,016

18,769 (1,282)

III. Cash flows from financing activities: Decrease in short-term borrowings, net Proceeds from long-term loans

4,856

Repayment of long-term loans

(20,543)

Proceeds from issuance of bonds





Payment for redemption of bonds

(29,216)

(55,335)

26,119



14,378

Proceeds from stock issuances

14,378

Dividends paid

(5,961)

Other, net Net cash used in financing activities Effect of exchange rate changes on cash and cash equivalents

Cash and cash equivalents at end of period

19

- (248)

24,643 (55,130) 7,500 (85,570)

122

4,056

(51)

(11,729)

(1,207)

(1,755)

548

(9)

(2,643)

(92,388)

36,416

(474)

(200,199)

4,339

(2,087)

(82,426)

69,848

(12,578)

Cash and cash equivalents at beginning of period

(190)

(174)

(55,972) 2,252

Net decrease in cash and cash equivalents

(5,771)



41

452,370

501,502

JPY 439,792

JPY 419,076

(49,132) JPY 20,716

18 (107)

9,950 (49,132)

3,834

501,502

$3,727

JPY 452,370

Preparation of the Interim Consolidated Financial Statements

1 Scope of consolidation (1) Number of consolidated subsidiaries: 365 Major consolidated subsidiaries :NEC Electronics Corporation, NEC Personal Products Ltd. (2) Number of affiliated companies accounted for by the equity method: 68 Major affiliated companies accounted for by the equity method: Nippon Electric Glass Co., Ltd. ANRITSU CORPORATION. 2 Change in scope of consolidation and affiliated companies accounted for by the equity method (1) Consolidated subsidiaries: 9 companies increase. New major consolidated subsidiaries: NEC Biglobe Ltd, NEC Philips Unified Solutions. A major deconsolidated subsidiary: NEC Compound Semiconductor Devices, Ltd. (2) Affiliated companies accounted for by the equity method: no change New major affiliated companies: Adcore-Tech Co., Ltd, Sony NEC Optiarc Inc., Decreased companies : Hua Hong Semiconductor , Ltd, and others. 3 Accounting Standards (1) Valuation of Major Assets (a) Securities Investments in other securities Marketable securities: Fair value method. Unrealized gains and losses on investments in marketable securities are included in shareholders' equity. Cost of sales for marketable securities are based on the moving average cost. Nonmarketable securities: Moving average cost method (b) Derivatives Fair value method (c) Inventories Lower of cost or market method based on the cost calculated by the following method Finished goods Custom-made products: Accumulated products cost method Mass-produced standard products: First-in, first-out method (in most cases) Work in process Custom-made products: Specific cost method Mass-produced standard products: Average cost method Purchased components and raw materials: First-in, first-out method (in most cases) (2) Depreciation method for fixed assets (a) Property, plant and equipment Depreciation is computed principally using the declining-balance method at rates based on the estimated useful lives of the assets. (b) Intangible assets: Software: The company applies the depreciation method based on the projected sales volume to software for sale, and applies the straight-line method to software for internal use based on the estimated useful life (ranging up to 5 years). Goodwill: Goodwill are amortized on a straight-line basis over the periods that are estimated by each acquisition, ranging up to 20 years.

