Fujitsu Ltd. (FJTSF) 2005年年度報告「OTC」.pdf

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1、Shiodome City Center,1-5-2 Higashi-Shimbashi,Minato-ku,Tokyo 105-7123,JAPANTel.+81-3-6252-2220FUJITSU LIMITED Annual Report 2005 FUJITSU LIMITEDPrinted in Japan BA0025-1APFUJITSU LIMITEDThis report is printed on 100%recycled paper with ink containing less than 15%oil-based solvent.A Determination to

2、 SucceedFUJITSU LIMITEDAnnual Report 200523ContentsA Message From Management.1Business Overview.10Operational Review and Outlook.11Customer Solution Profiles.18Research&Development.20Intellectual Property.22Social and Environmental Activities.24Management.26Corporate Governance.27Business and Other

3、Risks.28Five-Year Summary.32Managements Discussion and Analysis of Operations.33Consolidated Balance Sheets.42Consolidated Statements of Operations.44Consolidated Statements of Shareholders Equity.45Consolidated Statements of Cash Flows.46Notes to Consolidated Financial Statements.47Independent Audi

4、tors Report.69Principal Subsidiaries and Affiliates.70Shareholders Data.70Cautionary StatementThis annual report may contain forward-looking statements that are based on managements current views and assumptions and involve known and unknown risks and uncertainties that could cause actualresults,per

5、formance or events to differ materially from those expressed or implied in such statements.Words such as“anticipates,”“believes,”“expects,”“estimates,”“intends,”“plans,”“projects,”and similarexpressions which indicate future events and trends identify forward-looking statements.Actual results may di

6、ffer materially from those projected or implied in the forward-looking statements due to,without limitation,the following factors:general economic and market conditions in the major geographic markets for Fujitsus services and products,which are the United States,EU,Japan and elsewherein Asia,partic

7、ularly as such conditions may affect customer spending;rapid technological change,fluctuations in customer demand and intensifying price competition in the IT,telecommunications,andmicroelectronics markets in which Fujitsu competes;Fujitsus ability to dispose of non-core businesses and related asset

8、s through strategic alliances and sales on commercially reasonable terms,and the effectof realization of losses which may result from such transactions;uncertainty as to Fujitsus access to,or protection for,certain intellectual property rights;uncertainty as to the performance of Fujitsusstrategic b

9、usiness partners;declines in the market prices of Japanese and foreign equity securities held by Fujitsu which could cause Fujitsu to recognize significant losses in the value of its holdings andrequire Fujitsu to make significant additional contributions to its pension funds in order to make up sho

10、rtfalls in minimum reserve requirements resulting from such declines;poor operating results,inabilityto access financing on commercially reasonable terms,insolvency or bankruptcy of Fujitsus customers,any of which factors could adversely affect or preclude these customers ability to timely pay accou

11、ntsreceivables owed to Fujitsu;and fluctuations in rates of exchange for the yen and other currencies in which Fujitsu makes significant sales or in which Fujitsus assets and liabilities are denominated,particularly between the yen and the British pound and U.S.dollar,respectively.To Deliver on Four

12、 Key CommitmentsWe made real progress in fiscal 2004,refocusing our efforts and resources on fields where we can leverage Fujitsuscompetitive advantages.Consequently,we are poised to enter the next stage of growth.We are confident that we can now fully maximize our traditional strengths as a company

13、our broad anddiversified customer base,depth of applications expertise,and broad scope of technologies,as well as our strongintegration capabilitiesto generate this growth.As discussed in the following pages,we are determined to deliver on four key commitments to achieve ourultimate goal of transfor

14、ming Fujitsu into a truly powerful company.Determined Left:Naoyuki AkikusaChairmanRight:Hiroaki KurokawaPresidentA Message From Management2Fujitsu LimitedTo Change Our Business Structure Strengthening Existing BusinessesFiscal 2004 was a year when we made significant changes to the operational focus

15、 of the company.Specifically,we adopted a framework that moves from our past reliance on individual employee skills and expertise to agreater emphasis on the collective strengths of the organization.As part of efforts to reform the companys structure,we realigned our solutions business in Japan by u

