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Fujitsu sells off microcontroller and analog chip biz to Spansion

Japanese giant books a loss in 2012, optimistic about 2013

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It's been a busy day at Japanese IT giant Fujitsu, with the company reporting its financial results for its fiscal 2012 year ending in March (that's not a typo) and also announcing that it has spun off its microcontroller and analog device business to the flash-memory maker Spansion.

Back in February, Fujitsu announced a massive restructuring of its chip, information technology, and communications equipment businesses, and spun off its Fujitsu Semiconductor wafer baker, which makes chips for Fujitsu's own gear as well as on contract for third parties. Conglomerate Panasonic and former rival Taiwan Semiconductor Manufacturing Corp are taking bits and pieces of the Fujitsu chip-making biz.

And as of Tuesday, Spansion is paying Fujitsu ¥10.9bn ($110m) to take over anther chunk of the Fujitsu chip biz, plus another ¥6.4bn ($65m) to cover chip inventories. Oddly enough, this is a profitable microcontroller and analog chip business.

In a statement, Spansion said that the acquisition would be accretive in its fiscal 2013 financials. The flash chip maker added that it would be gaining people, intellectual property, and chips that will help it build better flash memory technology. The microcontroller and analog device business brought in about ¥55bn ($585m) in the fiscal 2012 year just completed in March, or about 1.3 per cent of Fujitsu's overall sales of ¥4,381.7bn ($46.6bn).

The various microcontroller and analog chips that Spansion is getting are spread around divisions of Fujitsu Semiconductor Limited and are being transferred to Nihon Spansion Limited, the Japanese division of the flash chip maker, which is based in Sunnyvale, California. About 1,000 Fujitsu employees will be transferred to Spansion as part of the deal, which is expected to close sometime between July and September. Spansion sold $915.9m of flash products last year, and had 2,838 employees as 2012 came to a close, so this deal will significantly embiggen the flash chip maker, more in revenue than in employees.

Spansion was formed two decades ago through a partnership between Fujitsu and AMD, and was taken over by AMD and spun out in December 2005 as a separate company. So having the microcontroller chips move from Fujitsu to Spansion is actually a reuniting of two pieces of the flash business that perhaps should not have been separated in the first place.

How 2012 stacked up for Fujitsu

For fiscal 2012, Fujitsu's revenues were off 1.9 per cent to ¥4,381.7bn ($46.6bn), and the company swung to a ¥72.9bn ($775.7m) loss compared to a ¥42.7bn ($454.3m) profit in the year-ago period.

The company's Technology Solutions business, which peddles servers, storage, and switches, was at the heart of the reorganization announced in February. At that time, Fujitsu said it would take a ¥28bn ($322m) charge to lay off workers, mostly in Europe, and that it would have an operating loss for Technology Solutions for the fiscal 2012 year. As it turned out, Technology Solutions did a little better than expected and posted an operating profit for the year.

Fujitsu's system platforms raked in ¥555.1bn ($5.91bn), falling 1.5 per cent against a tough compare as Fujitsu was shipping parts of the K supercomputer built for the Japanese government in fiscal 2011.

Ahead of the launch of the "Athena" Sparc64-X server lineup. customers paused as well – confusion over what Oracle and Fujitsu were doing in terms of their partnership with their respective Sparc-based servers probably didn't help much, either.

Fujitsu did see a bump in router sales to telcos, but optical transmission gear sold to telcos waned as carriers in North America shifted their attention to their wireless network build-out.

For the full year, Technology Solutions had an operating income of ¥180.9bn ($1.92bn), with systems contributing about ¥49.3bn ($524m) of that and IT services relating to hardware and systems integration making up the rest.

Frankly, this is a lot better than IBM did in its Systems and Technology Group in its first quarter that ended in March. IBM had sales of $3.11bn and a pre-tax operating loss of $405m in its roughly equivalent systems, storage, and networking biz, which is heavy on the mainframes and doesn't have switching and routing for telcos.

Fujitsu's Ubiquitous Solutions group had ¥1,090.2bn in sales ($11.6bn), down 5.5 percent, with PC sales down 7.5 per cent to ¥822.8bn ($8.75bn). Mobile devices such as smartphones (what Fujitsu calls Mobilewear) had a 1 point bump to ¥267.4bn ($2.88bn). Operating profits in Ubiquitous Solutions were cut in half to ¥9.6bn ($102m).

The Fujitsu Device Solutions group, which is being downsized from reorganizations, posted ¥540.3bn ($5.75bn) in revenues for the year, off 7.6 per cent, and had a ¥14.2bn ($151m) operating loss compared to a loss of ¥10.1bn a year ago.

Looking ahead, Fujitsu is forecasting around 5.4 per cent growth in its Technology Solutions business for fiscal 2013, which will end in March 2014, to ¥3,100bn. The company expects to see system sales grow by 12.2 per cent to ¥295bn, networking sales to rise by 11.2 per cent to ¥325bn, and related services rise by 3.9 per cent to ¥2,480bn.

In its quite detailed financial report, Fujitsu says that it anticipates an 11.3 per cent decline in PC revenues, to ¥730bn, with Mobilewear [sic] up 8.4 per cent to ¥290bn. The remaining parts of the Fujitsu chip biz will bring in ¥620bn, up 14.7 per cent.

Add it all up, and Fujitsu is planning to hit ¥4,550bn in sales, up 3.8 per cent, in fiscal 2013, with an operating income of ¥44.7bn, up 46.9 per cent. ®

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