Internet Initiative (NASDAQ:IIJI)

TOKYO, April 2, 2012 (GLOBE NEWSWIRE) -- Internet Initiative Japan Inc. (IIJ) (Nasdaq:IIJI) (TSE1:3774), one of Japan's leading Internet access and comprehensive network solutions providers, today acquired the stocks of Exlayer Global Inc.("Exlayer Global") from its existing shareholders. Exlayer Global is a holding company with overseas subsidiaries in the system integration industry. The newly acquired company will begin its operation as IIJ's subsidiary under the name IIJ Exlayer Inc.

Exlayer Global owns five overseas subsidiaries and has developed its business with high engineering skills in the SI and IT project management fields and with its reliabilities. Their strength lies in their business development ability in many countries, and with its strong presence among Japanese-owned local corporations, Exlayer Global has been steadily expanding its business.

IIJ, together with IIJ Global Solutions Inc., one of its subsidiaries, is expanding its overseas offices mainly in Asia and is accelerating its global business development by providing services such as Cloud services in the United States, China, and Asia. For IIJ Group to further accelerate its global business, IIJ has decided to make Exlayer Global its subsidiary. We believe the expertise and human resources that Exlayer global and its group companies had built could better help IIJ Group to accelerate its international business development.

IIJ Exlayer will continue to leverage IIJ Group's Cloud services and wide range of network solutions to strengthen business infrastructure in foreign countries and leads IIJ Group's international business development together with IIJ and IIJ Global.

TOKYO, March 12, 2012 (GLOBE NEWSWIRE) -- Internet Initiative Japan Inc. ("IIJ") (Nasdaq:IIJI) (TSE1:3774) and China Telecom Corporation Limited (China Telecom) today announced that they have forged a strategic partnership to jointly provide Cloud computing services in China. As part of the partnership, the two companies plan to develop Cloud computing services such as IaaS, PaaS and SaaS, and aim to provide them to the Chinese market from summer 2012.

IIJ has long experience in providing resource on-demand services, a prototype service for Cloud computing from 2000. From 2009, IIJ began providing Cloud computing service under the brand name "IIJ GIO" which covers layers from IaaS to SaaS. Currently,IIJ GIO has been recognized as No.1 Cloud computing service in Japan and is adopted by over 600 Japanese blue-chip customers. From 2011, IIJ has strengthened its overseas business and considers China to be one of the most important markets in Asia.

China Telecom is the largest carrier in China that provides an array of telecommunications-related services, from voice, internet connectivity to wireless services and also owns and operates data centers facilities across the country. With its elaborate network infrastructure, China Telecom provides services to around 170 million local line subscribers.

To make the most from this strategic partnership, IIJ and China Telecom will jointly provide high quality and flexible Cloud computing services in China, as is provided in Japan, by exploiting IIJ's abundant experiences in providing Cloud computing service and utilizing the largest and strongest network infrastructure that China Telecom owns throughout China. China Telecom will offer its data center and network infrastructure and IIJ will build and operate the Cloud computing platform.

Many Japanese companies are operating businesses in China and there would be demands for Cloud computing services. Also IIJ and China Telecom believe there are potential demands especially for IaaS from Chinese companies. We will cooperate together in developing and operating many great services most suited in the Chinese market.

IIJ Global Solutions China Inc., which is a Shanghai-based subsidiary of IIJ Global Solutions Inc., a subsidiary of IIJ, was established on January 6, 2012, and it will serve as a contact point for providing the above-mentioned services to the Japanese companies in China.

Third Quarter 2011 Results

Revenues were JPY70,752 million, up 24.6% YoY.

Net income attributable to IIJ was JPY2,390 million, up 19.7% YoY (JPY1,997 million in 3Q10).

"Outsourcing trend for Japanese IT systems has been a tailwind for us. Our business continued to show steady growth and we remain confident with our overall business strategy. For this fiscal year, we have some cost burden related to our new services and projects, especially cloud computing, FX services and ATM operation business, yet they are showing good progress so far and would contribute to income growth next fiscal year," said Koichi Suzuki, President and CEO of IIJ.