16、nifyingsales and systems engineering groups along customer lines.This step,aimed at creating clearer points of contactfor customers,also involved reorganizing regional systems engineering companies.These efforts were supportedby progress in standardizing business processes,allowing more systematic p

17、roject management and implemen-tation that more accurately reflects customer needs.We also took the decision to withdraw from the plasma display panel(PDP)and liquid crystal display(LCD)fields in our Electronic Devices business segment,which is facing seismic change in its operating landscape.Byconc

18、entrating resources in the system LSI field,where Fujitsu boasts a strong competitive advantage,we aredetermined to achieve profitable growth in Electronic Devices going forward.2Fujitsu Limited3Annual Report 2005 Creating and Cultivating New BusinessesTo generate growth in new areas,we will focus o

19、n using IT to drive“innovation in the field,”that is,the variousfront lines of business and personal lifestyles.Until now,we have primarily leveraged the power of IT to helpcustomers improve management and back-office systems.Now,we plan to help them use IT to realize far-reaching change in frontlin

20、e areas like R&D,manufacturing,distribution and sales.This will lead to the wide-ranging application of Fujitsu products and services in areas where the actual movement of people and goodstakes place.For individuals as well,there are numerous frontline areas where IT can bring greater dynamism,secur

21、ity,enjoyment and convenience to daily lives.I believe that the combination of Fujitsus broad and diversified customer base,depth of applications exper-tise,and broad scope of technologies,as well as our strong integration capabilities,are key success factors thatwill enable us to provide IT utiliza

22、tion solutions for these frontline scenarios.In order to pioneer IT-driven innovation in the field,we will promote more flexible and dynamic allocation ofskilled personnel in parallel with business development,and strive to ensure the results of R&D projects arerapidly translated into viable product

23、s and services.This will mean bringing together the collective strengths ofFujitsu Laboratories Ltd.and the rest of the Fujitsu Group,and channeling resources into new growth fields likesecurity/public safety and ubiquitous networking-related businesses.Fujitsu has now moved from a period of consoli

24、dationand recovery to refocus on growth.Supported by a newoperating framework,we are implementing a numberof initiatives designed to deliver this growth.3Annual Report 20054Fujitsu Limited Bringing an End to Loss-generating ProjectsProfitability in our Software&Services business segment has been det

25、eriorating over the last few years,mainlydue to a number of large loss-generating projects.After being appointed president,starting with new projects,Itackled this issue head on,implementing stringent risk management measures that begin right from the contractnegotiation stage and that allow us to b

26、etter visualize project progress.Thanks to these and other initiatives,theincidence of new loss-generating projects has fallen significantly since October 2003.During fiscal 2004,we also pushed forward with our Solution Business Restructuring initiative.Specifically,we integrated sales and systems e

27、ngineering groups to more effectively control profits,and established a SystemsIntegration Assurance Unit to reinforce risk management systems and reform contractual procedures.Thisallowed us to deal with around 75%of the loss-generating projects in monetary terms,and essentially bringunder control

28、the remaining 25%.Not only have these measures enabled us to significantly improve the costratios of existing projects,they have also helped boost the productivity of new projects and given us the agility weneed to compete in a more and more challenging marketplace.To Boost Earnings Power4Fujitsu Li

29、mited5Annual Report 2005In the past year,we essentially resolved our biggestproblemloss-generating projects.Our goal now isto rapidly build a robust financialstructure,giving us the base we needto prevail over the increasinglyintense competition in our markets.Rapidly Building a Robust Financial Bas

30、eWe are making good progress in creating the strong financial base we need to take on our increasingly competi-tive rivals.Determined to ensure we build a sound financial position for Fujitsu,I set the target of reducing thebalance of interest-bearing loans to less than 1,100.0 billion by the end of

31、 fiscal 2004.Despite a challengingoperating environment,we kept a tight rein on our financial position and were able to achieve our targetas ofMarch 31,2005,interest-bearing loans totaled 1,082.7 billion.At the same time,we aggressively implemented arange of other measures,including the booking of a