20

3 (3) Accounting Standards for Major Reserves (a) Allowance for doubtful notes and accounts An allowance for doubtful notes and accounts is provided based on credit loss history and an evaluation of any specific doubtful notes and accounts. (b) Accrued pension and severance costs In order to provide for pension and severance payments, accrued pension and severance cost is calculated based on the estimated amounts of benefit obligation and pension plan assets as of March 31, 2007. Net obligations of resulting from the adoption of applicable accounting standards have been amortized over 15 years. Unrecognized prior service cost is amortized on the straight-line method over the average remaining service period (mainly 14 years) of employees expected to receive benefits under the plan. Actuarial loss is amortized on the straight-line method over the average remaining service period (mainly 12 years) of employees expected to receive benefits under the plan. (c) Provision for loss on repurchase of computers Provision for loss on repurchase of computers is calculated on the basis of past experience. (d) Product warranty liabilities In order to be prepared for after-sales service expenses for products, an estimated amount is calculated based on the actual past results against sales. (e) Provision for recycling expenses of personal computers In order to be prepared for recycling expenses of personal computers, the Company estimates the amounts of expenses which will be accrued in the future. (4) Leases The Company accounts for finance leases as assets at an amount equal to the present value of future minimum lease payments during the lease term. (5) Hedge Activities (a) Accounting for hedging activities The Company adopts the deferred hedge accounting method for the derivative transaction in order to hedge the interest rate risk. (b) Hedging instruments and hedged items To hedge the interest rate risk regarding interest expenses resulting from loans and bonds, interest rate swap agreement are utilized as hedging instruments. (c) Hedging policy To hedge the interest rate risk regarding interest expense resulting from loans and bonds, interest rate swap agreements are utilized as hedging instruments. (d) Assessment of hedge effectiveness The Company assesses the hedge effectiveness based on the analysis of cumulative amounts of change in cash flow and fluctuations of market price of hedged items and hedging instuments. (6) Other accounting issues (a) Accounting for consumption taxes The Japanese consumption taxes withheld and consumption taxes paid are not included in the Consolidated Statements of Operations. (b) Consolidated return system The Company adopts the consolidated return system.

21

4 Change in Accounting Policy (1) Accounting standards for presentation of net assets in the balance sheet Effective from the interim accounting period ended September 30, 2006, the Company has adopted the “Accounting Standard for Presentation of Net Assets in the Balance Sheet (Accounting Standards Board Statement No.5)” and the “Implementation Guidance for Accounting Standard for Presentation of Net Assets in the Balance Sheet (Financial Accounting Standards Implementation Guidance No.8)” both issued by the Accounting Standards Board of Japan on December 9, 2005. The amount corresponding to the conventional “Shareholders’ Equity” in the balance sheet is 1,033,162 million yen. “Net assets” in the Balance Sheets for the interim accounting period is presented according to the revision of “Regulations Concerning the Terminology, Forms and Preparation Methods of Interim Consolidated Financial Statements”. (2) Accounting standards for business combinations Effective from the interim accounting period ended September 30, 2006, the Company has adopted the “Accouting standards for Business Combinations (Business Accounting Council, October 31, 2003)”, “Accounting Standard for Business Divestitures (Accounting Standards Board Statement No.7, December 27,2005)”, and “Guide on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures (Accounting Standards Board Guidance No.10, December 27, 2005)”. (3) Partial revision of Accounting standards for treasury stock and appropriation of leagal reserve, etc Effective from the interim accounting period ended September 30, 2006, the Company has adopted the revised “Accounting Standards for Treasury Stock and Appropriation of Legal Reserve (Accounting standards Board Statement No.1: final revision, August 11, 2006)” and “ Implemention Guidance on Accounting Standards for Treasury Stock and Appropriation of Legal Reserve (Accounting standards Board Guidance No.2: final revision, August 11, 2006)”. (4) Accounting standards for stock option Effective from the interim accounting period ended September 30, 2006, the Company has adopted the “Accouting Standard for Share-based Payment (Accounting Standards Board Statement No.8, December 27, 2005)”, and “Implementation Guidance on Accounting Standard for Share-based Payment (Accounting Standards Board Guidance No.11, May 31, 2006)”. The effect of this adoption did not have material impact on the interim consolidated financial statements. (5) Accounting standards for directors' bonus Effective from the interim accounting period ended September 30, 2006, the Company has adopted the “Accounting Standard for Directors' Bonus (Accounting Standards Board Statement No.4, Novembe 29, 2005) ”. As a result of this change, Operating Income and income before income tax decrease by ¥159 million and Ordinary loss increases by ¥159 million. 5 Cash Flow Cash and cash equivalents in CONSOLIDATED STATEMENTS OF CASH FLOWS are calculated as follows.   Unit Million Yen

September 30, 2006

September 30, 2005

March 31, 2006

347,815

387,889

404,303

Current marketable securities

93,303

31,509

49,242

Time deposit and Current marketable securities with maturity of more than three months

(1,326)

