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FUJITSU LIMITED
Annual Report
2003

Table of contents

  • Page 1
    FUJITSU LIMITED Annual Report 2003

  • Page 2
    ... Highlights To Our Shareholders At a Glance Customer Solution Profiles Software and Services Platforms Electronic Devices Research & Development Environmental Activities / Community Support Management Five-Year Summary Management's Discussion and Analysis of Operations Consolidated Balance Sheets...

  • Page 3
    Consolidated Financial Highlights Fujitsu Limited and Consolidated Subsidiaries Years ended March 31 Yen U.S. Dollars millions millions except per share data except per share data 2002 2003 2003 For the year: Net sales Operating income loss Income loss before income taxes and minority ...

  • Page 4
    ... returned to profitability as a result of restructuring initiatives. And our electronic devices business managed to trim operating losses. With the extraordinary losses stemming from restructuring charges and a charge to cover corrective measures for certain small form-factor hard disk drives...

  • Page 5
    3

  • Page 6
    .... We are committed to rebuilding our shareholders' equity base and reducing debt levels. We intend to accomplish this by generating higher profits from our business operations and through more strategic utilization of our asset holdings. A Trusted Partner to Our Customers Changes in IT and the...

  • Page 7
    ... different vendors at reasonable prices. In addition, it has become relatively inexpensive to scale IT systems to accommodate new application software and higher processing capacity as their business needs expand. These trends have produced real benefits for IT users and have promoted the widespread...

  • Page 8
    ... provide solutions to the biggest management challenges our customers face, helping them to accelerate the responsiveness of their businesses and reduce costs. Building a Prosperous Networked Society IT as an Integral Part of Our Daily Lives With the rapid proliferation of broadband Internet access...

  • Page 9
    .... Our unique value is in providing comprehensive IT solutions comprising high-performance, high-quality products and services that incorporate leading-edge electronic device technologies. In helping a vast number of customers make their businesses more efficient through the deployment of information...

  • Page 10
    ... billion SONET and DWDM systems PCs & Mobile Phones 655.5 billion PCs Consumer models Business models Mobile terminals Mobile Phones Others 161.4 billion Hard disk drives Electronic Devices FY2002 Net Sales: 618.6 billion Semiconductors 349.3 billion Logic Memory SoC System-on-Chip Compound...

  • Page 11
    ...GeoStream Series FLASHWAVE Series Desktops FMV-DESKPOWER Notebooks FMV-BIBLO Mobile notebooks FMV-BIBLO LOOX Desktops FMV-DESKTOP Notebooks FMV-LIFEBOOK Tablet PCs FMV-STYLISTIC PDAs Pocket LOOX Cameraphones, big-screen phones, FOMA 3G phones Compact magnetic disk drives for servers and notebook...

  • Page 12
    ... to offer the right product for each customer's individual needs. Kanebo, one of Japan's leaders in beauty and skin care products, teamed up with Fujitsu to develop a knowledge management system for its nationwide force of 7,000 beauty counselors. Using Fujitsu's Pocket LOOX handheld devices, beauty...

  • Page 13
    ... global standardization for electronic point-of-sale systems at its branded service stations and convenience stores, and it expects the agreement to deliver products that better meet its customers' needs, greater efficiency, and cost savings across its worldwide downstream business units. That's IT...

  • Page 14
    ...and feature an easy-to-operate one-touch touch screen interface, are being used to service an average 28 million customers a week across all 17,000 UK Post Office branches. Under a new seven-year contract for an extended range of services announced in January 2003, Fujitsu Services is developing and...

  • Page 15
    ... can manage sourcing of key product components from Japan, manufacture the units in Beijing, package them to specific customer specifications in the Czech Republic, and then ship the finished handsets to other markets in Europe. That's global integration. The National Diet Library: Online Access to...

