Paper: More questions than answers with Fujitsu reorg

Jan. 24, 2008 – Fujitsu’s announcement earlier this week that it would spin off its LSI business divisions into a new subsidiary at the start of the next fiscal year (March 2008), in a bid to focus on and spur growth in its ASSP and ASIC businesses, hasn’t really resonated with investors and “appears to lack a clear purpose,” according to a report in the Japanese press.

Recent chip-unit divestitures have been announced by Sanyo Electric (though it later pulled back and said it would retain and reinvest in the biz), and also NEC which wants to relist and procure more funds. But Fujitsu’s move is less easily understood, notes the Nikkei Business Daily.

Fujitsu’s shares more than doubled from 2003-early 2006 after president Hiroaki Kurokawa took office, reflecting what had been a careful balance under his leadership among customers, employees, and shareholders, the paper notes — getting rid of “failed projects,” withdrawing from non-synergistic operations like displays (PDP, LCD), and restoring company morale/pride. But since then the company’s shares have lost 30% value vs. 20% for the overall market — blamed largely on a lack of clear strategy for rescuing its chip operation, which lost ¥20B (US $) in FY06, and contributed <10% to total sales while requiring nearly a third of the company's total annual investment (¥100B/$).

After a year of no clear-cut decision about what to do with its chip ops, this week’s announcement didn’t really provide any clear answers, the paper claims. Next-gen system chips will require tens of billions of yen to develop, and 10x those amounts to build the facilities to make them; consolidating its chip ops as a subsidiary doesn’t promise greater efficiency, the paper noted. “We’re watching to determine whether this is preparation for something else to come,” said Hiroaki Kawada, an analyst at Mizuho Securities Co., quoted by the paper.


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