32、n allowance for deferred tax assets,leading to improvementin the total asset turnover and debt-equity ratios and other financial indices.Combined,these efforts are steadilyleading to the creation of a healthier financial structure.In parallel with efforts to streamline assets,we are actively channel

33、ing capital investment into new growthfields.In fiscal 2005,plans call for capital expenditure of 260 billion in Electronic Devices and other segments,an increase of more than 40%year on year.5Annual Report 20056Fujitsu LimitedTo Enhance Manufacturing Competitiveness Regaining Our Position of Streng

34、th in ManufacturingWe have been working to improve quality,cost and delivery(QCD)across all our operational areas,from designand development to production and sales.In fiscal 2004,the benefits of these efforts started to emerge in asignificant way.In quality,for example,we worked to eliminate the in

35、clusion of any of our principal products in the low-ordeficient-quality product rankings in the industry,and at the same time to expand the number of Fujitsu prod-ucts recognized as having industry-leading quality.Progress has been good:in the first quarter of fiscal 2003,18%of our principal product

36、s were ranked low or deficient in terms of quality.By the last quarter of fiscal 2004,this figure had dropped to just 2%,with no products at all in the deficient product category.In the same period,the ratio of Fujitsu products ranked as industry-leading in terms of quality rose from 59%to 88%.Our a

37、doption of the Toyota Production System is also leading to benefits in manufacturing innovation.Inthe second half of fiscal 2004,we reduced manufacturing lead times for optical transmission systems and mobilephone base stations by 40%and 38%,respectively,compared to a year earlier.Significant improv

38、ements werealso achieved in servers,storage systems,PCs and other products.The benefits of these gains have been three-foldlower costs,better quality and more reliable launch dates.6Fujitsu Limited7Annual Report 2005 Reducing Costs to Build a Stronger FujitsuGoing forward,we will work meticulously t

39、o improve QCD and reduce our cost ratio not only in manufacturingbut in design,development,procurement and all key processes.Cost reductions from these efforts will free upmore cash to enhance the competitiveness of our products,thereby helping to increase sales revenue,which wecan then reinvest.I a

40、m determined to establish this kind of virtuous cycle in our business.Our product competitiveness is dependent upon unflagging R&D efforts covering a wide range of fields.Butin the future,we need to translate the fruits of our research into actual business opportunities more quickly.With this in min

41、d,we plan to realize more efficient and rapid product development by more tightly aligningresearch with product development and launch roadmaps.Fujitsu has been regaining its traditional strength inmanufacturing innovation.Looking ahead,we aredetermined to more effectively translate our advantagesin

42、 technology development and production into newbusiness opportunities.7Annual Report 20058Fujitsu LimitedTo Expand Our Business Globally Forging Strategic PartnershipsDemand for IT is growing worldwide,so we are naturally focusing on further developing our global operations.Setting the stage for thi

43、s,in fiscal 2004 we linked up with several leading companies to form strategic alliances ina range of fields.Specific examples included a joint product development and supply alliance with SunMicrosystems,Inc.in the UNIX server field;collaboration with Microsoft and Red Hat in the development ofour

44、next-generation mission-critical IA server;and an alliance with Cisco Systems focusing on routers and switchesthat includes the joint development of basic software and marketing of co-branded products.These and otherstrategic alliances will help further accelerate the expansion of our global busines

45、s.8Fujitsu Limited9Annual Report 2005Fiscal 2004 was a significant year for our overseasbusiness.Building on this,we aim to capture a largershare for our products and services in overseas markets,where the application of IT is rapidly spreading intonew fields.Accelerating Global Business Development

46、We are achieving some solid results in our overseas business.For example,in Software&Services,we sawincreased profitability at our overseas operations in fiscal 2004,including benefits from the integration of Groupcompanies in Europe,Australia and other regions from the beginning of the fiscal year,

47、as well as the return tooperating profitability at our North American services subsidiary.Our server and network businesses are help-ing to drive this newfound strength,particularly in the network field,where we have been achieving marketleadership in an increasing number of areas,including optical

48、transmission systems in North America and ADSLin the UK.We will continue to reinforce the foundation to support further overseas business growth,accelerating theexpansion of global product volumes and advancing our solutions business to secure competitive advantage.9Annual Report 200510Fujitsu Limit

