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Fujitsu Limited


Fujitsu Reports FY 2006 Financial Results

Sales and income rise on strong performance in IT services though profit growth constrained by difficult pricing environment for product businesses


Tokyo, April 26, 2007 — Fujitsu Limited, a leader in customer-focused IT and communications solutions for the global marketplace, today reported consolidated net sales of 5,100.1 billion yen (approximately US$43,222 million*) for fiscal 2006 (April 1, 2006 - March 31, 2007), an increase of 6.4% over the previous fiscal year. Each of the company’s three main business segments as well as all of its key geographic segments posted higher sales. Sales in the Services sub-segment increased by 8.3%, with particularly strong results overseas, where sales increased by 23.9%.

Higher sales in the company's main business areas and continued progress in company-wide manufacturing innovation and cost reduction initiatives helped offset severe pricing pressure in several product businesses, including telecommunications equipment, servers, PCs, and hard disk drives. As a result, Fujitsu managed to post consolidated operating income of 182.0 billion yen (US$1,543 million), a slight increase over the previous year. The Services sub-segment once again led the way, with operating income of 156.1 billion yen (US$1,323 million), an increase of 27.6 billion yen over fiscal 2005.

During the period, Fujitsu's Internet service provider subsidiary, NIFTY Corporation, carried out an initial public offering, and the sale of a portion of Fujitsu's shareholdings in the company together with sales of its shareholdings in Fanuc Ltd. And other affiliates led to a gain of 77.3 billion yen on the sale of marketable securities. This, together with a significant reduction in expenses for amortization of unrecognized obligation for retirement benefits and other factors, led to record-high consolidated net income of 102.4 billion yen (US$868 million), an increase of 33.8 billion yen over fiscal 2005.

"Solid performance in our IT services business and in overseas markets enabled us to deliver higher sales and profits in fiscal 2006, although higher than anticipated pricing pressure caused us to fall short of our initial operating income targets,” said Fujitsu Limited president Hiroaki Kurokawa. "We have the organization in place to drive further growth in global markets, and our investments in next-generation technologies position us well to take advantage of new market opportunities. Moreover, we enter fiscal 2007 with a strong balance sheet and the determination to deliver value to our customers by providing them with the tools they need to promote innovation on the front lines of their organizations."

Business Segment Results

Consolidated net sales in the Technology Solutions segment, which includes the System Platforms and Services sub-segments, increased 5.8% over fiscal 2005, to 3,157.0 billion yen (US$26,754 million). Higher sales in the Services sub-segment, both in Japan and especially in overseas markets, as well as higher overseas sales of UNIX servers contributed to sales growth, despite weaker sales of telecommunications equipment. Operating income for the segment was 163.6 billion yen (US$1,386 million), an increase of 10.5 billion yen over the previous fiscal year. Operating profits in the Services sub-segment increased by 21.5%, driven by higher profitability in systems integration projects in Japan and continued solid performance by Fujitsu Services in the UK.

Net sales in the Ubiquitous Product Solutions segment, which includes PCs, mobile phones, hard disk drives (HDDs), and other products, were 1,118.3 billion yen (US$9,477 million), an increase of 5.5% over fiscal 2005. Robust overseas sales of HDDs were a major contributor to this increase, with record-high shipment volumes of HDDs for notebook PCs and servers. Sales of mobile phones increased solidly, but sales of PCs, impacted by intensified price competition, were sluggish. Operating income for the Ubiquitous Product Solutions segment was 41.6 billion yen (US$353 million), an increase of 6.8 billion yen compared to the previous fiscal year. Despite pricing pressures in the markets for PCs and HDDs, enhanced cost efficiency and quality improvements helped to achieve higher profitability.

Net sales of Device Solutions, which include LSI devices, electronic components and other devices, were 762.6 billion yen (US$6,463 million), an increase of 7.8% compared to fiscal 2005. In addition to continued strong sales of electronic components, the start of full-scale operation at the company's new 300mm wafer logic chip production facility contributed to higher sales. Operating income for Device Solutions was 19.0 billion yen (US$161 million), a decrease of 10.4 billion yen compared to the previous fiscal year. Higher amortization costs associated with investments in new production facilities and the impact of sluggish sales of devices for the digital AV market contributed to the decline in operating income.

FY 2007 Projections

In fiscal 2007 (April 1, 2007 - March 31, 2008), Fujitsu anticipates higher sales and a slight increase in operating income, driven primarily by expected continuing strong performance in the Services sub-segment, both in Japan and overseas. Since the record-high net income posted in fiscal 2006 included one-time gains on the sale of marketable securities, the company is projecting lower net income in fiscal 2007. The company plans to implement a number of accounting changes in fiscal 2007, primarily affecting inventory valuation and asset depreciation methods. When the impact of these changes has been calculated, the company will update its fiscal 2007 projections to reflect these changes. The following forecast of consolidated financial results for fiscal 2007 does not reflect these changes:

Fujitsu Limited Consolidated Earnings Forecast for Fiscal 2007

(billion yen)
FY 2007 (forecast) FY 2006 (actual) Change
Net Sales 5,400.0 5,100.1 5.9%
Operating Income 190.0 182.0 4.3%
Net Income 75.0 102.4 -26.8%

Complete information on Fujitsu's FY 2006 financial results, including financial tables, explanation of results, and supplementary information, may be found at: http://www.fujitsu.com/global/about/ir/

Note:

*All yen figures have been converted to U.S. dollars for convenience only at a uniform rate of US$1 = 118 yen, the approximate closing exchange rate on March 31, 2007.


About Fujitsu

Fujitsu is a leading provider of customer-focused IT and communications solutions for the global marketplace. Pace-setting device technologies, highly reliable computing and communications products, 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 5.1 trillion yen (US$43.2 billion) for the fiscal year ended March 31, 2007.
For more information, please see: www.fujitsu.com


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