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Excerpts from the Confidential Client Edition
Analysis of Fujitsu’s First Half Fiscal 2005 Business Results
Solid Hardware Growth Led by Electronics; Japan Drags Down Services
PHOENIX, Nov 29
– Fujitsu’s first half fiscal 2005 results signaled a continuation of
the recovery that had led to the company’s return to black last year
after two years of bleeding red ink (see Fujitsu:
Back in the Black, But..., Aug 2004).
The top Japanese computer vendor reversed an operating loss of $170
million from the first half of last year, turning it into an operating
profit of $323 million on revenues of $21.6 billion, up 6.7% (in U.S.
dollars; up 3.6% in yen).
The reversal was due to a 90% surge in its second quarter operating profit relative to the same period a year ago. All three major Fujitsu operating units posted surpluses for both the second quarter and for the first half of the current fiscal year (ending March 31).
Services & Software. This unit’s profitability suffered a 1.5-point margin decline, ending the first half of fiscal 2005 with a 1.7% operating margin on an anemic 1.2% increase in revenues (up only 0.8% in yen). Nevertheless, at $20 billion on an annualized basis, Services and Software continues to be Fujitsu’s largest business unit, accounting for 42% of total business. And that now makes it Fujitsu’s biggest challenge, especially in the domestic (Japanese) market.
Platforms. Both Fujitsu major hardware units – Platforms and
Electronic Devices - exceeded the company’s initial targets for fiscal 2005.
But “due to anticipated deterioration in the market conditions
for semiconductors, displays and mobile phones in the second half,”
Fujitsu expects the full-year 2005 results “to be roughly in line”
with its earlier projections.
In other words, the company expects to do worse than expected in the second half. Such pessimism seems strange especially coming at a time when Fujitsu’s biggest rival and an unwitting role model – IBM – is burning the track again with its servers’ performance (see “Server Renaissance,” Nov 2004). Is Fujitsu trying to lower the bar so it could clear it more easily come March 31? (the end of its current fiscal year).
Electronic Devices. The Electronic Devices unit was the “hero” of Fujitsu’s first half. Its revenues surged by 34% in Japan, and by 19% overseas, for a combined growth rate of 27%. Within that, the semiconductor sales jumped by 21%, while other component business revenues increased by 14%.
Speaking of overseas growth, that’s what Fujitsu needs more than anything in order to become a truly global leader. That’s especially true in the IT services sector, where its sheer size and the No. 2 ranking already imply leadership. And there is a way of even doing it in one fell swoop. But it would take boldness and courage.
Do Fujitsu’s current leaders have it?
We don’t know. Time will tell, as we said.
But we are pretty sure that Taiyu Kobayashi would not hesitate to
make a bold move.
Who is Taiyu Kobayashi? He is the legendary Fujitsu leader from the early 1980s who wrote a book on courage. Literally. The book’s title was, “Fortune Favors the Brave.” Maybe Messrs. Akikusa and Kurokawa will take a page out of his book? Also, literally.
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