49、edBusiness Overview Software&ServicesBreakdown of Net SalesNet Sales(Billions of Yen)Operating Income(Billions of Yen)Platforms Electronic Devices Other Operations43.5%35.8%15.4%5.3%2004200520032,094.22,070.42,025.720042003138.72005113.0176.5200420031,608.120051,705.11,612.02004200329.2200555.00.920

50、042003734.32005733.8618.620042003279.72005253.3241.82004200327.5200532.531.62004200313.6200514.010.0Note:In September 2003,Fujitsu Leasing Co.,Ltd.,our principal leasing operation,became an equitymethod affiliate and was removed from the scope of consoli-dation after we transferred a portion of our

51、shares in the company to a third party.As a result,from the third quarter of fiscal 2003,we eliminated the Financingsegment.Separately,in March 2004,FDK Corporation was made an equitymethod affiliate following an injection of capital from a third party.Consolidated ResultsFor fiscal years ending Mar

52、ch 31,excluding intersegment sales10Fujitsu Limited11Annual Report 2005Operational Review and OutlookChanges in Business Segment CategoriesFrom the next fiscal year,ending March 31,2006,we will revise our business segments into customer-centric product categories.First,we are positioning Technology

53、Solutionscovering the provision of comprehensive solutions comprising the high-performance,high-quality products and services that customers are demandingas the principal business domain of the FujitsuGroup,and we will aggressively pursue greater profitability and growth.Next,the Ubiquitous Product

54、Solutions segment includes products such as PCs,mobile phones and hard disk drives,whichare integral to meeting individuals needs in the era of ubiquitous networking.In this segment we will work to improve speed andquality and reduce costs.In Device Solutions,through a series of restructuring initia

55、tives and alliances,we are focusing our resources on leading-edgelogic LSI devices,and,together with related components businesses,we will pursue advanced technologies that other companiescannot match,as well as higher quality and greater efficiency.Software&Services Solutions/SI Infrastructure Serv

56、icesPlatforms Server-related Mobile/IP Networks Transmission Systems PCs/Mobile Phones HDD-relatedElectronic Devices Semiconductors OthersPrevious SegmentsNew SegmentsTechnology SolutionsDevice SolutionsUbiquitous Product SolutionsSub-segmentsSystem Platforms System Products Network ProductsServices

57、 Solutions/SI Infrastructure Services Others LSI Devices Electronic Components Others PCs/Mobile Phones Hard Disk Drives OthersOther OperationsOther Operations11Annual Report 200512Fujitsu LimitedUnited StatesSwedenFinlandDenmarkNetherlandsSpainChinaJapanThailandMalaysiaSingaporeAustraliaUnitedKingd

58、om Operating Environment and PerformanceSpending on IT in Japan in fiscal 2004 continued to lackstrength.Although there were moves to develop next-generation systems,including steps by financial institutionsto upgrade security and the introduction of traceability sys-tems by companies in the logisti

59、cs and transport industries,overall,commitment to IT investment was patchy at theindividual company level depending on industry,business sizeand region.Overseas,the outsourcing business was buoyant,particularly in Europe,and we expect continued growth inthis field going forward.Against this backdrop

60、,we worked to more aggressivelyimplement our comprehensive system development method-ology,called SDAS*1,as well as build a distinctive presencein the marketplace by advancing our TRIOLE*2 strategy foroptimized IT infrastructure to provide greater business effi-ciency,agility and continuity.Despite

61、these efforts,our solu-tions and systems integration(SI)business slowed in Japan,and we again experienced increased losses from certaindomestic loss-generating projects.Overseas,we made strongefforts to grow our business,especially in Europe and theAmericas.Overall,however,net sales in the Software&

62、Services segment declined 1.1%from a year earlier,to 2,070.4billion($19,350 million).Excluding the impact of measuresundertaken in fiscal 2003 to restructure our North Americanoperations,sales were roughly the same as last year on a con-tinuing operations basis.Although major government-sectorn Soft

