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  7. Fujitsu Reports FY 2005 Third-Quarter Financial Results

Fujitsu Reports FY 2005 Third-Quarter Financial Results

Earnings rise year-over-year on growth in overseas markets, improved profitability in devices and services

Fujitsu Limited

Tokyo, January 31, 2006

Fujitsu Limited, a leader in customer-focused IT and communications solutions for the global marketplace, today reported consolidated net sales of 1,121.4 billion yen (approximately US$9,504 million*) for the third quarter of fiscal 2005 (October 1, 2005 – December 31, 2005), an increase of 7.5% over the third quarter of fiscal 2004. Excluding the impact of changes in accounting policies and restructuring, sales increased by 7%. Growth was led by sharply higher overseas sales of outsourcing services, UNIX servers, PCs, optical transmission systems, hard disk drives (HDDs), and LSI devices, while higher sales of network products in Japan helped to offset sales declines in servers and other system products.

Consolidated operating income for the third quarter was 12.5 billion yen (US$107 million), an improvement of 7.7 billion yen over the third quarter of fiscal 2004. Excluding the impact of changes in accounting policies, operating income was roughly the same level as in the comparable period in fiscal 2004. Higher year-over-year profits in HDDs and in Device Solutions, which benefited from the increase in LSI sales and the divestiture of loss-making flat panel display businesses, was offset by an operating loss in System Platforms, which resulted from weaker sales of servers and storage systems in Japan, and costs associated with development of next-generation mobile communications base stations, optical transmission systems, and server-related products that were brought forward.

In other income (expenses), revisions to Fujitsu's pension system resulted in a 4.5 billion yen reduction in amortization of unrecognized obligation for retirement benefits, and there was a 5.0 billion yen improvement from foreign currency transaction gains. The company also posted an 8.4 billion yen loss on change of ownership interest in conjunction with the initial public offering of an affiliated company (Spansion Inc.).

Fujitsu's consolidated net income for the third quarter was 3.3 billion yen (US$29 million), an improvement of 12.9 billion yen over the net loss recorded in the third quarter of fiscal 2004.

Business Segment Results

Third-quarter consolidated net sales in the Technology Solutions segment, which includes the System Platforms and Services sub-segments, rose 9.1% over the same period in fiscal 2004, to 669.3 billion yen (US$5,672 million). Excluding the impact of applying the percentage-of-completion method, sales increased by 4.8%. Sales of mobile communications base stations and optical transmission systems were strong. However, although overseas sales of UNIX servers increased, sales of servers and other system products in Japan declined due to intensifying competition. Sales of solutions and systems integration services in Japan rose slightly, while overseas sales of services recorded double-digit growth, driven by especially robust outsourcing service revenues in the UK. Operating income for the Technology Solutions segment was 9.0 billion yen (US$76 million), a decline of 3.2 billion yen compared to the third quarter of fiscal 2004, primarily the result of weak server-related business results in Japan and costs associated with development of next-generation system platform products.

Net sales in the Ubiquitous Product Solutions segment, which includes PCs, mobile phones, hard disk drives, and other products, were 254.9 billion yen (US$2,161 million), an increase of 5.9% over the same period last year. PC sales in Japan rose modestly despite intensified competition, while overseas sales recorded double-digit gains on strong results in both PCs and HDDs. Led by higher earnings in HDDs, along with the impact of continued cost savings and quality improvements from manufacturing innovation initiatives, the segment recorded operating income of 5.9 billion yen (US$50 million), an increase of 1.2 billion yen over last year's third quarter.

Net sales in the Device Solutions segment were 182.6 billion yen (US$1,548 million). Excluding the impact of the transfer of the company's flat panel display businesses, sales on a continuing operations basis increased by 12.8%, driven by especially strong overseas sales growth. Quarterly sales of LSI devices increased on a year-over-year basis for the first time in five quarters. Operating income for the segment was 9.4 billion yen (US$80 million), an increase of 9.1 billion yen over the third quarter of fiscal 2004, which had included losses from flat panel display businesses that have since been divested.

FY 2005 Earnings Projections

Although third-quarter results exceeded earlier projections, in light of some uncertainties regarding its system products and services businesses in Japan and other factors, Fujitsu is maintaining its fiscal 2005 full-year consolidated earnings projections unchanged as follows:

Net Sales: 4,800.0 billion yen
Operating Income: 175.0 billion yen
Net Income: 50.0 billion yen

Complete information on Fujitsu's third-quarter FY 2005 consolidated financial results, including financial tables, explanation of results and supplementary information, may be found at: http://www.fujitsu.com/about/ir/

*Note: Yen figures are converted to U.S. dollars, for convenience only, at a uniform rate of $1 = 118 yen, which was the approximate Tokyo foreign exchange market rate at December 31, 2005.

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 4.7 trillion yen (US$44.5 billion) for the fiscal year ended March 31, 2005. For more information, please see www.fujitsu.com

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Company:Fujitsu Limited

Date: 31 January, 2006
City: Tokyo
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