Fujitsu 2008 Annual Report Download - page 74

Listed below are the principal business and other risks affecting the Fujitsu Group (Fujitsu Limited and its consolidated subsidiaries)
that we believe may influence investors’ decisions. With a view to proactively disclosing information to investors, we have also included
items that may not necessarily have significant bearing on such decisions. We are aware of these risks and are making efforts to prevent
them from arising, avoid potential risks altogether and immediately confront risks should they occur. Among the risks listed below are
some items related to future developments, but the list only includes items that the Group deems necessary to publicly disclose as of
the date of submission of its securities report (June 23, 2008).
1. Economic and Financial Market Trends
Economic and financial market trends have an impact on the Group’s business results, financial base and other aspects of its operations.
Examples of such risks are listed below.
1) Economic Trends in Key Markets
The Fujitsu Group provides IT products and services, telecommunications infrastructure equipment, as well as semiconductors, hard
disk drives (HDDs) and other components, to corporate and institutional clients and consumers in every region of the globe. Hence,
sales and income generated from these operations are greatly affected by economic conditions in each respective market. This is
particularly true of Japan, North America, Europe, and Asia (including China), key markets where economic trends can significantly
impact Fujitsu Group operations.
2) High-tech Market Volatility
The IT sector is periodically subject to dramatic changes in the balance of supply and demand that exceed the scope of normal cyclical
market variations. This tendency is particularly evident with regard to semiconductors, PCs, and other general-purpose products. The
Fujitsu Group gives ample consideration to market cycles and volatility when deciding to launch new products, initiate volume pro-
duction, or scale back production, among other actions. Nonetheless, we may fail to accurately forecast market changes, or changes in
market conditions could exceed our forecasts. Accordingly, there is a risk that we may be unable to recoup investment costs, as well as
the risk of opportunity losses. Further, the Group continuously implements structural reforms in a bid to respond to market changes.
However, drastic market changes could force us to enact structural reforms on a far greater scale than initially expected, resulting in a
temporary increase in related expenses.
3) Exchange Rates
The Fujitsu Group imports a substantial amount of components and materials and exports various products. While import and export
costs tend to roughly balance out over the course of a given year, sudden fluctuations in exchange rates and other factors could force
the Group to incur losses on foreign currency translation. In addition, with respect to overseas assets held by the Group, as well as liabili-
ties, there is the possibility that exchange rate fluctuations could lead to depreciation of assets and/or appreciation of liabilities.
4) Interest Rates
The Fujitsu Group has interest-bearing loans which include debt directly impacted by interest rate fluctuations. Consequently, rising
interest rates could increase borrowing costs.
5) Capital Markets
Stock market trends in Japan and overseas have a substantial effect on the value of Group stockholdings in other companies and the
management of pension assets. Weak stock market performance could thus force us to incur losses on the devaluation of marketable
securities held or a reduction in pension assets, exposing the Group to the risk of higher losses.
2. Customers
Fujitsu Group operations are highly influenced by the business trends of strategic key customers. Examples of potential risks are
described below.
BUSINESS AND OTHER RISKS
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ANNUAL REPORT 2008FUJITSU LIMITED