  • Page 16
    ... as system building blocks. The benefits to the customer are higher quality, lower cost and faster delivery. In fiscal 2002 our services units in Europe and North America returned to a profitable footing, and they are now aggressively developing new business focused on the outsourcing market and...

  • Page 17
    ... our business by offering products such as GLOVIA, a comprehensive software solution that provides managers with an integrated view of their operations, from finance and accounting to production. In network services, in addition to offering data processing outsourcing services at our Internet Data...

  • Page 18
    ... the system can be easily expanded as a customer's needs grow. Offering the TRIOLE IT infrastructure and its high value-added component products will be a major focus of our business initiatives in the current fiscal year. Mobile Phones FOMA F2051 Notebook PCs FMV-BIBLO Desktop PCs FMV-DESKPOWER...

  • Page 19
    ...expansion in overseas markets. And in IP networks, we are leveraging the technological advances we pioneered in our telecom networking equipment business and applying them to the promising areas of VoIP and IP-VPN. IA Servers PRIMERGY UNIX Servers PRIMEPOWER Optical Transmission Systems FLASHWAVE...

  • Page 20
    ... competitiveness of Fujitsu's platforms products and, by System-on-chip focusing our resources on applications for the digital AV, mobile phone / mobile terminal, and automotive markets- fields in which we have particular strength- we aim to expand sales and restore profitability. In flash memory...

  • Page 21
    ..., in software and services, we are working on ubiquitous system solutions, system security and knowledge management technologies. In platforms, we are focusing on business applications of grid computing and ways to merge optical, wireless, and IP-based networking. And in electronic devices, we...

  • Page 22
    ..., the Japan-America Institute of Management Science JAIMS was established by Fujitsu in Hawaii in 1972. A pioneer in intercultural education, since its inception JAIMS has offered the kind of management education needed to develop individuals with the skills, knowledge and international perspective...

  • Page 23
    ... how IT solutions from Fujitsu can deliver convenience and efficiency while lowering the burden on the environment. as two MBA programs developed in cooperation with the University of Hawaii focusing on Japan and China, respectively. JAIMS also offers overseas seminars on the latest business trends...

  • Page 24
    ... Officers President Hiroaki Kurokawa Corporate Executive Vice Presidents Akira Takashima Hiroya Madarame Kuniaki Suzuki Junji Maeyama Masamichi Ogura Group President, Software & Services Business Group Group President, Sales Group Group President, Platforms Business Group Head of Corporate Center...

  • Page 25
    ... Five-Year Summary Management's Discussion and Analysis of Operations Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Independent Auditors' Report 24 25...

  • Page 26
    ... Shareholders' equity 572.5 R&D expenditure Capital expenditure Number of employees Net sales by business segment (excluding intersegment sales): Software and Services Platforms Electronic Devices Financing Other operations Total Net sales by customers' geographic location: Japan Europe The Americas...

  • Page 27
    ... the telecommunications and financial sectors. In semiconductors, however, although price competition intensified, there was great improvement in the demand-supply balance for logic chips and flash memory, and sales increased. Cost of Sales, Selling, General & Administrative Expenses, and Operating...

  • Page 28
    ..., overall sales in this segment declined. The restructuring of our overseas subsidiaries returned our operations in the U.K. and the U.S. to a profitable footing. Business productivity also increased as a result of our promotion of packaged solution offerings and the full-scale utilization of...

  • Page 29
    ... services and mobile phones. Net sales overall declined, however, as a result of the drop in demand for optical transmission systems and the effects of our previous withdrawal from the small form factor hard disk drive business for desktop PCs. The streamlining effects of our restructuring...

  • Page 30
    ... income Japan ...Europe ...The Americas ...Other...Unallocated operating costs and expenses/intersegment elimination...Consolidated operating income ... ¥ 53 (17) (57) 5 (58) ¥ (74) ¥ 160 ¥107 3 21 (18) 38 12 6 (58) 0 Electronic Devices: ¥ 100 ¥174 For reference: Net Sales by Customers...

