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Fujitsu Reports Fiscal 2006 First-Quarter Financial Results

Strong Performance Overseas Paces 7.5% Year-on-Year Revenue Growth

Fujitsu Limited

Tokyo, July 27, 2006

Fujitsu Limited, a leader in customer-focused IT and communications solutions for the global marketplace, today reported consolidated net sales of 1,102.8 billion yen (approximately US$9,674 million*) for the first quarter of fiscal 2006 (April 1, 2006 - June 30, 2006), a 7.5% increase over the same period in the previous fiscal year. A more than 20% year-on-year increase in first-quarter overseas sales offset flat sales in Japan. Strong performers in overseas markets, where all three of the company's business segments recorded revenue gains, ranged from optical transmission systems and outsourcing services to logic LSI devices, hard disk drives and personal computers.

Fujitsu posted consolidated operating income of 14.5 billion yen (US$128 million) in the first quarter, approximately the same level as in the corresponding quarter in fiscal 2005 and significantly exceeding the projections announced at the beginning of the current fiscal year. Robust sales of outsourcing services both in Japan and overseas, a reduction in the burden of start-up costs for the 300mm-wafer LSI production line at the Mie Plant, and cost efficiencies in mobile phone production all contributed to profits. The company posted net income of 0.6 billion yen (US$6 million) for the quarter.

Business Segment Results

First-quarter consolidated net sales in the Technology Solutions segment, which includes the System Platforms and Services sub-segments, increased 5.9% over the same period in fiscal 2005, to 649.6 billion yen (US$5,698 million). Sales of mobile phone base stations in Japan were healthy, but decreased in comparison with the first quarter of fiscal 2005, when demand was especially high. Overseas sales for the segment recorded a 24.9% increase, thanks to continued strong growth in overseas sales of UNIX servers, optical transmission equipment, and outsourcing services, as well as the impact of corporate acquisitions in North America. Operating income for the Technology Solutions segment was 5.0 billion yen (US$44 million), a decrease of 2.3 billion yen in comparison with the first quarter of fiscal 2005. Due to such factors as intensified global price competition and the continuing burden of up-front strategic investments, the System Platforms sub-segment recorded an operating loss for the quarter of 5.2 billion yen (US$46 million). This was offset by operating income of 10.2 billion yen (US$90 million) for the Services sub-segment, bolstered by particularly favorable results in the UK and the US.

Net sales in the Ubiquitous Product Solutions segment, which includes PCs, mobile phones, hard disk drives (HDDs), and other products, were 252.3 billion yen (US$2,214 million), an increase of 4.6% over the same period in the previous year. Double-digit growth in overseas sales was a major contributor to this increase, with higher sales of PCs in overseas markets offsetting lower PC sales in the Japanese market. Operating income for the segment was 10.3 billion yen (US$91 million), a slight decline from the first quarter of fiscal 2005. While mobile phone business earnings benefited from improved quality and cost efficiencies resulting from manufacturing innovation initiatives, increased price competition negatively impacted the company's PC and HDD business in Japan and overseas.

Net sales in the Device Solutions segment, which includes the LSI Devices and Electronic Components, Others sub-segments, were 179.8 billion yen (US$1,577 million), an increase of 13% compared to the first quarter of last year. In the LSI Devices sub-segment, the market for logic chips remained strong, especially in the digital consumer electronics and automotive-related fields, and full-scale volume production at the new 300mm-wafer semiconductor fabrication facility (Fab No. 1) at the company's Mie Plant contributed to higher sales both in Japan and overseas. Operating income for Device Solutions was 12.4 billion yen (US$109 million), an increase of 5.1 billion yen compared to the previous year's first quarter. The increase reflected the impact of higher logic LSI device sales and a reduction in the burden of start-up costs at the Mie Plant's Fab No 1. Construction of another 300mm-wafer facility at the Mie Plant (Fab No. 2) commenced in April of this year, with operations scheduled to begin in April 2007.

Fiscal 2006 Projections

Fujitsu has revised upward its forecast announced in April for first-half fiscal 2006 earnings. The company's outsourcing and other services businesses are performing well both in Japan and in overseas markets, and demand remains firm for logic LSI devices for digital consumer electronics and other applications. However, in light of uncertainties with respect to certain product-related and solutions/SI businesses for which sales and profits tend to be highly concentrated toward the end of the fiscal year, and believing it premature to change its assessments of prospective market conditions and profitability for the logic LSI devices business, the company is maintaining its full-year earnings forecast unchanged.

(Billion Yen)
First Half
(April 1 - Sept. 30)
Full Year
(April 1 - March 31)
FY 2005
(Actual)
FY 2006
(Forecast)
Difference
vs. April
Projections
FY 2005
(Actual)
FY 2006
(Forecast)
Difference
vs. April
Projections
Net Sales 2,192.3 2,350.0 - 4,791.4 5,200.0 -
Operating Income 47.5 35.0 15.0 181.4 190.0 -
Net Income 7.6 5.0 5.0 68.5 80.0 -

Complete information on Fujitsu's first-quarter 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=114 yen, the approximate closing exchange rate on June 30, 2006.

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 about 4.8 trillion yen (US$40.6 billion) for the fiscal year ended March 31, 2006. See http://www.fujitsu.com for further information.

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Company:Fujitsu Limited

Date: 27 July, 2006
City: Tokyo
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