Tokyo: Fujitsu Ltd, Japan’s top IT services firm, forecast a larger-than-expected doubling in profit this year and sought to soothe fears that a scandal over the resignation of its former president may harm its businesses.
Fujitsu, like its bigger global rivals IBM and Hewlett-Packard, is benefitting as companies resume spending on technology hardware, software and services that they had tightened during the economic downturn.
The recovery in the sector prompted industry leader IBM to hike its annual outlook this month.
Fujitsu’s operations, however, have recently been overshadowed by a lingering dispute over the ouster of former president Kuniaki Nozoe and some analysts are worried about the possible impact on its businesses.
“In contrast to former president Nozoe’s stance, the new president says Fujitsu does not need more restructuring,” said Takeo Miyamoto, analyst at Deutsche Securities.
“I need to hear the company’s explanation on where the gap lies and thereby determine what it means for the company’s earnings outlook.” Fujitsu said it expects an operating profit of 185 billion yen ($1.97 billion) in the year to March 2011, helped by lower costs as well as the sector recovery.
The forecast was above the consensus of a ¥177 billion profit in a poll of 17 analysts by Thomson Reuters and 96% higher in the just-ended year. It expects annual sales to rise 2.6% to ¥4.8 trillion.
Its profit of ¥78.9 billion in the January-March quarter missed market expectations of ¥86.5 billion.
“In March, the number of orders increased a lot, but overall sales did not increase as much because the value of each order tended to be very small,” said its CFO Kazuhiko Kato. “We expect this to improve from the second half of this financial year.”
Fujitsu is aiming for an operating profit of ¥250 billion for the financial year ending March 2012, and the company said it would stick to that target. For the current financial year, it had previously targeted for a ¥200 billion profit.
Focus On Cloud Computing
Nozoe is fighting Fujitsu executives over his claim that he was improperly forced to step down as president in September because of allegations of dealings with a firm with suspected links to organised crime.
Fujitsu’s infighting had initially triggered selling of its shares, but the stock quickly recovered the losses and is now trading higher than when the issue first surfaced in early March.
President Masami Yamamoto rebuffed market concerns over possible impact of the dispute and said the company would continue with “positive restructuring” to grow Fujitsu globally, especially in cloud computing services.
“Some people may be concerned about this issue affecting our earnings, but we don’t think there is any impact on our operations,” he told a news conference.
It is already under pressure to cut costs and slash loss-making operations to keep pace with global rivals. Fujitsu is trying to expand overseas but is still deeply tied to the sluggish home market.
Fujitsu aims to boost its market-lagging profit margin of 2% to 5% in the year ending March 2012.
“The steps we need to take to achieve the 5% margin is to expand operations that make money. To be specific, to globalise our cloud computing services,” Yamamoto said, though he acknowledged a 5% margin is still low compared to IBM and other rivals.
Yamamoto said Fujitsu would double its investments in its cloud computing business to some ¥100 billion, in part to set up data centres in the US, the UK, Germany, Australia and Singapore.
In the year ended in March, shares in Fujitsu jumped 68% and outperformed a 53% rise in Tokyo’s electric machinery subindex during the same period.
Prior to the announcement, the stock closed up 2.3% at ¥665, outperforming a 0.9% rise in the subindex. ($1=94.07 Yen)