63、ware&ServicesWe operate a global network of system centers.The Fujitsu Tatebayashi System Center isamong the largest in Japan.12Fujitsu Limited13Annual Report 2005Our MultimediaArchiveExplorer lets users search the web byselecting images.Our netCommunity showroom in Tokyo gives visitors a glimpseof

64、how IT will be used in the ubiquitous networking future.outsourcing wins by Fujitsu Services in the UK and benefitsfrom restructuring at Fujitsu Consulting in the US boostedincome from overseas operations,this was not enough to off-set factors such as rising development costs related to loss-generat

65、ing projects in the domestic market.Consequently,thesegment posted a year-on-year decline in operating income of25.7 billion,to 113.0 billion($1,057 million).Initiatives in Fiscal 2004In order to boost profitability in this segment,we took pri-ority measures to deal with the issue of rising losses f

66、romloss-generating projects.Specifically,since creating a neworganization in February 2004 to assess project status at eachstage of development and implementation,we have takensteps including reinforcing project risk management andreviewing our approach to contracts.As part of our effortsto reform o

67、ur organization and approach,in June 2004,werealigned our solutions business organization in Japan byunifying our sales and systems engineering groups alongcustomer lines.This has resulted in a structure that enablesus to respond more rapidly to changes in customers busi-ness environments.More recen

68、tly,in April 2005,we set upan SI Assurance Unit reporting directly to the president inorder to enhance our ability to prevent the recurrence ofloss-generating projects.Thanks to these initiatives,we areseeing a dramatic drop-off in new incidences of such projects.Additionally,in October 2004,we made

69、 Fujitsu Support&Service a wholly owned subsidiary in order to reinforce ourability to provide operational support to customers through-out the entire IT system lifecycle.Issues to Be AddressedGoing forward,we plan to apply SDAS to all new projects toreduce development lead times and boost developme

70、nt effi-ciency.And in addition to continuing to promote TRIOLE,we will work to further expand our outsourcing business,which we believe offers potential for growth both in Japanand overseas.In project management,we will apply the percentage ofcompletion method for all new software development contra

71、ctorders in fiscal 2005.This will realize real-time project man-agement and improve project visibility.We will also activelyutilize the SI Assurance Unit to boost project profitability.*1 SDAS:System Development Architecture&Support,a comprehensiveapplication development framework covering all aspec

72、ts of information systemoperations.*2 TRIOLE:A highly reliable IT infrastructure model that brings together pre-verifiedcombinations of servers,storage systems,networking and other equipment.Meets the requirements of enterprises and organizations to support businessexpansion,speed operational develo

73、pment,deliver stable operations and reducetotal cost of ownership.13Annual Report 200514Fujitsu Limited Platforms Operating Environment and PerformanceDespite continued weakness in Japan,the server market over-all improved steadily in fiscal 2004 along with the recovery inbusiness confidence oversea

74、s.In the mobile communicationsystems market,business generated by the expansion of third-generation(3G)network services in Japan grew.At the sametime,the full-scale shift to IP networks by carriers and enter-prises worldwide gathered steam,and the optical networksystems business also expanded.In thi

75、s environment,our Platforms segment posted anincrease of 6.0%in net sales,to 1,705.1 billion($15,936million),supported by strong sales of UNIX servers in Europe,North America and other overseas markets.Operating incomeincreased 25.7 billion,to 55.0 billion($514 million).Initiatives in Fiscal 2004In

76、June 2004,we launched the worlds first UNIX server fea-turing 64-bit processors built on leading-edge 90-nanometer(nm)semiconductor technology.In December 2004,weopened our Platform Solution Center in central Tokyo,wherecustomers can efficiently verify system performance,qualityand other requirement

77、s.In another major server-related initiative,we announcedthe worldwide launch of our PRIMEQUEST server in April2005.This new mission-critical Intel Architecture(IA)serverboasts mainframe-class reliability and performance.Separately,underpinned by rising demand for securitysystems in response to new

78、personal data privacy regulationsand efforts to combat credit card fraud,a number of customersPRIMEQUEST mission-critical IA serverLeft:System board(CPU/memory unit)Right:Dedicated chipset(CPU control)14Fujitsu Limited15Annual Report 2005in the financial services field adopted our pioneeringcontactl

