CEO Comment Volume 38, 2008.08
DG Group's Business Reorganization and New Mid-Term Three-Year Plan
Adaptation to Changing Business Environment toward Evolution over Next Three Years
As approved at the board meeting on August 27, we announced the Digital Garage Group's business reorganization as well as the merger of the "B2B Solutions business" and the "New DG Group Mid-Term Management Plan."
Our business environment is changing drastically, as evidenced by the changes in the global economic environment and revisions of rules concerning listed corporations, for example. Amid these circumstances, based on our recognition that changes in the Internet business occur one step ahead of other industries, we have decided to implement a bold reorganization of our businesses with the exception og the "portal/ blog segment" driven by Kakaku.com, which is steadily generating profit.
At this time, we have decided to reorganize and integrate businesses targeting "B 2B customers," which are expected to be affected by intensified competition resulting from the economic slowdown. After being approved at the shareholders' meeting, Digital Garage is planning to shift from its current status of being a pure holding company to an operating holding company based on the structure indicated below.
Excerpts from our briefing material
1) DG Group mid-term overall strategy
2) Factors behind the business integration
3) New structure under the new Digital Garage as an operating holding company
As a result, our five group companies will be integrated into the parent Digital Garage, with cost and financial synergy of about 2.6 billion yen expected over three years. The details are contained in the section on integration synergy in our mid-term business plan.
Specifically, DG&Ibex, Inc., DG Media Marketing Inc. and Creative Garage, Inc., major subsidiaries in our solution segment, as well as ECONTEXT Inc., our subsidiary listed on the Hercules market that provides settlement solutions in our current finance segment, will be merged with holding company Digital Garage. (The new Digital Garage plans to introduce dual company organizations, where each business company will continue to make their decisions through company management meetings, just like independent companies.) Positioning the new Digital Garage, which fuses IT with MT and FT, as a "Hybrid Solutions Partner," we will strive to make a contribution to the world as a solutions partner of diverse companies, as "a group of experts on digital marketing and businesses" and as the only entity that seamlessly links IT formation, promotion and settlement.
In addition, Sogei Co., Ltd. will integrate DG Media Marketing's Web advertisement division and start operating based on the orientation of "Media Neutralality" under the new company name of "DG Communications" and new board members.
Please refer to "The concept and mission of the integrated company" for more details.
We also raised our estimates for both "parent-only" and "consolidated" results for this fiscal year in our "New Mid-Term Management Plan," projecting "consolidated sales of 55.5 billion yen," "consolidated recurring income of 7.3 billion yen" and "consolidated net income of 3.4 billion yen" for the fiscal year ending June 2011.
Please refer to "Summary of the mid-term management plan" (PDF) for more details.
The charts below show an overview of the DG Group after the reorganization. The new group will consist of "B2B: DG business holding company," "B2C: portal blog" and "Future/incubation" segment groups.
This is the "new group formation chart" aimed at reconfirming the "total and partial optimization" and "centripetal and centrifugal force" of our group management over the next three years, while objectively assessing each new rule and change in the economic environment surrounding the management of our businesses.
Both the board members and employees of the Digital Garage Group intend
to endeavor to expand our business of providing "useful contexts
to the world" under the new organization. We sincerely appreciate
your continued support and guidance.
