Fujitsu 2010 Annual Report Download - page 95

the benefits of these initiatives, the LSI business continues to make
progress toward being able to consistently generate earnings.
Other Operations
Sales in this segment declined 11.0% year on year, to ¥397.3 billion
($4,272 million). Sales of car audio and navigation systems were
lower, most notably in the first half of the year, due to the impact of
weak economic conditions. Operating income rose ¥4.4 billion
from the previous fiscal year, to ¥8.6 billion ($93 million). This out-
come reflected progress on cost reductions and greater efficiency
with expenses, which ultimately offset the effects of lower sales.
Elimination and Corporate
The segment posted an operating loss of ¥80.8 billion ($870 million),
with costs up ¥28.1 billion compared to fiscal 2008. This was chiefly
the result of strategic upfront investments and efforts to enhance
human resources. Japan’s Ministry of Education, Culture, Sports,
Science and Technology (MEXT) and the Institute of Physical and
Chemical Research, known as RIKEN, are promoting the nation’s
Next-Generation Supercomputer Project. The aim of the project is to
develop a system by the end of fiscal 2012 that will boast a perfor-
mance of 10 petaflops, which would make it one of the world’s fastest
supercomputers by today’s standards. The critical design and proto-
type/assessment phases of the project were completed by the end of
fiscal 2009. The Company, as a participant in this project, has been
selected to manufacture the system, including the CPUs, with pro-
duction starting in fiscal 2010. Because the government budget
approved for the project in March 2010 will not fully cover its produc-
tion costs, the Company recognized a loss provision in fiscal 2009.
Geographic Segment Information
The following section provides information on sales (including
intersegment sales) and operating income in each of our principal
operating regions.
Japan
In Japan, the Company reported consolidated sales of ¥3,400.5
billion ($36,565 million), a decrease of 10.3% compared to fiscal 2008.
Sales of system integration services and ATM- and POS-related solu-
tions services to customers in the manufacturing, retail/distribution,
and financial services sectors declined due to corporate spending
constraints. Sales of LSI, server-related products, and PCs were also
lower, primarily as a result of weaker sales in the first half of the fiscal
year. Operating income in Japan was ¥166.3 billion ($1,789 million),
an improvement of ¥59.8 billion over fiscal 2008. Despite lower sales
from system integration and solutions services, profitability improved
as a result of benefits from progress in restructuring the LSI business,
the positive effect of transferring the loss-generating HDD business,
and success in cutting costs and using expenses more efficiently.
EMEA (Europe, Middle East and Africa)
In EMEA, consolidated sales were ¥975.6 billion ($10,491 million),
an increase of 59.2% from the previous fiscal year. However, exclud-
ing effects from consolidating Fujitsu Technology Solutions and
FDK, the HDD business transfer, and exchange rate fluctuations,
sales declined 9%. The EMEA region posted an operating loss of
¥2.6 billion ($28 million), a deterioration of ¥14.7 billion from the
previous fiscal year. In the U.K., services sales were impacted by the
economic recession, while the profitability of some private- and
public-sector projects declined. Furthermore, the conversion of
Fujitsu Technology Solutions into a consolidated subsidiary
incurred a one-time charge for expensing the fair value of in-
process R&D and the amortization of goodwill and other assets.
These charges were offset, however, by a temporary reduction in
copyright levies imposed on PC manufacturers in Germany as the
result of a settlement with the national copyright organization.
The Americas
Consolidated sales in the Americas came to ¥293.8 billion ($3,160
million), representing a 19.5% year-on-year decrease. Excluding
effects from consolidating FDK, the HDD business transfer, and
exchange rate fluctuations, sales declined 10%. Although sales of
optical transmissions systems increased, sales of server-related prod-
ucts were adversely impacted by weak economic conditions. Operat-
ing income for the region was ¥1.8 billion ($20 million), an
improvement of ¥3.1 billion from fiscal 2008. Earnings rose principally
as a result of cost reductions in optical transmission systems and car
audio and navigation systems, which offset the sales decline.
APAC (Asia-Pacific) & China
In APAC & China, consolidated sales were ¥505.4 billion ($5,435
million), down 23.0% year on year. Excluding effects from consoli-
dating FDK, the HDD business transfer, and exchange rate fluctua-
tions, sales declined 9%. While sales benefited from expansion of
the services business in Oceania, along with higher sales of car
audio and navigation systems, sales of HDDs declined in the first
half of the fiscal year. Operating income was ¥12.9 billion ($140
million), ¥6.5 billion higher than the previous fiscal year. The
increase in operating income was the result of higher earnings in
the services business and car audio and navigation systems.
3. Capital Resources and Liquidity
Assets, Liabilities and Net Assets
Total assets at the fiscal year-end amounted to ¥3,228.0 billion
($34,710 million). Despite the increase in assets associated with the
conversion of Fujitsu Technology Solutions and FDK into consoli-
dated subsidiaries, total assets remained at roughly the same level
as at the end of fiscal 2008 due to several factors. These included
the use of cash reserves and amounts collected from trade receiv-
ables for the repayment of interest-bearing loans, as well as the sale
093
FUJITSU LIMITED Annual Report 2010
Management’s Discussion and
Analysis of Operations