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Earnings Results Briefing for the Second Quarter Ended September 30, 2009


Business results (consolidated)

The Vector Group posted net sales of 1,883,094,000 yen for the first six months of the 22nd term, up 14.8% from the corresponding period of the previous fiscal year (from April 1, 2008 to September 30, 2008; hereinafter the abbreviation “y-o-y” is used). Operating income was 163,901,000 yen, up 1,928.7% or about 20 times y-o-y, and ordinary income increased 797.2% or approximately nine times y-o-y to 171,112,000 yen, thanks to non-operating income of 7,210,000 yen.
Net income before taxes was 171,329,000 yen, up 1,285.4% or about 14 times y-o-y.
As a result, net income after corporate tax was 151,339,000 yen (in stark contrast with the net loss of 16,963,000 yen posted in the corresponding period of the previous fiscal year).

Internet sales business

Sales at the mainstay Internet sales business were 1,085,787,000 yen, down 6.5% y-o-y. The Internet sales business is a personal consumption-related business and influenced by the overall economic situation. In the software download sales field, mobile PCs, such as Net books, emerged, and this drastically changed demand for PCs. However, the degree of consumers’ interest in software decreased, and this was combined with a lack of demand for new PCs prior to the launch of Windows 7. Accordingly, sales from the Pro-Reji service fell 20.6% y-o-y to 574,361,000 yen, and sales from the Share-Reji service also fell 18.3% to 13,015,000 yen.
Meanwhile, in the software package and hardware sales sector, which deals with mainly PC peripherals, package software and household appliances, sales increased 18.2% y-o-y to 498,410,000 yen, thanks to our sales at major online shopping malls such as Yahoo, Rakuten Ichiba and Amazon.
However, this Net mail-order sector suffered from low profitability, though improving, because of an increase in low-gross-profit merchandise amid price-cutting competition and the burden of commissions paid to operators of online shopping malls where the sector sells products that accounted for 80% of total sales.

Note: Net sales at the Share-Reji service (provision of software prepared primarily by individual authors) of the software download sales sector consist only of commissions from users and authors (users pay a certain amount of commissions for each use, while authors pay an amount obtained by multiplying a certain rate by sales prices of software). Sales prices of software are an element of net sales from the Pro-Reji service (procurement and sales of software prepared by corporate authors, such as software houses, according to users’ orders).

Online game business

The Group pours its efforts and resources into the online game business as the secondary core business. Sales in this business soared 102.9% or about double those of the previous fiscal year, to 634,194,000 yen. This increase is attributable to the fact that we newly started operating browser games (online games that can be run on browsers without needing to download them). For these games we started up the specialty portal site Browser Game Time at the beginning of the current fiscal year, in addition to conventional online games (played by downloading client software). Of conventional online games, sales of seven titles including Sangoku Heroes, whose service formally started in April 2009, were robust. Of browser games, two titles including Dragon Crusade sold well.
In addition, new mobile games which can be played on cell phones without using applications, made a good start from their launch in August 2009. As a result, the ratio of the online game business to the Group’s net sales rose to 33.7% for the period under review, up from 19.1% in the previous fiscal year. As the sharp growth in sales offset an increase in fixed expenses, the online game business turned a profit.

Site advertisement sales business

Sales of the site advertisement sales business sector were 97,685,000 yen, down 14.7% y-o-y, affected by the sluggish economy. Of advertisements put on the website that the Company operates, keyword ads, which account for one-third of the sector’s total sales, were strong until a year ago. After that, however, sales of keyword ads decreased rapidly, and fell 32.2% y-o-y. The ratio of keyword ads to total sales of the sector was 27.3% (down from 34.1% in the corresponding period of the previous fiscal year).

Other businesses

Sales from other businesses were 65,426,000 yen, up 24.1% y-o-y. The reason for this increase is that sales of the comprehensive support service for download sales for software houses, which made up 78% of total sales of other businesses, jumped 49.6% y-o-y.

Press Releases » 2009

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