Fujitsu Ltd FUJTF.PK] believes the IT market is “finally bottoming out,” despite reporting that price competition became more severe in its core IT services and hardware sectors during its second fiscal quarter.
In the three months to September 30, 2003, the Japan-based company narrowed its net loss to $169 million (Y18.8 billion) from a loss of $840 million (Y91 billion) in the year-ago quarter. Revenue grew 3.1% to $10.8 billion (Y1,203 billion).
Sales from Japan increased 1.8% to $16.4 billion (Y1,817 billion), but revenue from Europe fell 3.35% to $2.3 billion (Y255 billion), and sales from the Americas dropped 12.5% to $1.1 billion (Y126 billion). However, the company’s recent focus on its overseas operations has been to tighten costs and this was evident in improved operating profits in both Europe and the Americas, of 2.1% and 7.4% respectively.
The largest chunk of Fujitsu’s revenue came from its Software and Services business, which represented 44% of second-quarter sales. Revenue from this division fell 2.1% to (Y526 billion) $4.7 billion, and operating profit fell 3.1% to $293 million (Y32.6 billion). The profitability of some of its major IT services projects had deteriorated as cash-strapped clients looked to renegotiate more favorable contract terms.
Some 77% of Fujitsu’s Software and Services business came from its native Japan, where revenue fell 1.4% to $3.7 billion (Y405.3 billion), in spite of strong demand from the public sector. Revenue from outside Japan in this division fell 4.4% to $1.1 billion (Y121 billion) despite recent restructuring at its overseas IT services business.
Sales of infrastructure services such as server management and infrastructure outsourcing fell 4.6% during the quarter to $2.4 billion (Y267 billion), and revenue from solutions and systems integration fell just 0.6% to $2.3 billion (Y259 billion). This is surprising given that spending on outsourcing and management services has generally been more stable than investment in bespoke projects such as systems integration and consulting, which has been largely frozen in the last two years.
Fujitsu’s Platforms business grew sales 5.4% to $3.7 billion (Y412 billion), accounting for 34% of group revenue. The division reduced its operating loss to $12 million (Y1.3 billion) from a loss of $160 million (Y17.8 billion) in the second quarter of 2002, and the company highlighted that its hard disk drive business returned to profitability. Server sales fell 9.4% to $800 million (Y88.8 billion), and revenue from transmission equipment fell 15.2% to $398 million (Y44.2 billion). However, this was balanced by 15.8% growth in sales of PCs and mobile phones to $1.7 billion (Y182 billion).
Fujitsu said it had experienced strong demand for consumer PCs with enhanced audio-visual and LAN functions in its domestic market, as well as for its latest line of mobile phone handsets. It also noted solid sales of notebook PC hard disk drives overseas, and a recovery in sales of Unix servers in Europe, but added that there had been only a moderate recovery in spending from telecom carriers and large enterprises in Japan.
The best performing of Fujitsu’s three main divisions was Electronic Devices, which posted a 17% increase in second-quarter sales to $1.6 billion (Y172 billion). This operation also reported the biggest profit increase, with operating profit up 12.1% to $45 million (Y4.97 billion). Revenue from semiconductors grew 6.6% to $829 million (Y92 billion), but the real growth was driven by sales of flat screen televisions.
In the six months to September 30, 2003, Fujitsu narrowed its net loss to $528 million (Y58.6 billion) compared to a loss of $1.36 billion (Y147 billion) in the year-ago period. Revenue fell 0.4% to $19.3 billion (Y2,141 billion). Sales from the Software and Services division fell 1% to $8.2 billion (Y909 billion), and revenue from Fujitsu’s Platforms unit fell 6% in the first half to (Y724 billion) $6.5 billion, accounting for 34% of total group sales. The best performing part of the business in the first half was its Electronic Devices unit, where sales grew 15.8% to $3 billion (Y335 billion).
Looking ahead, Fujitsu said that after two years of restructuring it expects to make a net profit of $280 million (Y30 billion) in the financial year ending March 2004, on revenue that expects to grow 2.9% to $44 billion (Y4,750 billion). This represents a slight downward correction from the full-year sales forecast of $44.4 billion (Y 4,800 billion) that it gave in July.
This article was based on material originally published by ComputerWire.