Fujitsu 2004 Annual Report Download

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Table of contents

  • Page 1

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    Annual Report 2004 CONTENTS Consolidated Financial Highlights To Our Shareholders Management Direction Principal Products and Services Customer Solution Profiles Software & Services Platforms Electronic Devices Research & Development Intellectual Property Environmental Involvement Social ...

  • Page 3
    ...taxes and minority interests Net income loss Cash flows from operating activities Per share Yen and U.S. dollars : Earnings loss Basic Diluted Cash flows from operating activities Cash dividends Cash dividends to face value At year-end: Shareholders' equity Total assets ¥ 4,617,580 100,427 147,606...

  • Page 4
    ... a net profit for the period, and we have also made strides in improving our financial strength. As a result, we have decided to issue a dividend of 3 yen per share. Looking ahead, we believe the IT market will continue to face a difficult business environment, including further declines in prices...

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    3

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    ... of everyone in the company, from senior management on down. In addition, early on I set forth certain immediate management priorities: improving the profitability of our business operations, restoring financial soundness, and continuous reform of our operating structure. Our dedicated efforts in...

  • Page 7
    ...Solutions and Fujitsu PC merged into Fujitsu Computer Systems Nov. 2003 Established Fujitsu (China) Holdings Merger of four China-based IT operating companies Apr. 2004 Realigned overseas services business Alignment of Americas operations under Fujitsu Consulting, European operations under Fujitsu...

  • Page 8
    Future Management Direction My goal in fiscal 2004 is to move beyond the restoration of our financial health and make Fujitsu a strong company for the benefit of customers, employees and shareholders. A strong Fujitsu will be able to provide solutions worldwide that are optimized for each customer's...

  • Page 9
    ... risk-related issues to the Management Council and to the Board of Directors so that countermeasures can be thoroughly considered. Through these and other measures, we are working to strengthen the risk management structure for the entire Fujitsu Group. Management Organization Regarding Business...

  • Page 10
    ... services to support customers as their trusted business partner. Speedy system development and construction with provision of optimal software and hardware. FY 2003 Net Sales: 2,094.2 billion Systems Integration Application Packages & Solutions Industry-specific Solutions Business Solutions (CRM...

  • Page 11
    ...) Liquid crystal displays employing our own high-resolution technology for use in PCs and other devices. Media Devices Components Compact, low-power-consumption devices for high-function mobile phones and other mobile equipment. Telecommunications relays, connectors, keyboards, thermal printers and...

  • Page 12
    ... to help new drug developers overcome these hurdles, we developed new techniques and software enabling the world's fastest quantum chemical computations based on the molecular orbital method. Working together with Tokai University's Japan's highest performance Linux cluster system is powering...

  • Page 13
    ... of Palm Vein Pattern Authentication Technology for Secure Banking Responding to growing needs for identity verification World's fastest quantum chemical computational techniques and software are helping to speed drug development. New ATMs incorporate pioneering palm vein pattern authentication...

  • Page 14
    ... regional medical institutions or family doctors in other areas via Internet connection, the Center can offer patients greater peace of mind knowing that they have access to a comprehensive healthcare environment. Visiting Nurse Service of New York Bringing the Caring Home - with Tablet PCs "We...

  • Page 15
    ... New York, Fujitsu's Tablet PCs have provided the right prescription for bringing home better care. HM Customs and Excise Secure and Reliable IT Infrastructure Supports Vital Government Services HM Customs and Excise (HMCE) is responsible for collecting over 40% of UK Central Government tax revenue...

  • Page 16
    ... of our operations in Europe, North America, Australasia, China and elsewhere, we are putting in place a new organizational structure that will lay the foundation for increased profitability. We will also work to reinforce our worldwide support structure and expand our overseas business with an...

  • Page 17
    ... and marketing, logistics and delivery. Package software supporting greater efficiency for customers various business processes, such as accounting and production management. 2 SCM (Supply Chain Management) 3 ERP (Enterprise Resource Planning) CRM and SCM offerings. Tatebayashi System Center...

  • Page 18
    ... that fuse information and communications, as well as boost efficiency through business alliances. 4. Seizing Opportunities in Ubiquitous Networking We plan to seize new business opportunities by opening up a new business area centering on innovative mobile terminals that meld PCs and mobile phones...

  • Page 19
    ... with TRIOLE, we will enhance our telecommunications server and high-performance router offerings for telecommunications carriers. In the optical transport sector, we already claim a high market share in North America and Asia-Pacific. Going forward we will seek to promote this business worldwide...

  • Page 20
    Electronic Devices Akiruno Technology Center Business Strategy Building on market growth from last year, our goal in fiscal 2004 is to increase profitability in both mainstay and leading-edge products, with logic chips as our core business. Fujitsu holds a leadership position in advanced ...

  • Page 21
    ...products and services that will give shape to this new era, Fujitsu Laboratories is carrying out cutting-edge research and development in fields ranging from IT services to computing and telecommunications systems, as well as in supporting fields such as electronic devices and materials technologies...