(322)

(1,175)

Cash and cash equivalents

439,792

419,076

452,370

Cash and deposit

22

FINANCIAL INSTRUMENTS As of September 30, 2006(AUDITED) (1) Other securities with market values Acquisition cost

(2)

Balance sheet amount

1.Stocks

JPY 65,637

JPY 168,787

2.Bonds

900

936

3.Other

1,361

1,311

Total

JPY 67,898

JPY 171,034

(In millions of yen) Difference JPY 103,150 36 (50) JPY 103,136

Main Securities without Marketable Values (In millions of yen) Balance sheet amount Other Securities 1.Stocks

JPY 74,085

2.Bonds

25,987

3. Investment limted partnership and similar partnership

7,017

4. Commercial Paper

54,085

5. M M F

12,862

As of September 30, 2005(AUDITED) (1) Other securities with market values Acquisition cost JPY 70,189

1.Stocks

JPY 160,430

(In millions of yen) Difference JPY 90,241

2.Bonds

16

12

(4)

3.Other

124

98

(26)

Total

(2)

Balance sheet amount

JPY 70,329

Main Securities without Marketable Values (In millions of yen) Balance sheet amount Other Securities JPY 65,066

1.Stocks

10

2.Bonds 3. Investment limted partnership and similar partnership

7,298

4. Commercial Paper

25,390

5. M M F

4,820

23

JPY 160,540

JPY 90,211

FINANCIAL INSTRUMENTS As of March 31, 2006(UNAUDITED) (1) Other securities with market values Acquisition cost JPY 70,685

1.Stocks 2.Bonds 3.Other Total

(2)

Balance sheet amount

(In millions of yen) Difference

JPY 196,050

JPY 125,365

816

811

(5)

1,159

992

(167)

JPY 72,660

JPY 197,853

JPY 125,193

Main Securities without Marketable Values (In millions of yen) Balance sheet amount Other Securities JPY 56,632

1.Stocks 2.Bonds

7,709

3. Investment limted partnership and similar partnership

7,679

4. Commercial Paper

40,015

5. M M F

3,809

IMPORTANT SUBSEQUENT EVENTS Since October 2006, the NEC Group has become an object of (1) inquires that began in October, 2006 by the U.S. Department of Justice and the European Commission into possible violations of the antitrust law (antitrust law/competition law) in the SRAM industry (2) inquires that began in October, 2006 by the Korea Fair Trade Commission regarding possible violations of Korea's antitrust law in the semiconductor industry, as well as (3) inquires that began in October, 2006 by the Japan Fair Trade Commision, the U.S. Department of Justice, the European Commission, the Korea Fair Trade Commission, and the Canada Competition Authorities into possible violations in the TFT liquid crystal display industry. In addition, after the commencement of inquires by the U.S. Department of Justice relating to possible violations of the antitrust act in the SRAM industry, several civil lawsuits(class action lawsuits) seeking damages from violations of the antitrust law were filed against NEC Electronics America, Inc. After the commencement of inquires by the U.S. Department of Justice relating to possible violations of the antitrust act in the TFT liquid crystal display industry, several civil lawsuits(class action lawsuits) seeking damages from violations of the antitrust law were also filed against NEC Corporation, NEC LCD Technologies, Inc. and NEC Electronics America, Inc. Conclusions have yet to be reached in the inquires by the above authorities or concerning the civil lawsuits in the U.S. It has been discovered that there is a possibility of a defective part used in the electrical power supply unit within the LCD TV-installed desktop PCs VALUESTAR H and VALUESTAR G type H (model for direct web sales), which were sold in November, 2003 by NEC Corporation and its consolidated subsidiaries, overheating and emitting smoke/igniting. NEC and its consolidated subsidiaries announced on December 18 that they were discontinuing use of the products by customers and that products would be taken back without charge and the faulty part exchanged in order to ensure the safe use of the aforementioned products by its customers. In addition, NEC's consolidated subsidiaries will be responsible for any expenses incurred in handling the product or exchanging the part etc. after the announcement of the aforementioned phenomenon. However,it is difficult to make a logical estimate regarding the amount of the expenses to be incurred at the current time.There is no important effect on NEC's individual financial statements.

