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Red ink not as deep as expected for Fujitsu in Q1

Systems integration, networking, and weakened yen save the day

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Japanese IT conglomerate Fujitsu may have been been hit hard by the decline in PC and smartphone sales and seen its server business slump as well, but the weakening of the yen by the Japanese government to boost the indigenous economy has helped inflate overseas sales revenues, and an uptick in the systems integration business has helped Fujitsu report a smaller loss than it was anticipating in its most recent quarter.

During that period, the company had ¥999.2bn ($10.93bn) in revenues across all of its divisions, and reported a net loss of ¥21.9bn ($221m). While this loss was not as large as expected, Fujitsu is uncertain enough about the remaining three quarters of its fiscal 2013 to leave its profit guidance unchanged.

"We are beginning to see a positive impact of structural reforms in the LSI business and businesses outside Japan as well as various workforce-related measures and progress in streamlining corporate headquarter functions," said Fujitsu president Masami Yamamoto in a statement announcing the figures. "We will continue to pursue aggressive structural reforms to achieve profitable growth for this fiscal year and years forward."

The Technology Solutions segment at Fujitsu brought in ¥677.5bn ($6.84bn) in the first fiscal quarter, up 8 per cent from the year-ago period. Sales in Japan were unchanged, Fujitsu said, and were partially impacted by the transition period as the "Athena" Sparc M10 server line, based on the Sparc64-X processor designed by Fujitsu, was rolled out in Japan in January and picked up for resale by Oracle in April.

Within this segment, the Systems Platform group nonetheless posted ¥122.5bn ($1.24bn) in sales, up 8.1 per cent and bolstered by networking products in Japan and Europe where Fujitsu still has a strong presence. Overall system product sales were down 3.1 per cent to ¥47.6bn ($480.8m), and networking product sales jumped 16.6 per cent to ¥74.9bn ($756.6m).

Sales of gear for LTE networks was up, but sales for gear to build out 3G networks was off compared to a year ago, Fujitsu said in a detailed analysis (PDF) of its results. The systems group had an operating loss of ¥2.9bn yen, which was better than the ¥4bn operating loss in the year-ago period. But it is still losing dough just the same.

The services business within the Technology Solutions segment had an 8 per cent revenue spike to ¥554.9bn ($5.6bn), and brought ¥5.5bn ($55.6m) to the operating income line. Infrastructure services sales rose 8.5 per cent to ¥372.2bn ($3.76bn), while systems integration and other solutions rose a nearly equal 7.2 per cent to ¥182.7 ($1.85bn)

Add it all up, and the core systems business at Fujitsu booked an operating income of ¥2.5bn, or about $25.3m at the exchange rates prevailing as the quarter came to an end in June.

The Ubiquitous Solutions segment at Fujitsu, which peddles PCs, smartphones, and other mobile gear, had an 8 per cent decline to ¥215.9bn ($2.18bn). The company said that PC unit sales were down and faced a tough compare as large clients in the financial services industry in Japan had done major PC upgrades this time last year. PC sales in Japan plummeted 16.9 per cent, Fujitsu said.

With feature phones waning and telcos revising their sales strategies for smartphones, mobile phone sales were off, but were up 2 points on a constant-currency basis. The Ubiquitous Solutions unit had an operating loss of ¥17.1bn ($173m), which was wider than the ¥15.1bn loss in the first quarter of fiscal 2012. Increased parts procurement costs thanks to the devalued yen hurt profits in this segment, Fujitsu said.

That leaves the remainder of Fujitsu's chip biz, parts of which were sold off to Panasonic and Taiwan Semiconductor Manufacturing Corp in February, and other parts of which went to Spansion in April. That said, the Device Solutions segment raked in ¥145.3bn ($1.47bn), up 11.5 per cent, with an operating income of ¥7.6bn ($77m). ®

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