  • Page 22
    ... form of intellectual property supporting technologies. We are strengthening and building our patent portfolio by establishing priorities and medium-range to long-term plans for patent filings in each business sector. Software & Services Software & Services Customer-oriented solutions covering...

  • Page 23
    ... that they provide, we are able to deal with other companies from a position of strength. A notable example is the very significant licensing revenue contributed by the patents we hold for our pioneering developments in plasma display panel and SAW (Surface Acoustic Wave) filter technologies. 21

  • Page 24
    ... of Company-Wide ISO 14001 Certification In March 2004 we became one of the largest companies in Japan to receive ISO 14001 certification covering all our domestic operations. We are now in the process of creating a unified environmental management system that will encompass the entire group. Full...

  • Page 25
    ... the Good Design Award from the Japan Industrial Design Promotion Organization. Top Spot on Nikkei Personal Computer's Corporate Web Site Usability Ranking Fujitsu was ranked number one in a survey carried out by Nikkei Personal Computer of the easiest-touse websites of major corporations in Japan...

  • Page 26
    ... Kato Katsuhiko Kondo Yoshiharu Inaba Chairman and Director, Fuji Electric Holdings Co., Ltd. Honorary Advisor, Mizuho Financial Group President and CEO, Fanuc Ltd. Corporate Executive Officers President Hiroaki Kurokawa Corporate Executive Vice Presidents Hiroya Madarame Kuniaki Suzuki Masamichi...

  • Page 27
    ... 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 26 27...

  • Page 28
    ... (times) Free cash flow R&D expenditure Capital expenditure Number of employees Net sales by business segment (excluding intersegment sales): Software & Services Platforms Electronic Devices Financing Other operations Total Net sales by customers' geographic location: Japan Europe The Americas Asia...

  • Page 29
    ... devices supporting the digital revolution - including plasma display panels (PDPs), liquid crystal displays (LCDs) and hard disk drives (HDDs) - enjoyed strong growth. In mobile communications, the shift toward 3G solidified. In Japan, although firm corporate demand for IT-enabled services...

  • Page 30
    ... on the North American market. In conjunction with this, Fujitsu Consulting's operations in Spain were sold to a third party, and other European operations were merged into Fujitsu Services Holdings PLC (the former ICL). Operations in Australasia were merged into Fujitsu Australia Limited. These...

  • Page 31
    ... and operation of new systems, reduce the occurrence of system errors, and bring about significant cost reductions by using pre-verified combinations of hardware and middleware under our TRIOLE model. Last November we completed construction of Fujitsu Solution Square in Kamata, Tokyo, bringing...

  • Page 32
    ... in the market, particularly in Europe and the US, and sales of these systems by Fujitsu Siemens Computers (Holding) B.V. in Europe, Fujitsu Computer Systems in North America and group companies in other areas increased. In PCs, as well, solidifying our organizational ability to supply products...

  • Page 33
    ... from our business operations, gains on sales of marketable securities, transfer of the substitutional portion of the employees' pension funds, and the effect of Fanuc shares not being accounted for as an equity method affiliate but revaluated at fair market value. We achieved the target we set at...

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    FINANCIAL SECTION Management's Discussion and Analysis of Operations increased profits in our business operations, sales of marketable securities, and gain on transfer of the substitutional portion of the employees' pension funds, as well as revaluation at fair market value for holdings in Fanuc, ...

  • Page 35
    ...discount rate, rates of retirement, death rates, and the expected rate of return on the plan assets. The discount rate for the company and its domestic subsidiaries is estimated based on the market rate of return in Japan for long-term corporate bonds of a certain rating. The expected rate of return...

  • Page 36
    ...assets: Cash and cash equivalents Short-term investments (Note 4) Receivables, trade (Note 16) Allowance for doubtful accounts Inventories (Note 5) Current portion of lease receivables (Note 15) Other current assets (Note 11) Total current assets 2003 U.S. Dollars (thousands) (Note 3) 2004 ¥ 282...

  • Page 37
    ... Issued 2003-2,001,962,672 shares 2004-2,001,962,672 shares Capital surplus Retained earnings (Deficit) Unrealized gains on securities, net of taxes Revaluation surplus on land, net of taxes Foreign currency translation adjustments Treasury stock, at cost Total shareholders' equity 324,624 324,624...

  • Page 38
    ...142,490) 468,906 Yen U.S. Dollars (Note 3) Amounts per share of common stock: Basic earnings (loss) (Note 17) Diluted earnings (loss) (Note 17) Cash dividends The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. ¥(193.0) (193.0) 5.0 ¥(61.3) (61...

  • Page 39
    ... Balance at end of year Treasury stock: Balance at beginning of year (Increase) decrease Balance at end of year The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 2002 2003 U.S. Dollars (thousands) (Note 3) 2004 ¥ 314,652 9,707 265 ¥ 324,624...

  • Page 40
    ... investment securities Other, net Net cash provided by (used in) investing activities A+B ( ) The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. ( )This is referred to as "free cash flow" in Management's Discussion and Analysis of Operations. 2002...