24

SEGMENT INFORMATION 1. Business Segment Information Six months ended September 30, 2006 (AUDITED) IT/Network Solutions Business Revenues and operating income Revenues 1. Customers 2. Intersegment Total revenues Operating expenses Operating Income(loss)

1,206,550 57,923 1,264,473 1,208,913 55,560

(In millions of Yen) Mobile/ Personal Solutions Business

419,695 79,319 499,014 536,356 (37,342)

Electron Devices Business

408,633 18,412 427,045 431,291 (4,246)

Others

Total before Eliminations/ Consolidated eliminations Corporate total

186,726 87,175 273,901 258,590 15,311

2,221,604 242,829 2,464,433 2,435,150 29,283

Six months ended September 30, 2006

10,225 491 10,716 10,245 471

Mobile/ Personal Solutions Business

3,557 672 4,229 4,545 (316)

Electron Devices Business

3,463 156 3,619 3,655 (36)

Others

1,582 739 2,321 2,191 130

Total before Eliminations/ Consolidated eliminations Corporate total

18,827 2,058 20,885 20,636 249

Six months ended September 30, 2005 (AUDITED) IT/Network Solutions Business Revenues and operating income Revenues 1. Customers 2. Intersegment Total revenues Operating expenses Operating Income(loss)

1,187,869 53,213 1,241,082 1,189,191 51,891

- (2,058) (2,058) (1,873) (185)

18,827 - 18,827 18,763 64

(In millions of Yen) Mobile/ Personal Solutions Business

497,294 82,740 580,034 595,744 (15,710)

Electron Devices Business

377,743 20,685 398,428 408,764 (10,336)

Others

220,873 80,809 301,682 296,272 5,410

Total before Eliminations/ Consolidated eliminations Corporate total

2,283,779 237,447 2,521,226 2,489,971 31,255

Fiscal 2006 (UNAUDITED)

- (237,447) (237,447) (211,194) (26,253)

2,283,779 - 2,283,779 2,278,777 5,002

(In millions of Yen) IT/Network Solutions Business

Revenues and operating income Revenues 1. Customers 2. Intersegment Total revenues Operating expenses Operating Income(loss)

2,221,604 - 2,221,604 2,214,100 7,504

(In millions of U.S. dollars) IT/Network Solutions Business

Revenues and operating income Revenues 1. Customers 2. Intersegment Total revenues Operating expenses Operating Income(loss)

- (242,829) (242,829) (221,050) (21,779)

2,653,732 108,683 2,762,415 2,581,583 180,832

Mobile/ Personal Solutions Business

1,077,198 173,059 1,250,257 1,305,573 (55,316)

Electron Devices Business

771,625 44,313 815,938 846,732 (30,794)

Others

427,415 171,454 598,869 581,247 17,622

Total before Eliminations/ Consolidated eliminations Corporate total

4,929,970 497,509 5,427,479 5,315,135 112,344

- (497,509) (497,509) (457,691) (39,818)

4,929,970 - 4,929,970 4,857,444 72,526

(Notes)

* The classification of business segment is made by the type of services, characteristics and the similarities of target market. * Major businesses of each segment are as follows: IT/Network Solutions Business System Construction, Consulting, Outsourcing, Support(Maintenance), Servers, Storage products, Professional workstations, Business PCs, Computer software, Enterprise network systems, Network systems for telecommunications carriers, Broadcast video systems, Control systems, Aerospace/Defense systems Mobile/Personal Solutions Business Mobile handsets, Personal computers, Personal communication devices, BIGLOBE Electron Devices Business System LSI and other semiconductors, Electronic components, LCD modules etc * Unallocable operating expenses included in “Eliminations / Corporate ” for Six months ended September 30, 2006,2005 and Fiscal 2006 was \22,855 million($194 million), \24,981 million, \48,394 million, respectively.Corporate expenses include general corporate expenses and research and development expenses at NEC Corporation. * Effective from the interim accounting period ended September 30, 2006, the Company has adopted the “Accounting Standards for Directors' Bonus (Accounting Standards Board Statement No.4, November 29, 2005) ”. The effect of this adoption did not have material impact on the interim consolidated financial statements. * The Company has adopted the “Partial amendment to the Accounting Standards for employees’ retirement benefits (Accounting Standards Board Statement No.3, March 16, 2005)" and the "Application guideline for partial amendment to the Accounting Standards for employees’ retirement benefits (Accounting Standards Board Guidance No.7, March 16, 2005). As a result of this change, the increase of operating Income for Six months ended September 30, 2005 and Fiscal 2006 was \2,953 million (IT/Network Solutions Business \2,326 million, Mobile/Personal Solutions Business \216 million, Others \411 million), \5,910 million (IT/Network Solutions Business \4,655 million, Mobile/Personal Solutions Business \431 million, Others \824 million), respectively.

