Fujitsu Reports FY2001 First-Half Financial Results
Sales, Income Impacted by Widening Economic Slowdown, Restrained IT Spending
Tokyo, October 24, 2001 ---Fujitsu Limited, the global leader in Internet-based information technology solutions, today reported consolidated net sales of 2,387.7 billion yen (US$20,065 million) for the first half of Fiscal Year 2001 (April 1 - September 30, 2001), a decline of 4% over the same period in fiscal 2000. Facing an increasingly difficult business environment, as the impact of the U.S. economic slowdown spread to Japan, Asia and Europe and heightened concern of a global economic slowdown, Fujitsu's first-half financial results were impacted by cutbacks in IT-related corporate spending, particularly in the U.S., and sluggish global demand for personal computers and mobile phones. As a result, production and inventory adjustments in IT-related fields continued to spread, and there was a rapid deterioration in the market for electronic devices.
Fujitsu recorded a consolidated operating loss of 59.1 billion yen (US$497 million) for the half-year period, compared with an operating profit of 100.2 billion yen in first-half fiscal 2000. While operating income was boosted to some extent by higher domestic sales of services, large-scale servers, and switching and base station systems for IMT-2000 third-generation mobile communications in Japan, these advances were offset by the combination of weak demand and lower prices for small form factor magnetic disk drives. Moreover, further deterioration in the financial condition of overseas telecommunications carriers, particularly in North America, led to sharply lower demand and price erosion in optical transmission systems. The market for electronic devices also rapidly worsened as a result of weak demand and further price erosion. These factors, coupled with inventory adjustments and lower capacity utilization, led to large operating losses in the telecommunications and electronic devices segments.
In addition, Fujitsu took a charge to cover restructuring measures designed to effect a radical restoration of profitability. As a result, the company reported a consolidated first-half net loss of 174.7 billion yen (US$1,468 million) compared to net income of 17.2 billion yen in the previous corresponding period.
Results by Business Segment
Services & Software
Consolidated first-half sales of services & software were 931.7 billion yen (US$7,830 million), an increase of 4% from the same period in fiscal 2000. There was steady growth in domestic sales of services, such as systems integration and outsourcing, as corporations and organizations in Japan actively implemented IT-driven restructuring initiatives. Although the low value of the yen raised the converted value of foreign subsidiaries' contributions to sales, corporate cutbacks in IT spending in the U.S. and Europe resulted in an overall sales decrease in Fujitsu's overseas services business.
In information processing, consolidated sales were 670.2 billion yen (US$5,632 million), down 7% from the corresponding period in the previous fiscal year. Domestic sales of large-scale enterprise servers increased, bolstered by vigorous IT spending by Japan's major corporations. Demand for PCs, however, remained sluggish worldwide, and domestic sales of PCs fell, particularly for the consumer market. As a result, overall domestic information processing sales declined. Overseas sales were also lower, led by a decline in sales of small form factor magnetic disk drives for PCs and lower demand for servers resulting from cutbacks in corporate IT spending, particularly in the U.S.
Consolidated first-half telecommunications sales were 315.2 billion yen (US$2,648 million), a decrease of 7% from the same period in fiscal 2000. Higher sales of switching systems and base station systems for IMT-2000, the next-generation mobile communications system in Japan, were offset by lower sales of optical transport systems, reflecting the impact of further cutbacks in investment by telecommunications carriers, particularly those based in North America.
Consolidated sales of electronic devices fell 18% to 296.0 billion yen (US$2,488 million). Against the backdrop of sluggish demand for mobile phones and digital consumer appliances, there was a rapid and severe deterioration in the market for electronic devices. Sales of flash memory, logic ICs and SAW filters all declined, as did sales of compound semiconductors for optical transmission systems.
All yen figures have been converted to US dollars for convenience only at a uniform rate of $1 = 119 yen.
Fujitsu's financial results reflect the performance of 522 consolidated subsidiaries (496 in first half of FY2000), including ICL PLC, Fujitsu Network Communications, Inc., and DMR Consulting Group, Inc., as well as 29 affiliates (25 in first half of FY2000), including Fanuc Ltd., Advantest Corporation and Fujitsu Siemens Computers (Holding) B.V., using the equity method.
Revised Projections for Fiscal Year 2001
Since the last earnings projections in July, there are heightened concerns of a U.S. recession, and the impact of those concerns is reverberating throughout the world. Against this backdrop, cutbacks in corporate IT spending, particularly among telecommunications carriers, are becoming more acute, and erosion in consumer demand for mobile phones and personal computers is also becoming more severe. As a result, demand for Fujitsu's electronic devices, optical transmission equipment, personal computers, small form factor magnetic disk drives, and other products is likely to decline further than previously anticipated, and price competition is intensifying. It is, moreover, difficult to predict the economic impact of the terrorist incidents in the U.S. of September 11, and the timing of a future recovery has become especially unclear. Taking these factors into consideration, Fujitsu has revised the earnings projections it made in July as follows:
Fujitsu Limited Consolidated Earnings Forecast for Fiscal 2001
(as of Jul. 27, 2001)
(as of Oct. 24, 2001)
|1H FY01||FY01||1H FY01|
|FY01||1H FY01|| FY01 ||1H FY00||FY00|
|Notes:||First half of fiscal period from April 1 - September 30|
FY 2001 from April 1, 2001 - March 31, 2002
FY 2000 from April 1, 2000 - March 31, 2001
Extraordinary Income (Loss) is included in "Other income (expenses)" in Consolidated Statements of Operations
Revised Dividend Projections for Fiscal 2001
Taking the above results into consideration, Fujitsu will issue an interim dividend of 2.5 yen per share (1H FY2000 dividend was 5 yen per share). The projected fiscal 2001 final dividend is also 2.5 yen per share (5 yen per share in fiscal 2000).
Due to uncertainties relating to changes in demand for products and components in key markets (Japan, U.S., Europe, etc.), currency exchange rate fluctuations, Japan and U.S. stock market conditions, and other factors, actual results may vary substantially from projections above.
Fujitsu is a leading provider of Internet-focused information technology solutions for the global marketplace. Its pace-setting technologies, best-in-class computing and telecommunications platforms, and worldwide corps of systems and services experts make it uniquely positioned to unleash the infinite possibilities of the Internet to help its customers succeed. Headquartered in Tokyo, Fujitsu Limited (TSE:6702) reported consolidated revenues of 5.48 trillion yen for the fiscal year ended March 31, 2001.