Fujitsu to overhaul chip biz, warns of $1B loss

Japanese firm will cut 5,000 jobs by merging its LSI chip unit with Panasonic's, and has cut its full-year forecast to a loss of US$1 billion.
Written by Ryan Huang, Contributor

Fujitsu is overhauling its chip business which will see it trim about 3 percent of its workforce, as it warns of US$1 billion loss this fiscal year.

In a statement Thursday, the company said it would merge its large-scale integration (LSI) chip business with that of Panasonic. As part of the restructuring, 5,000 job cuts are being planned while another 4,500 staff will be transferred to new ventures.

"This [semiconductor] business has been confronted with an extraordinarily difficult operating environment as sales declined due to fast-deteriorating market conditions and an increasingly severe competitive climate," said Fujitsu in the statement.

Fujitsu chip overhaul
Restructuring and new direction of Fujitsu's semiconductor business. (source: Fujitsu)

According to Angela Lambert, computing industry research analyst at TBR, Fujitsu’s strategy for aligning its IT hardware and services to address specific vertical needs is a step in the right direction, but is not a unique strategy in the IT industry.

"In recent quarters, IBM has achieved success in services and hardware sales such as System z through its vertically targeted sales approach in mature and growth markets. In addition, IBM is a direct competitor to Fujitsu’s own Smart city infrastructure offerings," she said.

To spark a turnaround in hardware and services revenue growth, Fujitsu must not only replicate go-to-market strategies of its competitors, but also identify key differentiating factors to win customer share in the global market, Lambert added.

Effective business line reorganization will be crucial to achieve this goal, given Fujitsu’s current challenges of coordinating go-to-market approaches across hardware and services business lines, according to the analyst.

Profit warning
Fujitsu cut its full-year earnings forecast to a loss of 95.0 billion yen (US$1 billion)--which would its first fiscal net loss in four years, reversing earlier estimates of a 25 billion yen profit (US$267 million).

For the nine months to December, the firm has already booked a 90.12 billion yen (US$962 million) net loss.

Other Japanese firms have also been struggling to revive their fortunes. Panasonic is undergoing its own restructuring plans and has forecast a loss of US$10 billion for the year ending March 2013, while Sharp has warned of "material doubt" over its own survival.

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