Yokogawa Electric Corporation has been restructuring its businesses and innovating new group management practices as called for by its corporate strategy, VISION-21 and ACTION-21, which was announced in January 2000. With this corporate strategy, Yokogawa set fiscal year 2005 as its first milestone and targeted the achievement of an operating income of 50 billion yen. To achieve this goal and to sustain growth, the company will continue its restructuring by integrating the businesses of three subsidiaries.

Business Reorganization for Future Growth
The basic concept of the corporate strategy, VISION-21 and ACTION-21, is that the Yokogawa Group will become a solution provider that helps customers manage their businesses more efficiently by providing them core measurement, control, and information technologies. True to this concept, Yokogawa has striven to understand each customer’s needs and to strengthen its ability to solve whatever issues the customer faces.

To achieve the management goal for fiscal year 2005 and to position the company by fiscal year 2010 as a high value added, high growth solution provider with core technologies in measurement, control, and information, Yokogawa is accelerating its efforts to restructure its businesses. This restructuring consists of a business reorganization focusing on the company’s main business lines of measurement and control, the consolidation and merger of subsidiaries, and the redistribution of management resources. Human resources in the indirect business operations of Yokogawa and its subsidiaries will be relocated to make the best use of these assets.

Basic Strategies and Goals for the Measurement and Control Businesses
1. Basic Strategies and Goals for the Measurement Business
For the measurement business, which consists of the communication, test and measurement, and automatic test equipment (ATE) segments, the strategy will be to focus on those products and segments that add the highest value. The products in the communications and the test and measurement segments that meet this requirement have been designated as waveform, optical, digital, and wireless measuring instruments. The ATE segment has also been designated as one that adds high value and it will be strengthened.

The allocation of management resources such as research and development staff to the communications, test and measurement, and ATE business segments will be coordinated to ensure that resources are used in the most timely and appropriate fashion, thereby strengthening our position in a highly competitive market.

In the test and measurement business segment, Yokogawa aims to become one of the top three suppliers in the world by fiscal year 2008. In the ATE segment, the company is set on exceeding a 50% share of selected markets by fiscal year 2005.

2. Basic Strategy and Goals for the Control Business
In the control business, attention will be paid on the following three broad areas: overseas markets, high value added products, and business solutions.  Business resources will be invested in priority world markets, with China receiving particular emphasis.  Competitive products will be introduced to the market continuously. Our ability to extend solutions throughout the life cycle of our products will be enhanced. With these strategies, the company aims to exceed a 50% share of the Japan industrial automation market and to achieve the top share in the world industrial automation market by fiscal year 2010.

Overview of Restructuring
1. Consolidation of service business
Effective April 1, 2004, the service business of Yokogawa Engineering Service Corporation will be integrated into Yokogawa and its employees will be reassigned to Yokogawa and other Group companies. This change aims at integrating the marketing, sales, engineering and service functions for the measurement, control and information businesses, so as to establish an organization that is truly capable of providing a total solution to our customers throughout the lifecycle of our products. The company believes that this move will make each business more valuable and profitable.

The formal transfer of the service business from Yokogawa Engineering Service to Yokogawa will take place on October 1, 2004.

The remaining businesses of Yokogawa Engineering Service such as repair, calibration, and parts supply will be integrated into Yokogawa Electronics Manufacturing effective April 1, 2004 and the formal transfer of these businesses to the latter will take place on October 1, 2004.

2. Consolidation of Communication, Test and Measurement Businesses
Effective April 1, 2004, Ando Electric Co., Ltd. will be consolidated into Yokogawa. Research and development resources at the Kofu plant and Ando Electric’s offices will be relocated to Yokogawa headquarters around the end of June. Effective October 1, 2004, Ando will formally merge with Yokogawa.

This reorganization will consolidate sales and development resources and enhance our ability to quickly adjust development strategy in response to changes in the market.

The employees of Ando will be assigned to Yokogawa and its group companies.

3. Strengthening of Control Business
The control business of Yokogawa M&C Corporation will be consolidated into Yokogawa effective April 1, 2004. Its employees will be reassigned to Yokogawa and its group companies. This reorganization aims to strengthen research and development by relocating product development resources, to enhance sales efficiency by unifying the sales channels of Yokogawa and Yokogawa M&C, and to rationalize indirect business activities.

The control business of Yokogawa M&C will be formally transferred to Yokogawa effective October 1, 2004. Its measurement business will remain at Yokogawa M&C.

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