Fujitsu Reports FY2001 Financial Results
Earnings Impacted by Global IT Slump and Large Restructuring Charges
Tokyo, April 25, 2002-Fujitsu Limited, a leader in customer-focused IT and communications solutions for the global marketplace, today reported consolidated net sales of 5.00 trillion yen for fiscal year 2001 (April 1, 2001 - March 31, 2002), a decline of 9% compared with the previous fiscal year. Converted into US dollars*, net sales were approximately US$37.6 billion.
Fujitsu faced a difficult operating environment in fiscal 2001. The impact of the economic slowdown in the U.S. last year spread to Japan, Europe and Asia, causing a deterioration in the global economic environment. Since the beginning of 2002, however, there have been some indications of a bottoming out, primarily in the U.S. and Asia. The weak economic environment, combined with large demand-supply imbalances, particularly in IT-related products, led to continuing cutbacks in corporate investment as well as inventory adjustments, adversely impacting the company's operating environment throughout the fiscal year. Although telecommunications carriers still face excess capacity, since the beginning of the year there have been signs that overseas demand for PCs and mobile phones has bottomed out, and that inventory adjustments in semiconductors have run their course and a recovery may be in sight.
Amidst these market conditions, Fujitsu recorded a consolidated operating loss of 74.4 billion yen (US$560 million) for the fiscal year, compared with an operating profit of 244.0 billion yen in fiscal 2000. In addition, to cope with sudden changes in market conditions and structure, Fujitsu took a 417.0 billion yen (US$3.1 billion) charge to earnings to cover the costs of its aggressive groupwide restructuring effort, which included realigning and rationalizing its development and production in electronic devices, information processing and telecommunications, as well as exiting from the business of small form factor magnetic disk drives for desktop PCs. As a result, the company recorded a consolidated net loss of 382.5 billion yen (US$2.8 billion) for fiscal year 2001, compared to a net profit of 8.5 billion yen the previous fiscal year.
Despite aggressive groupwide efforts to improve efficiency, including a 272.8 billion yen (US$2.0 billion) reduction in inventories - down 29% from fiscal 2000 - the large extraordinary loss booked to cover comprehensive restructuring measures held cash flow from operating activities to 306.5 billion yen (US$2.3 billion), a decline of 49%. Net cash used in investing activities was 409.4 billion yen (US$3.0 billion), a reduction of 12% from the previous fiscal year, as new capital expenditures were concentrated in promising growth sectors. As a result, free cash flow was negative, with an outflow of 102.8 billion yen (US$774 million), compared to an inflow of 129.6 billion yen in the previous fiscal year. Net cash generated from financing activities was 91.3 billion yen (US$687 million), compared to a net cash outflow of 137.6 billion yen in fiscal 2000.
Results by Business Segment
Services & Software
Consolidated sales of services & software were 2.08 trillion yen (US$15.6 billion) in fiscal 2001, an increase of 4% over fiscal 2000, bolstered especially by solid growth in domestic sales of systems integration, outsourcing and other services to meet the wide-ranging large-scale systems needs of enterprises and organizations. Corporate cutbacks in IT spending in the U.S. and Europe, however, resulted in lower overseas sales of services. Operating income for services & software increased by 23% to 157.8 billion yen (US$1.1 billion), boosted by higher domestic sales and greater operating efficiency in services, as well as progress in the restructuring of overseas subsidiaries.
In information processing, consolidated sales were 1.38 trillion yen (US$10.4 billion), down 12% from the previous fiscal year. Domestic sales of large-scale enterprise servers and storage systems increased, and results were also favorable for new mobile phone models introduced in the second quarter. Global demand for PCs, however, significantly declined in comparison with the previous year, and PC sales in Japan fell. As a result, overall domestic information processing sales were lower. Overseas sales also fell sharply, reflecting the impact of Fujitsu's exit from small form factor magnetic disk drives for desktop PCs and lower demand resulting from cutbacks in corporate IT spending, particularly in the U.S. Operating income for the sector declined by 23% to 14.5 billion yen (US$109 million).
Consolidated telecommunications sales were 629.8 billion yen (US$4.7 billion), a decrease of 19% from fiscal 2000, despite a rise in sales of IMT-2000 (3G) switching and base station systems, mainly in Japan. Overseas results were severely impacted by the worsening performance of telecommunications carriers, especially in North America. Major cutbacks in their capital spending resulted in sharply lower sales, particularly of optical transmission systems. Lower sales and deteriorating prices for optical transmission systems and other products contributed to an operating loss of 72.4 billion yen (US$545 million), versus an operating profit of 37.9 billion yen in fiscal 2000.
