Fujitsu reported its second-quarter financial results on October 28, with consolidated net sales displaying stronger performance on the quarter, and encouraging results indicating that in the first half of the year the company beat its own earnings targets.
Consolidated net sales reached $ 12,692 million in the second quarter of 2009, up from $ 10,878 million in the first quarter, which is a sequential increase of 9.4%. Annually, the net sales figures were down 10.5%, but the strength of the sequential increase was a solid marker. Quarter on quarter performance is becoming a common positive indicator of market demand gradually stabilizing. This is the case with this company as well as with other IT vendors during the current calendar quarter, but the quarterly increase has been steeper in the case of Fujitsu. Tom Meyer, VP EMEA Systems and Infrastructure Solutions at IDC believes that this is an encouraging sign for this vendor, but it is premature to see it as a reliable medium-term indicator.
Second-quarter operating income reached $ 210 million, a marked improvement when looking at the first quarter of 2009. The profitability of the core Technology Solutions business, comprising IT services and system platforms, rebounded strongly and drove demand. On a geographic basis, second-quarter profitability in and outside Japan declined compared with the same quarter last year, but improved in each region compared with the first quarter.
For the first half of fiscal 2009, the company posted net sales of $ 24,296 million, a decline of 10.9% compared with the same period in fiscal 2008, and the operating loss of $ 202 million displayed an improvement over the target, but a deterioration compared with the operating income of the first half of last year. Overall, it is fair to say that conditions remain extremely challenging for all IT vendors, and not least for Fujitsu. Undertaking a big-scale company integration and harmonizing a global systems landscape to increase sales efficiencies is a complex, time-consuming affair, to which the company added the Fujitsu Globalization with e.g. reorganization of the China business or the merge of Fujitsu Services and Fujitsu Technology Solutions in EMEA.
Fujitsu has been working as one global company since April 1st, 2009, focusing on building a global brand, a centralized supply chain, and global manufacturing processes. As reported in our IDC link in April 2009, on the new set up and reorganisation , nine sales geographies were created, and all product areas will continue as before, with global product responsibilities shared between Germany, with x86 servers and storage, and Japan, with PCs, enterprise (non-x86) servers, and software. Japan has therefore been managing the PC, mainframe, SPARC and software units since last April. However, the vendor is focusing on the x86 server business, based on its industry-standard PRIMERGY server line, and it has declared its target to achieve record profits in fiscal 2011 as part of a medium-term business plan. As part of this plan, the vendor outlined its aim of doubling the number of shipments in the next two years worldwide to 500,000 units. Fujitsu should leverage the competitive edge from the services background, as well as the R&D and hard cash investments. We believe that as the company continues to push the enterprise side of the business, the consumer-led PC segment will not receive the same amount of attention. In addition, the non-x86 enterprise business, namely the SPARC and mainframe areas, are also likely to lose traction over the medium term, as resources are poured over to strengthen Fujitsu's x86 strategy.
For its x86 strategy to be successful, Fujitsu needs to find a key differentiator in the area of services associated to the hardware. The recently announced Fujitsu global product portfolio could be a step in that direction. Regarding hardware, (and this is also a problem for its competitors) the main obstacle for Fujitsu will be to shift revenue and increase profit margins in such a commoditized segment. Equally, the vendor faces a very contested arena in the data center services and systems integration markets, against IBM and HP, and increasingly, Dell. HP's enterprise strategy is now evolving around the EDS services-oriented model, and IBM remains as big a competitor, thanks to its ability to push competitive prices in non-x86 hardware and services. On the other hand, Dell is increasingly looking towards the large enterprise, and its data center strategy is gradually advancing in that direction, overcrowding the market at a time when enterprise customers are reluctant to undertake major investments unless absolutely necessary.
In addition to these hurdles, right now, Fujitsu is still perceived as vulnerable to competitive pressure in areas such as branding, because of customer transition, particularly in the German domestic market of the former Fujitsu Siemens Computers. For the most part of 2009, the company has been busy setting up the broad lines of a new modus operandi based on shifting the focus from exclusively Japan, to a global transnational business strategy. However, confidence seems to be returning to customers. Those who were waiting to see what was really going on with Fujitsu are now returning, and what was perceived by many as uncertainty in Fujitsu's transition is slowly fading.
The general outlook for the server market remains grim in the short term, with IDC's EMEA Quarterly Forecast predicting that x86 revenue will not return to positive annual growth until 2011, and even then just in single digits and when compared with the historically low levels of revenue forecast for both 2009 and 2010. In this environment, Fujitsu faces an uphill struggle, with a market where players such as Cisco are exerting more competitive pressure in the segment of integrated solutions. We believe that looking ahead, Fujitsu needs to intensify its efforts on the side of the distribution channel, crucial to achieve its ambitious PRIMERGY server targets. Fujitsu will need to be aggressive leveraging its numerous strong points, such as the FlexFrame solutions portfolio, as well as the consulting and system integration offerings, alongside its industry standards servers.
Consolidated net sales reached $ 12,692 million in the second quarter of 2009, up from $ 10,878 million in the first quarter, which is a sequential increase of 9.4%. Annually, the net sales figures were down 10.5%, but the strength of the sequential increase was a solid marker. Quarter on quarter performance is becoming a common positive indicator of market demand gradually stabilizing. This is the case with this company as well as with other IT vendors during the current calendar quarter, but the quarterly increase has been steeper in the case of Fujitsu. Tom Meyer, VP EMEA Systems and Infrastructure Solutions at IDC believes that this is an encouraging sign for this vendor, but it is premature to see it as a reliable medium-term indicator.
Second-quarter operating income reached $ 210 million, a marked improvement when looking at the first quarter of 2009. The profitability of the core Technology Solutions business, comprising IT services and system platforms, rebounded strongly and drove demand. On a geographic basis, second-quarter profitability in and outside Japan declined compared with the same quarter last year, but improved in each region compared with the first quarter.
For the first half of fiscal 2009, the company posted net sales of $ 24,296 million, a decline of 10.9% compared with the same period in fiscal 2008, and the operating loss of $ 202 million displayed an improvement over the target, but a deterioration compared with the operating income of the first half of last year. Overall, it is fair to say that conditions remain extremely challenging for all IT vendors, and not least for Fujitsu. Undertaking a big-scale company integration and harmonizing a global systems landscape to increase sales efficiencies is a complex, time-consuming affair, to which the company added the Fujitsu Globalization with e.g. reorganization of the China business or the merge of Fujitsu Services and Fujitsu Technology Solutions in EMEA.
Fujitsu has been working as one global company since April 1st, 2009, focusing on building a global brand, a centralized supply chain, and global manufacturing processes. As reported in our IDC link in April 2009, on the new set up and reorganisation , nine sales geographies were created, and all product areas will continue as before, with global product responsibilities shared between Germany, with x86 servers and storage, and Japan, with PCs, enterprise (non-x86) servers, and software. Japan has therefore been managing the PC, mainframe, SPARC and software units since last April. However, the vendor is focusing on the x86 server business, based on its industry-standard PRIMERGY server line, and it has declared its target to achieve record profits in fiscal 2011 as part of a medium-term business plan. As part of this plan, the vendor outlined its aim of doubling the number of shipments in the next two years worldwide to 500,000 units. Fujitsu should leverage the competitive edge from the services background, as well as the R&D and hard cash investments. We believe that as the company continues to push the enterprise side of the business, the consumer-led PC segment will not receive the same amount of attention. In addition, the non-x86 enterprise business, namely the SPARC and mainframe areas, are also likely to lose traction over the medium term, as resources are poured over to strengthen Fujitsu's x86 strategy.
For its x86 strategy to be successful, Fujitsu needs to find a key differentiator in the area of services associated to the hardware. The recently announced Fujitsu global product portfolio could be a step in that direction. Regarding hardware, (and this is also a problem for its competitors) the main obstacle for Fujitsu will be to shift revenue and increase profit margins in such a commoditized segment. Equally, the vendor faces a very contested arena in the data center services and systems integration markets, against IBM and HP, and increasingly, Dell. HP's enterprise strategy is now evolving around the EDS services-oriented model, and IBM remains as big a competitor, thanks to its ability to push competitive prices in non-x86 hardware and services. On the other hand, Dell is increasingly looking towards the large enterprise, and its data center strategy is gradually advancing in that direction, overcrowding the market at a time when enterprise customers are reluctant to undertake major investments unless absolutely necessary.
In addition to these hurdles, right now, Fujitsu is still perceived as vulnerable to competitive pressure in areas such as branding, because of customer transition, particularly in the German domestic market of the former Fujitsu Siemens Computers. For the most part of 2009, the company has been busy setting up the broad lines of a new modus operandi based on shifting the focus from exclusively Japan, to a global transnational business strategy. However, confidence seems to be returning to customers. Those who were waiting to see what was really going on with Fujitsu are now returning, and what was perceived by many as uncertainty in Fujitsu's transition is slowly fading.
The general outlook for the server market remains grim in the short term, with IDC's EMEA Quarterly Forecast predicting that x86 revenue will not return to positive annual growth until 2011, and even then just in single digits and when compared with the historically low levels of revenue forecast for both 2009 and 2010. In this environment, Fujitsu faces an uphill struggle, with a market where players such as Cisco are exerting more competitive pressure in the segment of integrated solutions. We believe that looking ahead, Fujitsu needs to intensify its efforts on the side of the distribution channel, crucial to achieve its ambitious PRIMERGY server targets. Fujitsu will need to be aggressive leveraging its numerous strong points, such as the FlexFrame solutions portfolio, as well as the consulting and system integration offerings, alongside its industry standards servers.
