Fujitsu 2008 Annual Report Download - page 83

The Company maintains significant loss carryforwards for
corporate tax purposes in relation to structural business reforms
carried out in the past. Prior to and including the year ended
March 31, 2005, we booked around ¥150.0 billion (US$1,500
million) in accumulated valuation allowances for deferred tax
assets in excess of the amount expected to be returned over a
five-year period. Although we conservatively estimate future
recoverable amounts, the recovery of loss carryforwards had
proceeded faster than the initial plan as of March 31, 2008.
2. Segment Information
Information on consolidated sales (including intersegment sales)
and operating income by business segment is presented below.
Technology Solutions
Sales in this segment in fiscal 2007 amounted to ¥3,272.2 billion
(US$32,722 million), up 3.6% from fiscal 2006. Sales in Japan
edged up 0.7% thanks to the ongoing strength of our Services
business, which offset lower sales of mobile phone base stations.
Sales outside of Japan rose 9.4%, due to ongoing growth of the
Services business through acquisitions, as well as continued
strength of existing businesses and higher sales of UNIX servers.
Operating income for the segment rose ¥16.5 billion year on
year to ¥180.1 billion (US$1,801 million). (Excluding the impact
of accounting policy changes, operating income would have
been ¥188.3 billion (US$1,883 million), up ¥24.6 billion.) Despite
a provision for losses from an unprofitable project outside of
Japan, as well as higher upfront strategic investments in optical
transmission systems and other Next-Generation Network equip-
ment, operating income was boosted by higher sales in our
Services business, excellent cost efficiencies in our server busi-
ness, and other factors.
Seeking to optimize resources and step up integration of our
product development and sales organizations, in August 2007,
we made Fujitsu Access Limited and Fujitsu Wireless Systems
Limited—two subsidiaries responsible for manufacturing, devel-
opment, and sales of networking products—into wholly owned
subsidiaries through exchanges of shares. In addition, in April
2008, we decided to consolidate the sales divisions of our
domestic photonics business into Fujitsu Limited, and consoli-
date our domestic photonics development and manufacturing
operations into Fujitsu Access, with these changes scheduled to
take effect in July 2008. Integrating our sales divisions will
enhance our sales capabilities, while the merged product devel-
opment and manufacturing functions will improve and speed
up those processes, enabling us to deliver higher-quality ser-
vices to customers at competitive prices.
We are also pursuing our “Field Innovation” approach in the
Services business. In October 2007, for example, we began train-
ing selected employees to become “Field Innovators,” with the
aim of strengthening and expanding our relationships with our
customers. In addition, we are promoting the “industrialization”
of IT services to advance the standardization and automation of
processes used in the building of IT infrastructure. Specific mea-
sures include the establishment of the Infrastructure Technology
Center, spearheaded by subsidiary Fujitsu FSAS Inc. We will con-
tinue to enhance various technologies that support Field Inno-
vation. At the same time, we will focus on the development of
new business solutions based on internal practices.
In fiscal 2007, the Fujitsu Group continued working proac-
tively to strengthen its ability to deliver services on a global scale.
During the year, we acquired via public tender offer Mandator AB,
which provides application and other IT services in Scandinavia,
primarily in its home country of Sweden. We also acquired a
company that provides infrastructure services in Oceania. In
Canada, meanwhile, we acquired two companies—a provider of
business process optimization services and a provider of IT con-
sulting and solutions. In Japan, we reinforced the service delivery
capabilities of our remote data centers, which meet the security
needs of customers for top-level security and business continu-
ity in the event of natural disasters. In December 2007, we began
operation of our Fujitsu Tokyo No. 2 Systems Center, a city center-
based data facility designed to meet growing demand for
Internet Data Center (IDC) services.
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ANNUAL REPORT 2008FUJITSU LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS