Fujitsu Claims Big Verizon Telecoms Order
Tue Jun 24, 4:12 AM ET Add Business - Reuters to My Yahoo!
By Daisuke Wakabayashi and David McMahon
TOKYO (Reuters) - Chips-to-computers conglomerate Fujitsu Ltd. said on Tuesday it has won a telecoms equipment order reportedly valued at 100 billion yen ($849 million) from U.S. phone giant Verizon Communications, fueling hopes for a recovery in IT spending.
Fujitsu's Chairman Naoyuki Akikusa said Verizon's order for fiber optic network equipment was a sign the telecoms slump, which forced Fujitsu and some rivals to post record losses, shutter plants and lay off workers, is close to bottoming out.
"The telecoms slump in North America continues to weigh on earnings, but we think the market will bottom in 2003, so we have to hold strong for now," Akikusa said at the company's annual shareholders' meeting.
Company officials called the order "significant" and said it would be spread over a few years, but declined to confirm a 100 billion yen estimate made by Japan's Nihon Keizai business daily.
The order was good news for Fujitsu, which has been hit by two straight annual net losses due to a sharp downturn in capital spending for telecoms equipment and the collapse of the information technology (IT) bubble in the United States.
The Verizon order was for equipment compatible with an ultra high-speed SONET (synchronous optical network), which can send large amounts of data, including sound and video, Fujitsu's Akikusa said.
The order will be spread over a few years, a company spokeswoman said.
Over three years, a 100 billion yen order would come to 33.3 billion yen annually, which amounts to less than one percent of the forecast 4.8 trillion yen group revenue in 2003/04.
The news helped boost Fujitsu's shares, which closed up 2.55 percent at 442 yen, outperforming a 2.24 percent decline on Tokyo's electrical machinery sub-index IELEC.
At the shareholders meeting, officials were peppered with questions about the company's decision to skip its annual dividend in the latest business year ended March 31.
Fujitsu's outgoing chief financial officer, Takashi Takaya, said the company aims to pay out an annual dividend this year.
Takaya added that Fujitsu's chances of paying out an annual dividend were helped by the May sale of 55.4 billion yen worth of shares in industrial robot maker Fanuc Ltd.
After the sale, Fujitsu raised its parent net profit forecast for the current year to 50 billion yen from 20 billion yen.
Shareholders approved the appointment of Hiroaki Kurokawa as Fujitsu's new president, replacing Akikusa, who will become chairman. Masamichi Ogura will replace Takaya as CFO.
PICK-UP IN CAPEX?
Verizon Communications, whose operations are based on the east coast of the United States, is strengthening its SONET infrastructure, in part because of damage caused by the September 11 attacks, the Nihon Keizai said.
Deutsche Securities analyst Fumiaki Sato said that it is possible IT investment might start to gradually recover from 2004, because depleted cash flows at major telecoms firms will improve as the burden of corporate debt repayments eases.
"It is very possible that these companies might take those extra funds to invest in the construction of a regional fiber optic network infrastructure," Sato said in a note to clients.
Fujitsu said it has a leading 30 percent share of the North American market for SONET systems.
Fujitsu posted an annual net loss of over $1 billion in April for the second straight year and said it was targeting telecoms equipment, along with hard disk drives and electronic equipment, as underperforming areas. ($1=117.75 yen)
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