Lackluster telecom sector continues to hammer Fujitsu

The reluctance of large enterprise customers and telecommunication carriers to upgrade or invest in new equipment is continuing to hit Fujitsu Ltd., the company said Tuesday as it announced its third-quarter results.

The company reported a 4 percent year-on-year drop in consolidated net sales to ¥1.0 trillion (US$8.4 billion as of Dec. 31, the last day of the period being reported) while operating losses and net losses both narrowed as a result of restructuring efforts. Its consolidated operating loss was ¥13.1 billion, down from ¥45.7 billion the previous year, and consolidated net loss was ¥24.9 billion, down from ¥106.1 billion during the corresponding period in 2001.

The root of much of Fujitsu's problems is its platforms group, which includes telecommunication and computer system sales and makes up roughly one-third of the company's sales. The overall domestic PC market contracted, telecom carriers continued to cut back on spending, and several large contracts that contributed to the sector last year were previously completed. As a result, sales in this sector dropped 21 percent to ¥352.8 billion, Fujitsu said.

There were some bright areas in the sector, including sales of PCs to the public sector and flat-panel PCs to consumers.

The public sector, which in Japan is getting behind the government's e-Japan initiative, also helped increase sales in the software and services sector of Fujitsu's business, up 2 percent year on year to ¥419.8 billion. In addition to domestic sales the company also credited large government outsourcing deals in the U.K. for the rise, which managed to counter the effects of weakness in the financial and telecommunication sector.

In the company's electronic devices sector things were brighter. Sales rose 31 percent year on year to ¥156.5 billion as demand for chips for digital consumer electronics increased and the company shipped more flash memory chips, which are used in devices such as digital still cameras and digital music players.

Looking ahead, the company revised down its full-year consolidated net sales forecast to ¥4.7 trillion from ¥4.8 trillion. It kept other forecasts for the full year unchanged: a consolidated operating profit of ¥100 billion and a consolidated net loss of ¥110 billion.

Before announcing its results, Fujitsu also said it had signed a memorandum of understanding with Taiwan's AU Optronics Corp. under which AU will take a 20 percent stake in Fujitsu Display Technologies Corp., a wholly owned domestic subsidiary that designs and manufactures LCD (liquid crystal display) panels.

By linking with AU, Fujitsu said it hopes to benefit from the company's manufacturing strengths. Based in Hsinchu in Taiwan, AU is one of the world's biggest manufacturers of LCD panels. The two companies hope to sign a definitive agreement in March.

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