ISID >> information services international

February 5, 2003

Company: Information Services International-Dentsu, Ltd. (ISID)
Company Representative: Jutaro Takinami, President and CEO
(Stock Code 4812 TSE)
Contact: Kenji Ryu, Senior Executive Director
(Tel: 03-3228-6160)
Parent Company: DENTSU INC.
Company Representative: Tateo Mataki, President & COO
(Stock Code 4324 TSE)

Revision of estimated business results for the year ending in March 31, 2003

Information Services International-Dentsu, Ltd. (ISID) announced today, in light of recent earnings trends, it revised the financial results forecast for the year ending in March 31, 2003 we initially announced on November 11, 2002.

1. Revised financial results forecast for the year ending in March 31, 2003

(1) Consolidated Financial Results Forecast

(in million yen)

	Sales	Ordinary Income/Loss	Net Income/Loss
Initial Forecast (A)	78,000	2,700	1,000
Current Forecast (B)	70,000	△1,700	△2,000
Increase/Decrease (B-A)	△8,000	△4,400	△3,000
Changes (%)	△10.3%	△163.0%	△300.0%
(cf.) Results for the year ended in March 31, 2002	72,447	5,761	2,752

(2) Non-consolidated Financial Results Forecast

(in million yen)

	Sales	Ordinary Income/Loss	Net Income/Loss
Initial Forecast (A)	59,000	2,000	800
Current Forecast (B)	54,000	△1,400	△1,400
Increase/Decrease (B-A)	△5,000	△3,400	△2,200
Changes (%)	△8.5%	△170.0%	△275.0%
(cf.) Results for the year ended in March 31, 2002	57,204	4,424	1,452

2. Reasons for revision

Even after we announced our financial forecasts for the year ending in March 31, 2003 on November 11, 2002, companies continued to suppress systems development investment spending. Although we have increased our sales efforts and have worked to reduce costs to cope with this severe business environment, we have decided to lower our forecasts since results appear likely to fall well below our previous forecast, and we are likely to post a loss. The causes for the shortfall are explained as follows:

(1) Sales-related

1) Sales growth has been weak as companies continue to suppress investment spending in systems development. The IT solutions business geared for the financial industry has been particularly hard hit, well beyond our initial expectations. As many financial companies are holding off on systems development projects, we expect sales to fall far short of our initial expectations.
2) Lost opportunities are another cause for the shortfall in sales as we have had to dispatch engineers to deal with trouble that has arisen in existing systems development projects.

(2) Profit-related

Profits have fallen for the following reasons:
1) Gross profits have fallen due to lower sales as companies have delayed investment projects.
2) Cost of sales has expanded as we have had to deal with trouble that has surfaced with existing systems development projects.
3) Gross margins have deteriorated due to price pressures and an unfavorable change in the sales mix.

(3) Consolidated subsidiary-related

As for our consolidated subsidiaries, earnings have deteriorated at Brainyworks, Ltd. and we expect the subsidiary to produce a loss this fiscal year. Sales at Brainyworks?which specialises in IT solutions for the financial industry?have dropped significantly as financial institutions continue to suppress investment spending. Additionally, earnings have been severely impacted by some development projects that have become unprofitable, as well as by accompanying opportunity losses.

Of course we continue to strive to be more thorough in choosing projects that fit our core competencies, and we have focused our sales efforts on those systems development investment themes that are most important to our customers. Additionally, through a reduction in personnel and outsourcing costs, and other cost management measures, we expect to reduce costs by as much as ¥1 billion in parent for the fiscal year, relative to initial plans. Unfortunately, these efforts have not been enough to compensate for the drop in gross profits on the back of lower sales, and for the increase in cost of sales resulting from trouble arising in existing systems development projects. As a result, we expect to post a loss at the operating, ordinary, and net income levels.

3. Measures to improve future results

Considering our lowered earnings forecast for the current fiscal year, we intend to implement the following measures to increase sales and improve profitability.

(1) Strengthen sales efforts

We do not expect an improvement in the operating environment for our business any time soon. With this in mind, we intend to approach clients more aggressively, offering IT solutions to clients' management obstacles. We expect these efforts will lead to greater orders. Additionally, in order to bolster our sales efforts, the company president himself will take charge of the sales team, pushing for greater sales and profits.

(2)Improve systems development quality

Various systems trouble caused some projects in the first half of the current fiscal year to become low-margin; a trouble continued, and even expanded, in the second half. We are currently examining why this trouble occurred in the first place, and why it worsened in the second half. Also, in order to improve quality and strengthen development management, we will implement comprehensive measures to prevent any reoccurrence of such trouble, including the establishment of a development management structure where directors are held responsible, the systemization of project management, and the restructuring of our project management education program.

(3)Lower costs

We intend to implement measures that will enable us to establish a lower cost structure to cope with pricing pressures. We plan to further reduce personnel costs, outsourcing costs, as well as other miscellaneous costs.

We have already advanced to the implementation stage for several of the aforementioned measures. We will do our best to improve earnings for the current fiscal year up to the very last day of this fiscal year.

We sincerely regret that we have had to revise our earnings forecasts for the second time this fiscal year. By faithfully implementing the aforementioned measures, we hope to provide continuous returns to our shareholders and other stakeholders throughout the future.

(Note)
Sales and profit projections in this report are based on information (industry trends, client information, etc.) available to management at the time this report was prepared. As such, these projections contain risk and uncertainty. Readers should be aware that actual sales and profits may differ from these projections.