"Regarding our cloud computing service "IIJ GIO", the numbers of clients are continuously increasing and leveraging our client bases, we are now providing "IIJ GIO" to many blue-chip companies such as NTT DOCOMO, Nippon Life Insurance, Sumitomo Forestry, Japan Mint, Tokyo Stock Exchange, Ricoh and more. Transaction volumes from Social Game Provider are also increasing alongside with their increasing usage. Cloud computing revenues for the 9 months ended December 2011 has reached over 2 billion yen."

"Related to our global business expansion, IIJ-Global has established a subsidiary in Shanghai, China in January 2012. As a Group, in effort to meet and supply demands from Japanese companies that are making inroads into foreign market, we will continue to expand our global network services. We are now providing private cloud computing service in the United States to our largest Japanese Social Game client and we expect to bring our cloud computing service to the Asian region soon."

"Systems construction revenues for this third quarter decreased YoY as orders received in the second quarter were low affected by the weak Japanese economic situation. However, we accumulated order backlogs during this third quarter and expect revenues to realize going forward."

FY2011 Financial Targets

During the nine months ended December 31, 2011, our revenues, especially for systems integration and ATM operation business were below our initial target. Systems integration projects were generally mid- to-small sizes reflecting the cautious attitude towards systems investment due to weak Japanese economic situation. As for ATM operation business, revenue and income are continuously improving quarter by quarter with the increasing number of ATMs in place, but the progress was slower than our initial expectation. Profit level is in line with our initial target due to cost control, despite the increase in initial investment related to our cloud computing services.

Considering our FY2011 nine months results and the weak order backlog for systems construction and equipment sales, we changed our full FY2011 revenue target from JPY1,000 million to JPY970 million. Targets for operating income, income before income tax expense and net income attributable to IIJ remain unchanged.

First Quarter 2011 Results

• Revenues were JPY23,362 million ($290 million), up 47.7% YoY. Our overall business grew and there were additional revenue from IIJ Global Solutions ("IIJ-Global"), a consolidated subsidiary from Sep. 1, 2010. Network service was up 66.8% YoY and systems integration ("SI") was up 15.4% YoY.
• Operating income was JPY915 million ($11 million), up 244.2% YoY due to IIJ-Global, increase in gross margin for our network service and the decrease in operating loss related to the ATM operation business.
• Net income attributable to IIJ was JPY512 million ($6 million), up 107.4% YoY.

"We recorded a strong and very encouraging first quarter growth in a volatile economic environment. Revenue and operating income for this quarter was the highest 1^st quarter results recorded," said Koichi Suzuki, President and CEO of IIJ. "In addition to the contributions from IIJ-Global, we have seen continuous growth in our overall business, including SI, despite the weakened Japanese economic momentum after the March11 Earthquake. Followed by various outsourcing needs, our recurring revenues continued to accumulate and contributed to steady business growth."

"As for our cloud computing service, it continued to deliver strong performance from the first quarter. Although cloud computing services have just begun in Japan and our customers are mostly Social Application Providers at the moment, we are helping more Japanese blue-chip companies build their new systems using our cloud computing service. Currently, we are servicing nearly 600 cloud computing projects and monthly revenue from our cloud computing services for June 2011 has reached over JPY180 million from JPY120 million for March 2011. For FY2011, we target our cloud computing service to earn over JPY3 billion in revenues."

"Due to stronger demands, we will further invest in cloud computing-related facilities such as the 'Matsue Data Center' and other service facilities to drive future growth and augment competitive advantage."

"In addition, we have opened the new lease based data center in the Kansai region, the 'Kozu Data Center', to meet the increasing demands for data center facilities in relation to BCP (Business Continuity Plan) and disaster recovery needs."

"For the coming quarters, we expect our outsourcing services and cloud computing-related services to grow steadily. We will continue to be best positioned as one of the leading total network solutions provider in Japan for those in need for network service, outsourcing service and systems integration."