  • Page 31
    ... and reorganized other subsidiaries with the aim of increasing their competitiveness, including a reorganization of the Fujitsu Services Group. The net result was a decrease in the total number of subsidiary companies. The number of affiliates accounted for by the equity method increased by 1 to 29...

  • Page 32
    ...,258 311,496 296,927 2,474,392 2,223,067 2,071,640 17,263,667 Investments and long-term loans: Affiliates (Note 6) Lease receivables (Note 15) Other investments and long-term loans (Notes 4, 6 and 11) Total investments and long-term loans 341,937 116,859 438,638 897,434 285,837 115,392 500,358 901...

  • Page 33
    ...,925 1,787,967 Minority interests in consolidated subsidiaries Shareholders' equity: Common stock (Note 12) Authorized-5,000,000,000 shares Issued 2002-2,001,962,672 shares 2003-2,001,962,672 shares Capital surplus (Note 12) Retained earnings (Deficit) Unrealized gains on securities, net of taxes...

  • Page 34
    ...(Note 3) 2003 Net sales Operating costs and expenses: Cost of sales Selling, general and administrative expenses (Note 18) ¥5,484,426 ¥5,006,977 ¥4,617,580 $38,479,833 Operating income (loss) Other income (expenses): Interest and dividend income Equity in earnings of affiliates, net Interest...

  • Page 35
    FINANCIAL SECTION Years ended March 31 2001 2002 Yen (millions) 2003 U.S. Dollars (thousands) (Note 3) 2003 Common stock (Note 12): Balance at beginning of year Exercise of warrants Conversion of bonds Increase as a result of stock exchange Balance at end of year ¥ 306,246 7,007 1,399 - ¥ ...

  • Page 36
    ... provided by operating activities: Depreciation and amortization Goodwill amortization Accrual (payments) for retirement benefits Provision for ...finance leases Conversion of bonds into common stock and capital surplus The accompanying Notes to Consolidated Financial Statements are an integral part ...

  • Page 37
    ... products and computer systems are generally recognized upon acceptance by the customers, whereas revenues from sales of personal computers, peripherals, other equipment and electronic devices are recognized when the products are shipped. (f) Marketable securities Marketable securities included in...

  • Page 38
    ... benefit plans, in principle, the actuarial valuation used to determine the pension costs is the projected unit credit method. (m) Provision for loss on repurchase of computers Certain computers manufactured by the Group are sold to Japan Electronic Computer Company Ltd. ("JECC"), other leasing...

  • Page 39
    .... However, the Group takes into consideration the recoverability of property, plant and equipment based on future business activities. Retirement benefits (Note 10) Under IAS No.19, the period of amortizing the unrecognized net obligation upon application of a new accounting standard should be...

  • Page 40
    ...Years ended March 31 2001 2002 2003 Net sales Net income (loss) ¥1,390,549 84,337 ¥1,163,438 (8,803) ¥1,214,169 $ 10,118,075 445 3,708 Of the affiliates accounted for by the equity method, the carrying and market values of the shares of the publicly listed companies at March 31, 2002 and...

  • Page 41
    ..., net for the year ended March 31, 2002 and 2003 mainly related to the comprehensive structural reform of the Group. Mainly, for the year ended March 31, 2002, sale or disposal of machinery and equipment and devaluation on the North American semiconductor plant for close of the plant were included...

  • Page 42
    ...average interest rate was 1.63% at March 31, 2003: Secured Unsecured Bonds and notes issued by the Company: 1.4% unsecured convertible bonds due 2004 1.95% unsecured convertible bonds due 2003 2.0% unsecured convertible bonds due 2004 zero coupon...000 30,000 50,000 50,000 100,000 80,000 330,141 - 129,...

