TOKYO, Japan, Nov. 4 — Fujitsu has reported a profit for the second quarter attributable to owners of the parent of 17.2 billion yen (US$158 million), a decrease of 6.5 billion yen compared to the second quarter of fiscal 2013.

Consolidated revenue for the second quarter of fiscal 2014 was 1,124.1 billion yen, a decrease of 2.4% from the second quarter of fiscal 2013. On a constant-currency basis, revenue fell by 5%. Revenue in Japan decreased by 4.8%. Outside of Japan revenue rose 1.3%, but declined by 4% on a constant-currency basis.

Gross profit was 299.8 billion yen, a decrease of 11.1 billion yen from the second quarter of fiscal 2013, resulting from the impact of lower revenue, despite the beneficial effects of structural reforms in the mobile phone business and other areas. The gross profit margin was 26.7%, a decrease of 0.3 of a percentage point. Selling, general and administrative expenses were 274 billion yen, an increase of 2.2 billion yen from the second quarter of fiscal 2013. Other expenses included a loss of 0.8 billion yen, representing a deterioration of 2.7 billion yen from the second quarter of fiscal 2013, primarily on one-time gains recorded in last year’s second quarter stemming from changes to the retirement benefit plans of Fujitsu’s subsidiaries in Japan.

Fujitsu recorded an operating profit of 24.9 billion yen (US$228 million), a decrease of 16.1 billion yen from last fiscal year’s second quarter.

In net financial income including financial income, financial expenses and income from investments accounted for using the equity method was 7.2 billion yen, an improvement of 7.3 billion yen from the second quarter of fiscal 2013 resulting from improved net gain on foreign exchange owing to the weak yen. Profit before income taxes was 32.1 billion yen, a decrease of 8.7 billion yen from the same period in the previous fiscal year.

Comparison to Consolidated Projections for First-Half Announced in July 2014

Revenue exceeded the most recent projections announced on July 31, 2014, by 42.8 billion yen. Operating profit, profit before income taxes, and profit for the period attributable to owners of the parent each exceeded projections by 7.2 billion yen, 17.6 billion yen and 14.1 billion yen, respectively. The Ubiquitous Solutions segment exceeded projections owing to revenue from PCs/mobile phones that exceeded projections and improvement of profitability. Financial results in the Technology Solutions and Device Solutions segments were essentially in line with projections. In addition, as the yen weakened more than anticipated, there was a gain on foreign exchange.

Comment from President Masami Yamamoto

In the first half of fiscal 2014, I am happy to report that Fujitsu benefitted from the restructuring of our mobile phone business, as well as from demand for upgraded PCs in line with the end of support for an operating system, enabling year-on-year increases in revenues and operating profit. Furthermore, Fujitsu surpassed its estimates for the First-Half made at the beginning of fiscal 2014, bolstering confidence that we will be able to achieve our full-year projections. Moving forward, while the future of the world economy becomes somewhat opaque, we continue to invest in sustainable growth as we pursue our full year and medium term goals.

Business Segment Financial Results for the Second Quarter

Revenue in the Technology Solutions segment amounted to 784.1 billion yen, essentially unchanged from the same period in fiscal 2013. Revenue in Japan fell 2.8%. Server-related revenue declined sharply in comparison with the second quarter of fiscal 2013, when there were large-scale systems deals. Revenue outside Japan increased 4.4%. On a constant currency basis, however, revenue declined by 2%. Revenue from optical transmission systems in North America declined as telecommunications carriers entered a trough in their investment cycle in relation to relevant segments of Fujitsu’s business. The segment posted an operating profit of 39.3 billion yen (US$361 million), a sharp decline of 21.1 billion yen compared to the second quarter of fiscal 2013. In addition to the impact of lower systems integration services revenue from the public sector, there was the impact of lower revenue and upfront development costs in server-related products in Japan and lower revenue from network products both in Japan and North America.

Revenue in the Ubiquitous Solutions segment was 245.0 billion yen, a decrease of 6.8% from the same period of the prior fiscal year. Revenue in Japan was down by 12.1%. Total revenue from PCs decelerated in the second quarter, resulting in lower revenue from both enterprise PCs and consumer PCs. Revenue outside Japan increased 5.3% and even increased 1% on a constant-currency basis. Revenue from PCs declined in Europe, but increased in the Mobilewear sub-segment, primarily in North America. The segment posted an operating profit of 0.9 billion yen (US$8 million), an improvement of 12.5 billion yen from the second quarter of the previous fiscal year. For mobile phones, a combination of the impact of structural reforms implemented last fiscal year, a decline in costs relating to quality issues, which have stabilized, and a further reduction in operating costs, led to a sharp improvement in operating profit, returning operations to profitability in comparison with the loss posted in the same period of the prior fiscal year.

Revenue in the Device Solutions segment amounted to 145.1 billion yen, a decline of 8.7% from the same period of fiscal 2013. Revenue from LSI devices decreased as a result of selling the microcontroller and analog device business, and lower revenue from the devices used in smartphones. Revenue from electronic components declined mainly on lower revenue from semiconductor packages in the Americas. The segment posted an operating profit of 6.6 billion yen (US$61 million), a decline of 6.2 billion yen compared to the second quarter of fiscal 2013. For LSI devices, operating profit was 5.1 billion yen, an improvement of 1.1 billion yen with the impact of the weaker yen and structural reforms, despite lower revenue. For electronic components, operating profit was 1.5 billion yen, a decline of 7.4 billion yen on lower revenue and intensified price competition in semiconductor packages, and because results for the second quarter of the previous fiscal year included a one-time posting of profit stemming from changes to the retirement benefit plans of Fujitsu’s subsidiaries in Japan.

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Source: Fujitsu