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Fujitsu Reports FY 2004 Third-Quarter Financial Results

Sharp Downturn in Markets for Electronic Devices, Sluggish IT Investment in Japan Offset Overseas Gains in IT Services, Computing and Communication Platforms

Fujitsu Limited

Tokyo, January 28, 2005

Fujitsu Limited, a leader in customer-focused IT and communications solutions for the global marketplace, today reported consolidated net sales of 1,043.6 billion yen (approximately US$10,133 million*) for the third quarter of fiscal 2004 (October 1 - December 31, 2004), a decline of 2.3% compared to the same period in the previous fiscal year. Excluding the impact of restructuring last fiscal year, on a continuing-operations basis Fujitsu's third-quarter sales were flat. IT investment in Japan remained generally weak, and growth in overseas sales of IT outsourcing services, UNIX servers, personal computers, optical transmission systems, and hard disk drives was offset by sharply lower sales of semiconductors, plasma display panels (PDPs), and liquid crystal displays (LCDs) arising from deteriorating conditions in the digital home electronics market.

Consolidated operating income for the third quarter was 4.8 billion yen (US$47 million), a decline of 53% compared to the third quarter of fiscal 2003. While income from software and services and platforms businesses overseas increased, and further cost-cutting progress was achieved through stepped-up manufacturing reforms in Japan, the combination of lower market prices and sluggish growth in production volumes for semiconductors, PDPs, LCDs and other electronic components resulted in the decline in operating income.

Fujitsu recorded a third-quarter consolidated net loss of 9.5 billion yen (US$93 million), a deterioration of 17.2 billion yen compared to last year's third quarter, in which results were bolstered by significant other income on sales of investment securities.

"While there were a number of bright spots, such as strong overseas results in IT services, servers, notebook PCs, and other areas, the severity of the downturn in the digital AV market seriously impacted our chip and flat-panel display businesses and hurt our overall results," said Fujitsu Limited president Hiroaki Kurokawa. "We continued to make good progress in driving down operating costs and are determined to further intensify these efforts in order to withstand increasing pricing pressures and volatility in the segments in which we compete."

Business Segment Results

Third-quarter consolidated net sales in Software & Services were 435.9 billion yen (US$4,232 million), roughly even with the same period last year. Solid growth in overseas sales, which received a strong lift from some large-scale public-sector outsourcing projects in the UK, was offset by lower sales of solutions and systems integration services in Japan. Operating income for the segment was 14.2 billion yen (US$139 million), an increase of 6.6 billion yen from the prior year. In addition to the increase in overseas income, the improvement was attributable to the accumulated benefit of cost-cutting measures aimed at offsetting continuing pricing pressures in the Japanese market, as well as the positive effects of the restructuring of US and other overseas subsidiaries last year.

Net sales in the Platforms segment, which includes computing and communications products, were 375.3 billion yen (US$3,644 million), up slightly compared to the third quarter of last year. Weak demand and pricing pressures in Japan resulted in a 5.6% decline in domestic sales, but overseas sales rose 13.2%, driven by strong growth in sales of UNIX servers, notebook PCs, hard disk drives, and optical transmission systems. The Platforms segment recorded third-quarter operating income of 1.8 billion yen (US$18 million), an improvement of 1.7 billion yen over the third quarter of fiscal 2003, due in large part to progress in driving down production costs and raising operating efficiencies.

Third-quarter net sales in the Electronic Devices segment declined 11.0% compared to the prior year, or 9.4% on a continuing-operations basis, to 170.1 billion yen (US$1,652 million). The decline reflected the sharp deterioration in the markets for PDPs, LCDs and certain semiconductor products, including slacker demand for Flash memory. Nevertheless, thanks to intensified manufacturing reforms to boost production efficiency, Fujitsu was able to post a slim operating profit of 0.3 billion yen (US$3 million) for the quarter, a sharp decline of 15.2 billion yen from the results posted in the same period in the previous year.

FY 2004 Earnings Projections

In spite of the slowdown in business in the third quarter, higher income from stronger hardware sales, cost savings from more efficient manufacturing, and the effects of last year’s restructuring of overseas operations has helped bring about a significant improvement of more than 45 billion yen in operating income over the first nine months of fiscal 2004 in comparison with the same period last year. However, due to the impact of declining income from electronic devices, in particular flat-panel displays, the worsening of profitability in certain domestic solutions/systems integration projects, a fall-off in large public system orders that are usually clustered at the end of the year, and other factors, Fujitsu is lowering its full-year consolidated net sales projection by 100 billion yen to 4,800 billion yen, its consolidated operating income projection by 30 billion yen to 170 billion yen, and its consolidated net income projection by 15 billion yen to 55 billion yen.

Complete information on Fujitsu's fiscal 2004 third-quarter financial results, including financial tables, explanation of results and supplementary information, may be found at: http://www.fujitsu.com/global/about/ir/

Notes:
Yen figures are converted to US dollars for convenience only at a uniform rate of $1 = 103 yen, the approximate closing exchange rate on December 31, 2004.

These materials may contain forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results may differ materially from those projected or implied in the forward-looking statements due to, without limitation, the following factors:
-General economic and market conditions in key markets (particularly Japan, North America and Europe)
-Variability in high-technology markets (particularly for semiconductors, PCs, mobile phones, etc.)
-Fluctuations in currency exchange rates or interest rates
-Fluctuations in capital market
-Intensifying price competition
-Changes in market positioning due to competition in R&D
-Changes in the environment for procurement of parts and components
-Changes in competitive relationships relating to collaborations, alliances and technology provision
-Potential emergence of unprofitable projects

About Fujitsu

Fujitsu is a leading provider of customer-focused IT and communications solutions for the global marketplace. Pace-setting technologies, highly reliable computing and communications platforms, and a worldwide corps of systems and services experts uniquely position Fujitsu to deliver comprehensive solutions that open up infinite possibilities for its customers' success. Headquartered in Tokyo, Fujitsu Limited (TSE: 6702) reported consolidated revenues of 4.7 trillion yen (US$45 billion) for the fiscal year ended March 31, 2004.
For more information, please see: http://www.fujitsu.com/

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Company:Fujitsu Limited

Date: 28 January, 2005
City: Tokyo
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