79、ess palm vein pattern authentication technology foruse in ATMs and with other services.Overseas,we aggressively marketed our optical transportsystems to two of North Americas largest carriersSBCCommunications Inc.and Verizon Communications Inc.as well as to major cable TV operator Comcast Corporatio

80、n.This helped us maintain leadership in the synchronous opticalnetwork(SONET)segment there.In the UK,we leveragedour powerful partnership with British Telecommunicationsplc(BT)to secure the top share in the ADSL systems mar-ket.Based on our strong track record,BT selected Fujitsu asa preferred suppl

81、ier for its 21st Century Network.We also advanced partnerships with other leading globalcompanies in fiscal 2004.These included:a joint productdevelopment and supply alliance with Sun Microsystems,Inc.in the UNIX server field;collaboration with MicrosoftCorporation and Red Hat,Inc.in the development

82、 of ournext-generation mission-critical IA server;a strategic alliancewith Cisco Systems,Inc.in the router and switch field;andthe establishment of a joint venture with TDK Corporationto manufacture HDD heads.Issues to Be AddressedWe view our server business as dedicated to shouldering thebusiness p

83、rocessing burdens of our customers,and in pursu-ing global expansion of this business we aim to also grow ourbusiness in related product and service fields.As part of thisThe server room at our Platform Solution Center in TokyoProprietary development tools are used to ensure high-quality mainboardde

84、sign for the FMV-LIFEBOOK PC(Shimane Fujitsu Limited).approach,we will work particularly hard on boosting sales ofour new PRIMEQUEST mission-critical IA server.In addition,we will strive to grow our IP network busi-ness by leveraging our collaboration with Cisco Systems toprovide a wider lineup of I

85、P solutions for communicationscarriers and enterprise customers,as well as offer integratedIT and telecommunications solutions.In the 3G mobile communication systems business,wewill continue to focus on the growing domestic market andwork with partner Alcatel to win a larger share of globaldemand.In

86、 North America and Europe,we aim to build onour current strong customer relationships by offering power-ful optical transport systems to support the build-out ofbroadband and IP network infrastructure,helping to drivefurther business growth in these markets.In addition,alongwith focusing on the full

87、-scale deployment of fixed-line opti-cal access systems,we also plan to win new business throughaggressive efforts in the broadband wireless access field relatedto WiMAX*and various other protocols.In the PC business,we will enhance our consumer prod-ucts with greater AV functionality and introduce

88、more strin-gent security functions for products targeting business users.Our efforts in mobile phones will target greater productivityand lower costs,while we will focus on further boosting thequality of our HDD products.*WiMAX:Offering wider coverage than Wi-Fi,Bluetooth and other wirelesscommunica

89、tion protocols,WiMAX can provide connectivity over an area of sev-eral square kilometers.15Annual Report 200516Fujitsu Limited Electronic Devices Operating Environment and PerformanceThere was strong demand for digital consumer electronicsproducts such as PDP and LCD televisions and DVD record-ers i

90、n the first half of fiscal 2004.However,from the secondhalf,demand for these products began to stagnate and theelectronic components market deteriorated rapidly.Amid these overall industry trends,although intensify-ing price competition led to lower income from our PDP andLCD products,higher sales o

91、f LSI devices for other digitalconsumer electronics products and automotive applications,and strong performance by electronic components subsidiar-ies made positive contributions to our results.Accordingly,Electronic Devices reported only a marginal decline of 0.1%in net sales,to 733.8 billion($6,85

92、9 million).On a continu-ing operations basis,after excluding the impact of making ourcompound semiconductor business and Flash memory manu-facturing subsidiary equity-method affiliates,sales grew 4.6%year on year.Although operating income was adversely im-pacted by the deteriorating situation in PDP

93、s and LCDs,there was a significant increase in operating income from semi-conductors thanks to higher income in the logic chip busi-ness and improved earnings in the system memory business.Consequently,the segment recorded an increase of 5.0 bil-lion in operating income,to 32.5 billion($305 million)