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SEGMENT INFORMATION 2. Geographic area segments Six months ended September 30, 2006 (AUDITED) Japan Revenues and operating income Revenues 1. Customers 2. Intersegment Total revenues Operating expenses Operating Income(loss)

1,712,997 215,714 1,928,711 1,919,243 9,468

(In millions of Yen) Europe

215,209 9,860 225,069 225,634 (565)

Others

293,398 97,713 391,111 390,754 357

Total before eliminations

2,221,604 323,287 2,544,891 2,535,631 9,260

Six months ended September 30, 2006 Europe

14,517 1,828 16,345 16,265 80

1,824 84 1,908 1,913 (5)

Others

2,486 828 3,314 3,311 3

Total before eliminations

18,827 2,740 21,567 21,489 78

Six months ended September 30, 2005 (AUDITED) Japan Revenues and operating income Revenues 1. Customers 2. Intersegment Total revenues Operating expenses Operating Income(loss)

- (323,287) (323,287) (321,531) (1,756)

2,221,604 - 2,221,604 2,214,100 7,504

1,780,208 213,031 1,993,239 1,991,471 1,768

Eliminations/Co rporate

- (2,740) (2,740) (2,726) (14)

Consolidated total

18,827 - 18,827 18,763 64

(In millions of Yen) Europe

217,710 7,989 225,699 226,212 (513)

Others

285,861 113,095 398,956 394,941 4,015

Total before eliminations

2,283,779 334,115 2,617,894 2,612,624 5,270

Fiscal 2006 (UNAUDITED)

Eliminations/Co rporate

- (334,115) (334,115) (333,847) (268)

Consolidated total

2,283,779 - 2,283,779 2,278,777 5,002

(In millions of Yen) Japan

Revenues and operating income Revenues 1. Customers 2. Intersegment Total revenues Operating expenses Operating Income(loss)

Consolidated total

(In millions of U.S. dollars) Japan

Revenues and operating income Revenues 1. Customers 2. Intersegment Total revenues Operating expenses Operating Income(loss)

Eliminations/Co rporate

3,825,580 440,730 4,266,310 4,203,954 62,356

Europe

494,330 20,007 514,337 512,159 2,178

Others

610,060 256,735 866,795 862,437 4,358

Total before eliminations

4,929,970 717,472 5,647,442 5,578,550 68,892

Eliminations/Co rporate

- (717,472) (717,472) (721,106) 3,634

Consolidated total

4,929,970 - 4,929,970 4,857,444 72,526

(Notes)

* The classification of business segment is made by the type of services, characteristics and the similarities of target market. * “Europe ” consists of the business results mainly in United Kingdom, France, Netherlands, Germany, Italy, Spain. * Effective from the interim accounting period ended September 30, 2006, the Company has adopted the “Accounting Standards for Directors' Bonus (Accounting Standards Board Statement No.4, November 29, 2005) ”. The effect of this adoption did not have material impact on the interim consolidated financial statements. * The Company has adopted the “Partial amendment to the Accounting Standards for employees’ retirement benefits (Accounting Standards Board Statement No.3, March 16, 2005" and the "Application guideline for partial amendment to the Accounting Standards for employees’ retirement benefits (Accounting Standards Board Guidance No.7, March 16, 2005). As a result of this change, the increase of operating Income for Six months ended September 30,2005 and Fiscal 2006 was \2,953 million (Japan), \5,910 million (Japan), respectively.

