Fujitsu 2008 Annual Report Download - page 75

Download and view the complete annual report

Please find page 75 of the 2008 Fujitsu annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

1) Changes in Customers’ IT Investment Trends
A large proportion of our IT systems and services, as well as communications infrastructure and other business, is with telecommunica-
tions carriers, financial institutions, and large manufacturers. The business environment within these industries, including shifting
market trends and structural reforms, could lead to changes in customers’ IT investment trends, having a significant impact on Group
sales and profitability. In semiconductors, HDDs and other operations where the Group provides components and other products,
both demand and prices are impacted to a large extent by customers’ sales and inventory adjustments of PCs, digital home electronics,
mobile phones, automobiles and other products in which these parts are used. Accordingly, soft demand and falling prices for custom-
ers’ products, or a decline in customers’ market share, could negatively impact Group sales and earnings.
Alongside corporate clients, national and local governments represent another important customer base for the Fujitsu Group. In
the UK, for example, government-related projects are an especially important part of our business. Accordingly, changes in the
approach to e-Government and other national-level IT utilization policies being promoted in Japan and elsewhere could impact sales
and profitability.
2) Ability to Maintain Lasting Ties with Customers
The Fujitsu Group is committed to bolstering ties with customers, striving to serve as a business partner and provide solutions across
the full IT system lifecycle. For semiconductors, HDDs and other operations where the Group provides components and other prod-
ucts, business stability hinges on maintaining lasting ties with customers that represent key sources of demand for our products. An
inability to secure repeat business and retain contract relationships with such customers could therefore affect sales and profitability.
3. Competitors/Industry
The IT sector is characterized by intense competition and fast-paced technological innovation. Events within the industry or actions by
competitors could therefore have a substantial impact on our business results. Examples of such potential risks are listed below.
1) Price Competition
Intensifying competition is directly linked to declining prices for products and services. Anticipating such technology- and
competition-driven price erosion, we are pursuing a variety of measures to reduce costs, including the introduction of Toyota Produc-
tion System reforms, standardization of system development methodologies, and software modularization, as well as efforts to expand
sales of new products and services. Despite these steps, the Group still faces the risk of larger-than-expected declines in prices, as well
as the risk of being unable to achieve sufficient cost reductions and sales growth due to fluctuations in the price of semiconductors
and other components, either of which could negatively impact Group sales and profitability.
2) Competition from New Market Entrants and Others
In addition to challenges posed by existing industry peers, competition from new market entrants continues to intensify in the IT
sector. Today, new entrants continue to emerge in market areas where the Fujitsu Group wields a competitive advantage, thus entail-
ing the risk that we may lose our competitive edge, or fail to secure a clear competitive advantage in future business operations.
3) Competition in Technology Development
Technological advancement in the IT sector occurs at an extremely fast pace, leading to rapid turnover in new products and technolo-
gies. In this context, remaining competitive requires the continuous development of state-of-the-art technology. While the Fujitsu
Group does its utmost to maintain highly competitive technologies, a loss in competitiveness versus other companies in the race to
develop innovative technologies could lead to a decline in the Group’s market share and profitability, which would negatively impact
sales and earnings. Further, sales and profitability could be affected by the development of groundbreaking technologies and other
actions by competitors that would severely compromise the value of the Group’s products and services. Additionally, there is also the
risk of an adverse effect on sales and profitability as a result of the time it takes to implement mass-production chip technologies for
semiconductors, such as in solving technological issues concerning cutting-edge process development technology.
073
ANNUAL REPORT 2008FUJITSU LIMITED
BUSINESS AND OTHER RISKS