  • Page 43
    ...stocks. Certain outstanding convertible bonds and notes can be repurchased at any time and may be redeemed at the option of the Company, in whole or in part, at prices ranging from 101% to 100% of their principal amounts. The aggregate annual maturities of long-term debt subsequent to March 31, 2003...

  • Page 44
    ... in Japan have unfunded lump-sum retirement plans which, in general, cover all employees who retire before a retirement age prescribed in their internal codes. The employees are entitled to the benefits primarily based on their length of service and basic salary as of the retirement date. In...

  • Page 45
    ...all employees voluntarily terminated their services at the balance sheet date. Considering the above trust scheme, the adoption of the new accounting standard had no material impact on net income for the year ended March 31, 2001. The major defined benefit pension plan outside Japan is the ICL Group...

  • Page 46
    ...tax rate - - (8.2%) Tax effect to prior losses of subsidiaries - 6.2% - Realization of equity in earnings of affiliates from establishment of stock holding trust for retirement benefit plan 10.1% - - Other (0.9%) (1.7%) (0.4%) Effective income tax rate 89.3% 33.5% 19.5% The significant components of...

  • Page 47
    ...cost of the funds financed, and to improve their return on invested funds. Basic Policies for Derivative Trading The Group basically enters into derivative transactions only to cover their actual requirements for the effective management of receivables/liabilities, and not for speculative or dealing...

  • Page 48
    ... their hedging. Hedge accounting The group has adopted hedge accounting for its derivative transactions. Gains or losses on changes in the fair market values of the hedging instruments which consist of forward exchange, option and swap contracts and related complex contracts are recognized in income...

  • Page 49
    ...ended March 31 2001 2002 Yen (millions) 2003 U.S. Dollars (thousands) 2003 Gain on sales of marketable securities Gain on business transfer Gain on establishment of stock holding trust for retirement benefit plan Gain on sales of subsidiaries' stock Loss on disposal of property, plant and equipment...

  • Page 50
    ... related to certain small-form-factor hard disk (magnetic disk) drives due to some procured parts that were found to be defective. 19. Segment Information Business Segment Information Yen (millions) Years ended March 31 Software& Services Platforms Electronic Devices Financing Other Operations...

  • Page 51
    Yen (millions) Years ended March 31 Software& Services Platforms Electronic Devices Financing Other Operations Elimination& Corporate Consolidated 2003 Sales Unaffiliated customers Intersegment Total sales Operating costs and expenses Operating income(loss) Total assets Depreciation Capital ...

  • Page 52
    ... March 31 Japan Europe The Americas Other Elimination & Corporate Yen (millions) Consolidated 2001 Sales Unaffiliated customers Intersegment Total Operating costs and expenses Operating income (loss) Total assets 2002 Sales Unaffiliated customers Intersegment Total Operating costs and expenses...

  • Page 53
    ... This information is required by the Securities and Exchange Law of Japan. For the year ended March 31, 2003, the Company entered into the transactions with its affiliate as follows: •Related party: Fanuc Ltd.  Common stock - ¥69,014 millions ($575,117 thousands)   The Company...

  • Page 54
    FINANCIAL SECTION 52

  • Page 55
    ...AMERICAS Unlisted Fujitsu IT Holdings, Inc. Fujitsu Network Communications, Inc. Fujitsu Consulting Holdings, Inc. EUROPE Unlisted Fujitsu Services Holdings PLC Affiliates-Equity Method Applied Only JAPAN Listed Fanuc Ltd. Fujitsu General Ltd. Advantest Corporation EUROPE Unlisted Fujitsu Siemens...

  • Page 56
    FUJITSU LIMITED Shiodome City Center, 1-5-2 Higashi-Shimbashi, Minato-ku, Tokyo 105-7123, Japan Telephone +81-3-6252- 2175 Facsimile +81-3-6252-2783 Internet www.fujitsu.com Printed in Japan BA0021-1M This report is printed on 100% recycled paper with ink containing less than 15% oil-based solvent.