Consolidated sales of electronic devices fell 28% to 546.5 billion yen (US$4.1 billion). Marked by significantly worsening demand-supply imbalances in semiconductors and the whole range of electronic devices, the industry continued to be impacted by unprecedented adjustments in inventory and production, as well as intensified price competition. As a result, Fujitsu experienced major declines in the sales of all of its main products, including flash memory, logic ICs, SAW filters, and compound semiconductors. Lower sales and severe price erosion, along with a decline in capacity utilization rates, resulted in a major deterioration in profitability, with the sector recording an operating loss of 109.3 billion yen (US$822 million), compared with an operating profit of 113.4 billion yen the previous fiscal year.
Fujitsu's financial results reflect the performance of 494 consolidated subsidiaries (517 in FY2000), including ICL PLC, Amdahl Corporation, Fujitsu America, Inc., Fujitsu Microelectronics America, Inc. and Fujitsu Network Communications, Inc., as well as 28 affiliates (28 in FY2000), including Fanuc Ltd., Advantest Corporation and Fujitsu Siemens Computers (Holding) B.V., using the applied equity method.
* Note: All yen figures have been converted to U.S. dollars for convenience only at a uniform rate of US$1 = 133 yen, the closing exchange rate on March 31, 2002. The rate used for the FY2000 financial results announcement (issued April 26, 2001) was US$1 = 124 yen.
Earnings Projections for Fiscal Year 2002
In fiscal 2001, the IT industry was beset by a slump of unprecedented severity, reflecting the struggling global economy. Since the beginning of 2002, however, inventory adjustments in semiconductors and other areas seem to have run their course, and there are indications that the market may have bottomed out. On the other hand, performance is flagging at telecommunications carriers worldwide, and major cuts in investment are expected to continue. In addition, one must look with caution at the prospects for a full-fledged recovery in corporate IT spending in the US, where there have been recent signs of an economic resurgence. With the uncertain job market causing consumer anxiety, the future course of economic recovery in Japan and around the world remains in doubt.
Nevertheless, as IT has advanced, customer needs have also been steadily changing. Customer trends and market inventory cycles provide an indication of the areas in which recovery is at hand and growth prospects are brightest. In light of these trends, in its services and software business, Fujitsu is working to efficiently provide a wide range of comprehensive solutions, including offerings related to the e-Japan initiative, as well as outsourcing and services that take advantage of its global network. In the platforms area, which combines the former telecommunications and information processing businesses, Fujitsu is capitalizing on its solutions strengths to provide infrastructure products, high-speed IP routers, network servers and storage systems under a new integrated concept for supporting the network era. In electronic devices, the company is working to bring to market more quickly products that respond to changing market conditions, primarily in the mobile and AV segments in the U.S., Asia and elsewhere.
Although Fujitsu carried out a large-scale groupwide restructuring program in fiscal 2001, it will continue to vigilantly pursue reforms that enable it to quickly respond to changes in the business environment. By strengthening management's ability to more rapidly select and concentrate on areas with the most immediate prospects for growth, Fujitsu intends to be an IT industry leader in reforming its business structure to establish a firm foundation for growth in the medium and long term.
Taking these factors into consideration, Fujitsu makes the following projections at this time.
Fujitsu Limited Consolidated Earnings Forecast for Fiscal 2002
|First Half Fiscal 2002||Full Year Fiscal 2002|
|(Apr.1 - Sep.30,2002)||(Apr.1,2002 - Mar.31,2003)|
|Net Sales||2,320 (-3%)||5,200 (+4%)|
|Operating Income (Loss)||(30)||100|
|Net Income (Loss)||(40)||0|
Fujitsu is a leading provider of customer-focused IT and communications solutions for the global marketplace. Pace-setting technologies, high-reliability/performance computing and telecommunications platforms, and a worldwide corps of systems and services experts make Fujitsu uniquely positioned to unleash the infinite possibilities of the broadband Internet to help its customers succeed. Headquartered in Tokyo, Fujitsu Limited (TSE:6702) reported consolidated revenues of 5 trillion yen (about US$38 billion) for the fiscal year ended March 31, 2002.
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