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Fujitsu Reports Fiscal 2007 First-Quarter Financial Results

Sales Increase 5.8% on Continuing Strength in Services

Fujitsu Limited

Tokyo, July 26, 2007

Fujitsu Limited, a leader in customer-focused IT and communications solutions for the global marketplace, today reported consolidated net sales of 1,166.8 billion yen (approximately US$9,486 million*) for the first quarter of fiscal 2007 (April 1 - June 30, 2007), a 5.8% increase over the same period in the previous fiscal year. The increase in sales was broadly based, with each of Fujitsu's three business segments reporting year-on-year first-quarter sales gains of at least 5%, including a nearly 11% gain in the Services sub-segment. First-quarter sales in Japan increased by 4.3%, while overseas sales rose 8.2%.

Fujitsu posted consolidated operating income of 2.9 billion yen (US$24 million) in the first quarter, a drop of 11.6 billion yen compared to the first quarter of the prior fiscal year but higher than the break-even level forecast in April. Excluding the impact of a significant change in accounting policies initiated this fiscal year in conjunction with a move toward compliance with International Financial Reporting Standards (IFRS), operating income was 5.6 billion yen. Apart from this impact, the decline in operating income was primarily attributable to a 3.6 billion yen (US$29 million) operating loss in the company's Device Solutions segment, down 15.0 billion yen compared to the especially strong first quarter of fiscal 2006. The downturn in this segment reflected lower production capacity utilization due to the delayed rebound in demand for standard technology logic chips, as well as heavy depreciation expenses in the wake of the company's investments in expanded production capacity for advanced technology logic devices. Higher upfront strategic investments in logic LSI devices, next-generation networks and other areas also impacted operating income.

In other income (expenses), as a result of the implementation of new accounting policies, Fujitsu posted a loss of 25.0 billion yen on revaluation of inventories at the start of the quarter. The company also posted a gain of 9.8 billion yen on the sale of shares in affiliates. As a result of these and other factors, Fujitsu reported a consolidated net loss of 14.7 billion yen (US$120 million) for the first quarter, but a net profit of 0.6 billion yen if the impact of change in accounting policies is excluded.

Business Segment Results

First-quarter consolidated net sales in the Technology Solutions segment, which includes the System Platforms and Services sub-segments, increased 5.2% over the same period in fiscal 2006, to 683.1 billion yen (US$5,554 million). Lower sales of mobile phone base stations and optical transmission systems contributed to a 1.8% decline in sales in Japan. Overseas sales for the segment rose 17.5%, bolstered by continued strong growth in sales of outsourcing and other services as well as higher sales of UNIX servers. Operating income for the Technology Solutions segment was 3.9 billion yen (US$32 million), an increase of 1.5 billion yen in comparison with the first quarter of fiscal 2006. Due to such factors as lower sales of mobile phone base stations and optical transmission systems, as well as the continuing burden of up-front strategic investments, the System Platforms sub-segment recorded an operating loss for the quarter of 11.1 billion yen (US$91 million). However, this was offset by an operating profit of 15.0 billion yen (US$123 million) for the Services sub-segment, which was bolstered by continued strong performance in overseas markets and improved profitability in Japan.

Net sales in the Ubiquitous Product Solutions segment, which includes PCs, mobile phones, hard disk drives (HDDs), and other products, were 274.6 billion yen (US$2,233 million), an increase of 8.8% over the same period in the previous year. Sales in Japan increased by 8.0%, primarily as a result of higher sales of mobile phones, while overseas sales increased by 10.4% on higher sales of notebook PCs in the US and other markets. Operating income for the segment was 12.3 billion yen (US$101 million), an increase of 2.2 billion yen over the first quarter of fiscal 2006. Despite severe price competition in PCs and certain segments of the HDD market, higher sales and progress in reducing component costs contributed to higher operating income for the segment.

Net sales in the Device Solutions segment, which includes the LSI Devices and Electronic Components, Others sub-segments, were 189.0 billion yen (US$1,537 million), an increase of 5.1% compared to the first quarter of last year. Although sales of standard technology logic products declined, sales of advanced technology logic products increased, spurred in part by an increase in production capacity. Device Solutions posted an operating loss of 3.6 billion yen (US$29 million) for the quarter, a deterioration of 15.0 billion yen compared to the prior year's first quarter, when sales were particularly robust. The loss was the result of lower capacity utilization, attributable to lower demand for standard technology logic devices, combined with higher depreciation expenses in advanced technology logic devices.

Fiscal 2007 Projections

Although Fujitsu has not fundamentally changed its outlook regarding overall trends in its businesses in fiscal 2007, the earnings projections announced in April did not take into consideration the impact of accounting policies newly adopted from this fiscal year. With the implementation of these changes, the company recorded a valuation loss of 25.0 billion yen on inventories at the start of the first quarter. In addition, in light of the impact of changes in method of depreciation and the presentation of amortization of unrecognized retirement obligations, the company is at this time upwardly revising its full-year projection for consolidated operating income by 5.0 billion yen and reducing its full-year projection for net income by 10.0 billion yen versus the April forecast.

(Billion Yen)
First Half
(April 1 - September 30, 2007)
Full Year
(April 1, 2007 - March 31, 2008)
FY 2006
(Actual)
FY 2007
(Forecast)
Difference
vs. April
Projections
FY 2006
(Actual)
FY 2007
(Forecast)
Difference
vs. April
Projections
Net Sales 2,362.3 2,450.0 - 5,100.1 5,400.0 -
Operating Income 50.6 20.0 - 182.0 195.0 5.0
Net Income (Loss) 14.8 (20.0) -20.0 102.4 65.0 -10.0

Complete information on Fujitsu's first-quarter FY 2007 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=123 yen, the approximate closing exchange rate on June 30, 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 create 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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Company:Fujitsu Limited

Date: 26 July, 2007
City: Tokyo
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