Fujitsu, Japan's largest IT services vendor, beat expectations with a doubling of quarterly operating profit but cut its annual sales outlook as it copes with a firmer yen and corporations rein in IT spending.
Fujitsu's lower sales forecast, while not a surprise to analysts, underscores the increasingly murky outlook for IT services providers as a fragile global economic recovery prompts companies and governments to review their investment plans.
The company, which ranks third in the global IT services sector behind IBM and HP, said it had been hurt by a drop-off and delays in US and European IT investment, as well as the yen's rise to a 15-year high on the dollar.
"The economic recovery in the United States and Europe was unfortunately slow and we could not get as many contracts in the private sector as we had hoped," Fujitsu chief financial officer Kazuhiko Kato told a news conference in Tokyo, adding that the company has been hard hit hard by spending cuts by the British government.
"But our business negotiations have been going well in regions like central Europe and the Nordics, and we would like to see how these will turn out in the second half."
For the July-September quarter, Fujitsu said its operating profit totalled 37.16 billion yen ($456.4 million), against an 18.9 billion yen profit a year ago. Sales fell 3.7 percent to 1.1 trillion yen.
The firm yen and the euro's drop against the dollar cut into the profits of the company, which has large operations in Europe, but strong sales of its network products such as optical transmission devices helped offset some of the losses.
Fujitsu, which competes with NEC and Hitachi in Japan, stood by its full-year forecast for a 185 billion yen operating profit, but lowered its sales outlook by nearly 3 per cent to 4.67 trillion yen.
It now assumes 85 yen to the dollar for the second half, revised from its previous 90 yen/dollar estimate.
Mr Kato said US elections in November and the British government's budget cuts are clouding its business outlook.
"The (British) government is being so stingy about its spending that large contracts we won in the private sector do not cover (the loss from this)," he said.
Fujitsu's overall earnings have also been supported by a strong performance in its mobile phone business, which it merged with the handset operations of Toshiba Corp this month. Its chips and other electronic devices returned to a profit in July-September, helped by brisk sales in Asia and cost cuts.
Prior the the results, Fujitsu's shares closed up 1.9 per cent, outperforming a 0.3 per cent rise in the electric machinery sector index.
Fujitsu's stock is down 9 per cent so far this year, against a 6 per cent drop in the sector index.
Reuters