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SEGMENT INFORMATION 3. Overseas sales Six months ended September 30, 2006 (AUDITED)

(In millions of Yen) Europe

389,405

233,790

Overseas sales Consolidated sales

Total

Others



2,221,604

- 17.6%

10.5%

Percentage of overseas sales to consolidated sales

623,195

Six months ended September 30, 2006

28.1%

(In millions of U.S. dollars) Europe

Others

Consolidated sales



5,281

3,300

1,981

Overseas sales

Total 18,827



Six months ended September 30, 2005 (AUDITED)

(In millions of Yen) Europe

Others

252,050

Overseas sales Consolidated sales



Total 363,260

615,310 2,283,779

- 11.0%

Percentage of overseas sales to consolidated sales

15.9%

Fiscal 2006 (UNAUDITED)

26.9% (In millions of Yen)

Europe

Others 789,575

555,107

Overseas sales Consolidated sales



16.0%

* The classification of geographic area segments is made according to the geographical distances. * “Europe ” consists of the business results mainly in United Kingdom, France, Netherlands, Germany, Italy, Spain. * “Overseas sales” represents net sales and other operating revenue of consolidated subsidiaries in countries and areas as outside of Japan.

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1,344,682 4,929,970

- 11.3%

Percentage of overseas sales to consolidated sales

Total

27.3%

CAUTIONARY STATEMENTS: This material contains forward-looking statements pertaining to strategies, financial targets, technology, products and services, and business performance of NEC Corporation and its consolidated subsidiaries (collectively "NEC"). Written forward-looking statements may appear in other documents that NEC files with stock exchanges or regulatory authorities, such as the U.S. Securities and Exchange Commission, and in reports to shareholders and other communications. The U.S. Private Securities Litigation Reform Act of 1995 contains, and other applicable laws may contain, a safe-harbor for forward-looking statements, on which NEC relies in making these disclosures. Some of the forward-looking statements can be identified by the use of forward-looking words such as "believes," "expects," "may," "will," "should," "seeks," "intends," "plans," "estimates," “targets,” "aims," or "anticipates," or the negative of those words, or other comparable words or phrases. You can also identify forward-looking statements by discussions of strategy, beliefs, plans, targets, or intentions. Forward-looking statements necessarily depend on currently available assumptions, data, or methods that may be incorrect or imprecise and NEC may not be able to realize the results expected by them. You should not place undue reliance on forward-looking statements, which reflect NEC's analysis and expectations only. Forward-looking statements are not guarantees of future performance and involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those in the forward-looking statements. Among the factors that could cause actual results to differ materially from such statements include (i) global economic conditions and general economic conditions in NEC's markets, (ii) fluctuating demand for, and competitive pricing pressure on, NEC's products and services, (iii) NEC's ability to continue to win acceptance of NEC's products and services in highly competitive markets, (iv) NEC's ability to expand into foreign markets, such as China, (v) regulatory change and uncertainty and potential legal liability relating to NEC's business and operations, (vi) NEC's ability to restructure, or otherwise adjust, its operations to reflect changing market conditions, and (vii) movement of currency exchange rates, particularly the rate between the yen and the U.S. dollar. Any forward-looking statements speak only as of the date on which they are made. New risks and uncertainties come up from time to time, and it is impossible for NEC to predict these events or how they may affect NEC. NEC does

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not undertake any obligation to update or revise any of the forward-looking statements, whether as a result of new information, future events, or otherwise. The management targets included in this material are not projections, and do not represent management's current estimates of future performance. Rather, they represent targets that management will strive to achieve through the successful implementation of NEC's business strategies. Finally, NEC cautions you that the statements made in this material are not an offer of securities for sale. The securities may not be offered or sold in any jurisdiction in which registration is required absent registration or an exemption from registration under the applicable securities laws. For example, any public offering of securities to be made in the United States must be registered under the U.S. Securities Act of 1933 and made by means of an English language prospectus that contains detailed information about NEC and management, as well as NEC's financial statements.

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