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  • Fujitsu's FY98 Interim Ordinary Profit Plunges 88 Percent
  • October 28, 1998 (TOKYO) -- Fujitsu Ltd. announced that its parent-only sales in the April-September period dropped 6.9 percent year on year to 1.418 trillion yen (US$11.91 billion) and its ordinary profit plunged 88.1 percent to 5.194 billion yen (US$43.93 million).
    The major computer maker suffered an extraordinary loss of 33 billion yen (US$277 million) resulting from restructuring of plants in Japan and overseas.

    The huge extraordinary loss slashed the firm's midterm ordinary profit. For fiscal 1998, Fujitsu projects total sales of 3.220 trillion yen (US$27 billion), about the same level as last year, ordinary profit of 40 billion yen (US$336 million), down about 50 percent because of the extraordinary loss, and net profit of 5 billion yen, a decline of 90 percent.

    Sales of the computers and information processing systems division accounted for 73.6 percent of Fujitsu's total sales, followed by those of the communications systems division, representing 17.8 percent and the semiconductors and electronic components division at 8.6 percent. Sales of the communications systems division fell 28.3 percent from a year earlier, for the largest drop among the company's divisions, followed by a slide of 26.8 percent in the semiconductors and electronic components division.

    The substantial drop in sales of the communications systems division was attributed to the recent completion of major investments by Nippon Telegraph and Telephone Corp. and other telecommunications carriers. The huge loss also was blamed on a decrease in domestic sales due to the lingering recession.

    Fujitsu's sales of semiconductors fell 29.7 percent from a year earlier. Declining prices of DRAM chips and the weaker growth in sales of application specific integrated circuits (ASICs) and other logic IC chips were the main reasons for the drop.

    Sales of the computers and information processing systems division expanded 3.9 percent from last year. Although domestic sales fell 3 percent from the previous year because of lower hardware sales, exports jumped 50.1 percent year on year. Larger shipments of servers to Amdahl Corp. of the United States and increasing exports of hard-disk drives boosted the total exports related to the computers and information processing systems division.

    Sales of the Global Server GS Series, a line of mainframe products, comprised 11 percent of the total sales of the computers and information processing systems division. Meanwhile, sales of personal computers accounted for 33 percent, other hardware including servers such as the GRANPOWER Series represented 12 percent, and sales of software and services comprised 44 percent.

    The percentage of sales of software and services grew, while the ratio of sales of hardware dropped. In the April-September period of 1997, sales of hardware accounted for 58 percent of the total.

    PC shipments in Japan in the initial six months of the fiscal year stood at 930,000 units, down 2.1 percent from 950,000 units a year earlier. Total PC shipments for fiscal 1998 are projected at 2.08 million units, or less than the earlier projection of 2.25 million units. Fujitsu's PC business is generating losses, the spokesman said. Although domestic PC sales are profitable, Fujitsu is suffering price declines in other markets.

    PC sales prices in the United States are dipping even below production costs. Fujitsu will need to explore more direct distribution routes, the company official said.

    The value of semiconductor production for the first half was 253 billion yen (US$2.12 billion), or down 12.2 percent from a year earlier. Estimated production in value for the full year is 500 billion yen (US$4.2 billion), which would be a decline of 12.3 percent from the previous year. Although Fujitsu did not disclose the actual figure, the spokesman said that Fujitsu will likely see a loss of 40 billion yen-50 billion yen in fiscal 1998.

    The loss was due to a drop in prices of DRAM chips, said board member Takashi Takaya. The price of a 64Mb DRAM chip fell to US$7.50 in September from US$12 in March, he noted. Takaya said the company will streamline the general-purpose DRAM business for PCs as much as possible.

    The ratio of DRAM production to total semiconductor output for fiscal 1998 is 15 percent, down from 20 percent in the previous fiscal year. The company will beef up the logic IC business including system ICs, or system-on-a-chip devices instead of the DRAM business, the spokesman said.

    Also, it will restructure its semiconductor plants by closing its plant in Durham, the United Kingdom, the firm's main DRAM production site, and Ross Technology Inc. of the United States, its microprocessor development base. It will manufacture logic ICs at wafer processing plants in Japan. These restructuring efforts will result in expenses totaling 8.1 billion yen (US$68 million). Fujitsu also is considering a realignment of assembly plants in Asia and Europe.

    Takaya said the company expects the semiconductor business to show a profit in the second half of 1999. Its consolidated capital investments for semiconductors for the first half of fiscal 1998 reached 44.1 billion yen (US$370 million). The company estimates the figure for fiscal 1998 to be 80 billion yen.

    More information in English is available at: http://www.fujitsu.co.jp/hypertext/news/1998/Oct/finance-e1.html

    (BizTech News Dept. & Nikkei Microdevices)

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    Updated: Tue Oct 27 19:11:59 1998 PDT