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Fujitsu Reports FY 2004 First-Half Financial Results

Operating Income Up Sharply on Continued Cost Reductions and Sales Gains in System Chips and 3G Base Stations

Fujitsu Limited

Tokyo, October 28, 2004

Fujitsu Limited, a leader in customer-focused IT and communications solutions for the global marketplace, today reported consolidated net sales of 2,220.0 billion yen (approximately US$20,182 million*) for the first half of fiscal 2004 (April 1 - September 30, 2004), an increase of 3.6% over the same period last year. Double-digit sales increases in system chips, 3G mobile phone base stations, and hard disk drives were offset by lower than expected sales of mobile phone handsets and solutions and systems integration services. Excluding the impact of restructuring last fiscal year, on a continuing operations basis Fujitsu's first-half net sales increased by 8.1%.

In a market characterized by gradually increasing corporate IT investment but severe price competition, Fujitsu has continued to aggressively pursue cost reductions and greater operational efficiencies. Together with higher sales, these efforts have resulted in successive major gains in operating income. Following a much-narrowed operating loss in the first quarter of the current fiscal year, second-quarter operating income jumped nearly 90% over the same period in the previous year, to 37.6 billion yen. As a result, consolidated operating income for the first half was 33.2 billion yen (US$303 million), rebounding by 51.2 billion yen from the operating loss recorded in the first half of fiscal 2003. All three of Fujitsu’s main business segments - Software & Services, Platforms, and Electronic Devices - posted operating profits for both the second quarter and the first half.

With regard to net income, Fujitsu recorded a 3.6 billion yen (US$33 million) net profit for the second quarter, its first second-quarter net profit since fiscal 2000. However, this was not enough to offset the net loss in the first quarter, and Fujitsu reported a first-half consolidated net loss of 8.1 billion yen (US$74 million) - nevertheless, a major improvement of 50.4 billion yen over the first half of fiscal 2003

"We're continuing the momentum of our corporate-wide turnaround, with profitability now restored in all three major business segments as well as in each of our principal geographies," said Fujitsu Limited president Hiroaki Kurokawa. "Although market uncertainties and price competition make it difficult to achieve substantial sales growth in the current environment, we are determined to continue to drive down costs to achieve solid bottom-line performance."

Business Segment Results

First-half consolidated net sales in Software & Services rose slightly over the first half of fiscal 2003, to 916.5 billion yen (US$8,332 million). Higher sales of infrastructure services, including some large-scale public-sector projects in the UK, were partially offset by lower sales of solutions and systems integration services in Japan. Operating income for the segment was 15.5 billion yen (US$141 million), down 13.3 billion yen from the prior year. Overseas, Fujitsu Services and Fujitsu Consulting both saw improved profitability. However, in the Solutions/Systems Integration sector in Japan, continuing pricing pressures outpaced progress in cost cutting, and there were new or additional losses in conjunction with some system development projects.

Net sales in the Platforms segment, which includes computing and communications products, were 787.9 billion yen (US$7,163 million), an increase of almost 9% over the first half of last year. Base stations for 3G mobile phone systems posted particularly strong sales gains, as did financial terminals able to accommodate new banknotes in Japan and hard disk drives. The Platforms segment recorded a first-half operating profit of 3.7 billion yen (US$34 million), an improvement of 24.4 billion yen over the operating loss recorded in the first half of fiscal 2003. In addition to gains from higher sales in the previously mentioned product sectors, progress in cutting costs and improving operating efficiencies led to improved profitability for servers, IP network equipment and optical transmission systems.

First-half net sales in the Electronic Devices segment jumped 17.6% over the prior year, to 393.5 billion yen (US$3,577 million), driven by continued strong demand for system chips used in digital AV equipment. Operating income in the segment was 34.5 billion yen (US$314 million), rebounding by 35.7 billion yen from the narrow loss posted in the previous year.

FY 2004 Earnings Projections

In anticipation of a second-half downturn in the markets for certain products, including semiconductors, displays, and mobile phones, Fujitsu has lowered its fiscal 2004 full-year consolidated net sales projection by 50 billion yen, to 4,900 billion yen. However, the company is maintaining its previous full-year projections of 200 billion yen in operating income and 70 billion yen in net income, with the expectation that continuing progress in cost reductions, further contributions to profitability from its European services operations and other factors will offset the impact of lower sales and profitability in its domestic software and services business in the first half.

Complete information on Fujitsu's fiscal 2004 first-half and second-quarter financial results, including financial tables, explanation of results and supplementary information, may be found at:

Yen figures are converted to US dollars for convenience only at a uniform rate of $1 = 110 yen, the approximate closing exchange rate on September 30, 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.
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Company:Fujitsu Limited

Date: 28 October, 2004
City: Tokyo
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