Exchange rates put pressure on Fujitsu's hardware business

Fujitsu said exchange rate movements that impacted its hardware products were to blame for the results of the 2014 financial year being short of expectations.
Written by Aimee Chanthadavong, Contributor

Weakening exchange rates resulting in greater production costs have seen Fujitsu's full-year earnings for the 2014 fiscal year fall short of projections that were made in January 2015.

The Japanese company recorded consolidated revenue of 4,753.2 billion yen ($39.7 million) -- which was essentially unchanged from fiscal year 2013 -- but was short of its projection by 46.7 billion yen.

The company said its lower-than-anticipated result was due to a drop in revenue from network products, other hardware products such as PCs, and mobile phone sales in Japan. In Japan alone, revenue declined by 3 percent.

Meanwhile, revenue outside of Japan rose 4.4 percent. The company said that although revenue from components and PCs declined, overall results benefited from foreign exchange movements.

Fujitsu reported an operating profit of 178.6 billion yen, an increase of 31.3 billion yen from fiscal 2013. However, this result fell short of projections by 6.3 billion yen. The company said the high costs for its PC business in Europe, as well as the declining value of the euro against the US dollar, was responsible for missing expectations.

Additionally, Fujitsu said operating profit increased as restructuring charges for areas such as components and mobile phones were recorded.

Looking forward, the company has projected that for fiscal 2015, it will increase revenue by 2 percent, to 4,850 billion yen, with the belief that it will be mainly driven by the technology solutions segment thanks to a projected increase in revenue from the services sub-segment. It is also projecting that operating profit will decline by 28.6 billion yen from fiscal 2014 to 150 billion yen.

Fujitsu senior vice president Tatsuya Tanka said the company has identified that it needs to urgently address two broad issues during fiscal 2015, which is the main reason behind the "severe projections" for the coming year.

"Although we have no intention of easing up on upfront investments for future growth, we do intend to recoup our investments in very tangible ways as quickly as possible in order to improve the earnings capacity of our existing business and expand into new business areas," he said.

"In our hardware products business, we have not resolved our vulnerability to exchange rate movements, particularly at our European subsidiaries, where the unexpectedly rapid and sharp weakening of the euro is hurting our earnings.

"Reaffirming that our hardware products business is one of Fujitsu's strengths, we aim to create a business model with a clear growth trajectory that is impervious to the influence of external factors."

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