March 23, 2006 10:29 AM PST

NEC restructures operations, restates financials

Japan's NEC is restructuring its operations, the company said Thursday, a day after it announced it is restating its financials over a three year-period due to fictitious sales in its engineering subsidiary.

As part of its restructuring efforts, NEC will form a carrier network business unit to consolidate systems integration services, hardware and software development, and sales for telecommunications carriers. That unit will be one of five new business units the electronics giant is creating.

Other units include a government, community, financial and carrier solutions business unit; a software business promotions unit; an enterprise solutions business unit; and an IT platform business unit.

The electronics giant also announced a number of promotions. Kunitomo Matsuoka, NEC America president, will serve as senior vice president, effective April 1. He will also continue to serve as NEC America president, the company said.

More than two dozen NEC executives are undergoing title changes. Last week, the company announced that Kaoru Yano, former NEC senior executive vice president, will be promoted to president. He will replace Akinobu Kanasugi, who has been suffering from an illness, the company said.

NEC said it is restating financials because its net sales were artificially inflated by 36.3 billion yen, or $310 million, between March 2002 and December 2005. It alleges the actions were committed by a single employee within the engineering subsidiary.

"The false transactions relate to certain sales of products, which were actually not delivered and were fabricated by creating fictitious 'round-trip' transactions among (the engineering subsidiary) and its vendors and purchasers," NEC stated. The company added that the employee allegedly "embezzled a significant" amount of money in connection with the fictitious transactions.

NEC said it has instituted a number of measures to reduce the likelihood of a similar occurrence, such as enacting policies to confirm the existence of goods that are sold or purchased, and increased supervision by the auditing and controllers divisions.

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