  • Page 41
    ...of year Noncash investing and financing activities: Acquisition of assets under finance leases Contribution of assets to an affiliated company Conversion of bonds into common stock and capital surplus 2002 2003 Yen (millions) 2004 U.S. Dollars (thousands) (Note 3) 2004 448,947 (296,718) (36,191...

  • Page 42
    ... of IT systems and products including software development contracts is recognized upon acceptance by the customers, whereas revenue from sales of personal computers, other equipment and electronic devices is recognized when the products are shipped. (f) Marketable securities Marketable securities...

  • Page 43
    ... plans, 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 Co., Ltd. ("JECC") and other leasing companies for leasing...

  • Page 44
    ... between the accounting principles and practices adopted by the Group and those prescribed by International Financial Reporting Standards ("IFRS/IAS") at March 31, 2004, which are presented below. This note is out of scope of the audit. Software development contracts Under IAS 11, revenue and costs...

  • Page 45
    ... significant influence over JECC's affairs. JECC's principal business is the leasing of computers and peripherals purchased from its six shareholders. At March 31, 2003 and 2004, JECC's issued share capital was ¥65,700 million ($619,811 thousand). Its net sales for the years ended March 31, 2002...

  • Page 46
    ... operations and FDK Corporation from consolidated subsidiaries to equity method affiliates, the securitization of Fujitsu Solution Square (located in Kamata, Tokyo), and the sales of other properties that had been used for employees' welfare. Machinery and equipment Balance at beginning of year, net...

  • Page 47
    ...: Yen (millions) U.S. Dollars (thousands) 2003 Loans, principally from banks and insurance companies, due 2003 to 2020 with the weighted average interest rate of 1.63% at March 31, 2003 and due 2004 to 2020 with the weighted average interest rate of 2.12% at March 31, 2004: Secured Unsecured Bonds...

  • Page 48
    ... based on their length of service, basic salary as of the retirement date and the number of years of participation in the Plan. The contributions of the Company and the subsidiaries covered by the Plan and their employees are made to the Fujitsu Welfare Pension Fund which is an external organization...

  • Page 49
    ...cover the unrecognized net obligation at transition, the Company placed its holding of marketable securities in trust which was solely established for the retirement benefit plan. The major defined benefit pension plan provided outside Japan is the plan that Fujitsu Services group provides in the UK...

  • Page 50
    ...: Gains from establishment of stock holding trust for retirement benefit plan Unrealized gains on securities Retained earnings appropriated for tax allowable reserves Other Gross deferred tax liabilities Net deferred tax assets 2003 Yen (millions) 2004 U.S. Dollars (thousands) 2004 ¥ 455,928 229...

  • Page 51
    ..., 2002 reflected the issuance of shares by which the Company turned Fujitsu Systems Construction Ltd. into a wholly owned subsidiary. 13. Commitments and Contingent Liabilities Commitments outstanding at March 31, 2004 for purchases of property, plant and equipment were approximately ¥940 million...

  • Page 52
    ... Notes to Consolidated Financial Statements Fair Value of Derivative Financial Instruments: At March 31, 2003 and 2004, all derivative financial instruments were stated at fair market value and recorded on the balance sheet. 15. Leases Lessors On September 30, 2004, Fujitsu Leasing Co., Ltd. was...

  • Page 53
    ..., net" for the years ended March 31, 2002, 2003 and 2004 consisted of the following: Yen (millions) 2004 Years ended March 31 Gain on transfer of substitutional portion of employees' pension funds Gain on sales of marketable securities Gain on sales of property, plant and equipment Gain on business...

  • Page 54
    ... March 31, 2003 related to certain small-form-factor magnetic hard disk drives due to some procured parts that were found to be defective. Please refer to Note 10 for Gain on transfer of substitutional portion of employees' pension funds. 19. Segment Information Business Segment Information Yen...

  • Page 55
    ... in the IT market, as well as the Group's strategic focus on providing integrated systems solutions that optimally combine servers, storage and networks. Segment information prior to and for the year ended March 31, 2002 has been restated. 3. Fujitsu Leasing Co., Ltd., an operating company under the...

  • Page 56
    ... Total Operating costs and expenses Operating income (loss) Total assets 2004 Sales Unaffiliated customers Intersegment Total Operating costs and expenses Operating income (loss) Total assets Japan Europe The Americas Others Elimination & Corporate Yen (millions) Consolidated ¥3,759,770 401...

  • Page 57
    ... of systems support and operational services in Japan within the Group. The exchange of shares is expected to take place on October 1, 2004. The share exchange ratio will be one share of Fsas for 2.72 shares of the Company's common stock. The number of new shares to be issued by the Company is...

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    FINANCIAL SECTION Independent Auditors' Report 56

  • Page 59
    ... Unlisted Fujitsu Services Holdings PLC Affiliates-Equity Method Applied Only JAPAN Listed Fujitsu General Ltd. Advantest Corporation FDK Corporation Unlisted Fujitsu Leasing Co., Ltd. Shareholder Information For further information, please contact: Fujitsu Limited Public & Investor Relations...

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    FUJITSU LIMITED www.fujitsu.com This report is printed on 100% recycled paper with ink containing less than 15% oil-based solvent.