Fujitsu gears up for chip wars

Fujitsu, the Japanese computing manufacturer, on Thursday reported an 80 per cent drop in its quarterly operating profit, amid sharp price falls for systems chips and hard drives.

The results highlight the severe competition in the company’s core computer parts markets.

Fujitsu has responded with a string of acquisitions in a bid to boost its presence in the computer services market, where margins are under less pressure.

In particular it has tried to expand abroad. The company has set itself a target of double-digit annual overseas sales increases.

Fujitsu said on Thursday that operating profit dropped to Y2.95bn ($24.5m) in the three months to June, hurt also by a drop in sales of mobile phone base stations and optical transmission systems.

The company reported a net loss of Y14.78bn, because of a decision to adopt stricter accounting rules on booking losses for unused parts.

This compared with a net profit for the same period last year of Y664m.

Despite the poor quarterly figures, Fujitsu boosted its estimate for the 12 months to March 2008 by Y5bn to Y195bn.

Japanese companies’ earnings forecasts are characteristically overcautious at the beginning of the financial year.

As part of its expansion plans in the overseas computer services market, Fujitsu recently made a €395m ($542m) bid for French computer services company GFI Informatique. But the deal has reached a deadlock, with GFI’s management advising shareholders against the offer and Fujitsu refusing to raise its price.

In December, Fujitsu won the bid to develop the Tokyo Stock Exchange’s new equity trading system, at a cost estimated at about Y13bn.

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