January 23, 2008

Notice on revision of the performance forecasts

We hereby inform you that we have upwardly revised our consolidated performance forecasts and non-consolidated performance forecasts for the fiscal year ended December 2007 (January 1, 2007–December 31, 2007), which we announced in “Notice on revision of the performance forecasts” on July 25, 2007. Details of the latest revision are as follows:

Statement

1. Revision of the forecasted performance values for the fiscal year ended December 2007 (January 1, 2007–December 31, 2007)

(1) Consolidated performance forecasts

Sales Operating income Ordinary income Net income Net income per share Previously announced forecast (A) Millions of yen
5,800 Millions of yen
22 Millions of yen
10 Millions of yen
−110 Yen
−1,239.52 Revised forecast (B) 5,851 118 137 −51 −581.38 Increase or decrease in amount (B – A) 51 96 127 59 658.14 Percentage change (%) 0.9% 438.9% 1,277.7% － － Reference: Actual performance in the same period of last year
(period ended December 2006) 5,125 −13 −16 −184 −2,249.72

The Company acquired all the shares of SteelEye Technology, Inc. in June 2006, and made it a consolidated subsidiary. SteelEye’s income statement has been consolidated since the second half of the fiscal year ended December 2006.

(2) Non-consolidated performance forecasts

Sales Operating income Ordinary income Net income Net income per share Previously announced forecasts (A) Millions of yen
5,180 Millions of yen
160 Millions of yen
148 Millions of yen
55 Yen
619.76 Revised forecasts (B) 5,136 225 231 100 1,132.75 Increase or decrease in amount (B – A) −44 65 83 45 512.99 Percentage change (%) −0.8% 41.1% 56.1% 82.8% 82.8% Reference: Actual performance in the same period of the previous year(period ended December 2006) 4,843 79 72 −84 −1,033.24

2. Reasons for the revision

Sales of LifeKeeper1, a product of our U.S. subsidiary SteelEye Technology, Inc. (hereinafter referred to as “SteelEye”), expanded steadily thanks to the efforts to expand sales in the markets in Japan, the U.S. and Europe, and also because the software business including Red Hat Enterprise Linux2 remained steady in the Japanese market.
As a result, in our consolidated performance, we expect sales to increase 5,851 million yen, up 0.9% from the previously announced forecast. Also, we expect operating income to increase to 118 million yen, 5.4 times our previously announced forecast. We expect ordinary income to increase to 137 million yen, 13.8 times our previously announced forecast, and net income to improve to −51 million yen, up 59 million yen from our previously announced forecast. This is because the 320 million yen posted in “goodwill depreciation and amortization” that has arisen because of our acquisition of SteelEye will be absorbed as a result of reducing the costs of goods sold and sales and administrative costs, in addition to the fact that sales of LifeKeeper, whose profit ratio is high, were higher than we had expected.
Looking at our non-consolidated performance, we expect sales to be 5,136 million yen, which is roughly in line with our plan, and we expect operating income to be 225 million yen, an increase of 41.1% from our previously announced forecast. In addition, we expect ordinary income to be 231 million yen, an increase of 56.1% from our previously announced forecast, and net income to be 100 million yen, an increase of 82.8% from our previously announced forecast.

*1 LifeKeeper
LifeKeeper is HA (High Availability) cluster software developed by SteelEye Technology, Inc., a U.S. subsidiary of the Company. In addition to a production server, the software lets a spare server with the same operating environment act as a standby, and in the event of a system failure the spare server then automatically takes over the tasks that the production server used to perform.

*2 Red Hat Enterprise Linux
Red Hat Enterprise Linux is a type of Linux OS developed by Red Hat, Inc., the world’s biggest distributor of Linux OS.

Note: The above-mentioned performance forecasts have been prepared based on the information available at the time, and they include many uncertain factors. Actual performances may differ from the forecasts for various reasons.