Fujitsu 2010 Annual Report Download - page 94

redundancies and heightening efficiencies in each region, as well as
to maximize synergies. As a result of structural reforms at European
subsidiaries, the Group has established three integrated organiza-
tional structures covering the U.K. and Ireland, the Nordics, and
Continental Europe. These changes should enable the Group to
make strides in resource optimization and business efficiency. In line
with this realignment, the Group reduced its workforce and consoli-
dated offices chiefly in continental Europe. Large personnel reduc-
tions were also made in the U.K. in light of continued economic
weakness. As a result, the Group booked ¥26.3 billion in restructur-
ing charges as other expenses for fiscal 2009.
In Japan, the Group’s front-end terminal technology businesses,
including ATMs, POS systems, and totalizator terminals, were consoli-
dated under Fujitsu Frontech Limited, with a view to integrating
production and sales to accelerate development of its store solutions
targeting the retail and service sectors. Moreover, in order to further
strengthen the Group’s solutions for medium-sized businesses in
Japan, Fujitsu Business Systems Ltd.* was made a wholly owned
subsidiary of the Company. In addition, the Company’s scanner
business was consolidated under PFU Limited (PFU). In April 2010,
PFU was converted into a wholly owned subsidiary in a bid to
expand synergies with the Company’s wide-ranging services and to
deliver optimal services and products to customers on a global basis.
* Fujitsu Business Systems Ltd. will be renamed Fujitsu Marketing Limited on
October 1, 2010.
Ubiquitous Product Solutions
Sales in this segment in fiscal 2009 were ¥918.7 billion ($9,879 mil-
lion), down 3.2% from fiscal 2008. Excluding the effects of consolidat-
ing Fujitsu Technology Solutions, the transfer of the HDD business
and exchange rate fluctuations, sales declined 9% year on year. Sales
in Japan fell 6%, reflecting the effects of lower revenues due to
declining PC prices, despite an increase in PC sales volume atop the
launch of models compatible with the new Windows operating
system and growth in demand for PCs for educational use. In mobile
phones, sales were lifted by increased sales of affordably priced
handset models, coupled with revenues from handset repairs in line
with the lengthening replacement cycle for mobile phones. Sales
outside of Japan increased 3.3%, but would have declined 18% if
business realignment effects and exchange rate fluctuations were
excluded. Sales were negatively affected by the lingering impact of
lower sales in the HDD business in the first half of the year.
Segment operating income was ¥22.9 billion ($247 million),
¥22.4 billion higher than the previous fiscal year. However, exclud-
ing the effects of business realignment and exchange rate fluctua-
tions, operating income actually worsened by ¥9.0 billion year on
year. Earnings benefited from growth in mobile phone sales and
cost reductions in design and the purchase of components. Earn-
ings were negatively affected, though, by declining PC prices and a
first-half loss in the HDD business, which grew ¥6.5 billion from the
corresponding period of the previous fiscal year.
Business realignment and exchange rate fluctuations boosted
profits by approximately ¥31.0 billion from the previous fiscal year.
The components of this rise included, in addition to exchange rate
fluctuations, effects from the transfer of the HDD business, which
posted a loss of ¥16.5 billion in the second half of fiscal 2008.
Another major component was profits in the PC business of con-
solidated subsidiary Fujitsu Technology Solutions, enabled largely
by a temporary reduction in copyright levies imposed on PC man-
ufacturers in Germany as the result of a settlement with the
national copyright organization.
Regarding the HDD business, which had continued to face a
severe business environment marked by intensifying price compe-
tition worldwide, the Company signed final agreements on April
30, 2009 for the transfer of its HDD drive business to Toshiba
Corporation and its HDD media business to Showa Denko K.K. The
HDD media business was transferred on July 1, 2009, and the HDD
drive business was transferred on October 1, 2009. As a result, the
Company completed its exit from the HDD business.
Device Solutions
This segment reported a 6.9% year-on-year decrease in sales, to
¥547.2 billion ($5,884 million). Sales in Japan decreased 15.5%. Sales
of Flash memory and other devices were lower for the year. But
while sales of logic LSI devices also declined for the year, a recovery
in demand for LSI devices used in digital home appliances and
automobiles during the fourth quarter of the year (January to
March 2010) resulted in a year-on-year increase in sales for this
three-month period. Sales outside of Japan increased by 8.1%,
although sales were largely on par with the previous year when
excluding the impact of the conversion of FDK into a consolidated
subsidiary and exchange rate fluctuations. While sales of LSI prod-
ucts declined for the full year as a result of the first-half slump in
sales, demand for electronic components increased for the full year.
The segment posted an operating loss of ¥8.7 billion ($94
million). Electronic components turned profitable during the year.
Although the LSI business became profitable in the second half, the
large losses posted in the first quarter (April to June 2009) resulted
in a loss on an annual basis. Overall, profitability in the Device Solu-
tions business improved by ¥63.1 billion compared to the previous
year. The profitability of the LSI business dramatically improved due
to lower depreciation costs and reductions in personnel and other
fixed costs resulting from structural reforms, as well as greater devel-
opment efficiencies. In electronic components, higher demand and
other factors contributed to improved profitability.
As part of the restructuring initiatives in its LSI business, the
Group embarked on a drive to realign its production framework to
match demand and to enhance efficiency in administrative opera-
tions. Consequently, the integration and consolidation of three
wafer production lines, which the Group had begun phasing in,
were completed as planned by the end of the fiscal year. Due to
092 FUJITSU LIMITED Annual Report 2010
Management’s Discussion and Analysis of Operations