94、.Initiatives in Fiscal 2004During the fiscal year we launched a diverse stream of highvalue-added devices.These included COT,ASIC and otherproducts built on our leading-edge 90nm semiconductor tech-nology,FRAM*1 devices with world-leading 1Mbit memory,and the worlds smallest mobile phone SAW duplexe

95、rcompatible with the North American PCS protocol.FRAM devices with world-leading 1Mbit memoryASIC lineup16Fujitsu Limited17Annual Report 2005SiExpress:With our technology,different ICs can bedesigned into a single mask,realizing the productionof ICs for multiple customers on the same wafer.Customer

96、BCustomer ACustomer CMagnified image of a 90nm transistorAdvanced,multilayer wiring usedin LSI devicesAs part of group-wide business restructuring reformssince 2002,we have been channeling resources into our mostcompetitive business fieldLSI devicesand these reformsprogressed steadily during fiscal

97、2004.Targeting the digitalconsumer electronics,mobile phone,PC and peripherals,andserver and network fields,we strove to strike a balancebetween our advanced product(90nm devices)and standardproduct(130nm and higher devices)businesses,and to boostprofitability in both.In advanced products,we leverag

98、ed ourindustry-leading 90nm technology to offer a broad range ofsolutions to customers,from products to foundry services.Thishelped us forge strong customer relationships and create alaunch pad for business expansion,illustrated by the fact wehave secured business with more than 20 companies.In stan

99、-dard products,we worked to raise productivity by expandingthe implementation of Toyota Production System reforms,thereby moving toward an earnings structure that will enableus to secure greater competitiveness and profitability on a sus-tainable basis.Our decision to channel resources into the LSI

100、businessis underpinned by the fact that we boast world-leading tech-nological capabilities in a broad range of related fields,fromembedded software development,design methodologies,analysis and verification,to cutting-edge process technologies.We proceeded as scheduled with plans to increase manu-fa

101、cturing capacity for volume production of next-generation LSIdevices.In April 2004,we began constructing a new facility atour Mie Plant for the mass production of logic devices on300mm wafers using 90nm and 65nm process technologies andcompleted pilot testing in February 2005the fastest-everfacility

102、 start-up in the industry.Since the facility became offi-cially operational in April,we have been steadily progressingtoward scheduled full volume production in September.Also in conjunction with the shift of resources to the LSIbusiness,we transferred the majority of our PDP businessshareholding to

103、 joint venture partner Hitachi,Ltd.in March2005,and in June,we transferred our LCD operations toSharp Corporation.Issues to Be AddressedGoing forward,we will work to further strengthen our NewIDM business,leveraging our distinctive low-power and first-time-right*2 design technologies and internal an

104、d externalcollaboration to enhance strategic partnerships with custom-ers,starting from upstream processes.Through this approach,we will harness our technological strengths to create a pow-erful lineup of competitive products with our customers.Atthe same time,in anticipation of intensifying price c

105、ompeti-tion and other challenges,we will strive to build an operatingstructure that is more resilient to changes in the business land-scape.This will include enhancing our design capabilities,developing new technologies and pursuing continuous inno-vation in manufacturing to create a lower cost base

106、 by reduc-ing costs and boosting productivity.*1 Ferroelectric Random Access Memory:non-volatile memory offering higherendurance for multiple read/write operations*2 Design that achieves a fully functioning LSI device at first iteration17Annual Report 200518Fujitsu LimitedCustomer Solution ProfilesT

107、icket-dispensing Multimedia TerminalsProviding a Wide Range of ServicesRegal Entertainment Group(United States)Entertainment is big business in the United States,and fewamusement spots have the ability to attract massive numbersof people the way that movie theaters can.The Regal Entertainment Group

108、operates the worldslargest network of cinemas,boasting 254 million visitors inthe United States each year,according to 2004 data.Fujitsuhas started replacing existing ticket dispensers installed byRegal with new multimedia terminals that can also issue tick-ets.To ensure these terminals serve as aut

109、omatic ticketingplatforms for the greatest number of customers,Regaldemanded exceptional reliability from both the machines andthe systems that run them to minimize technical glitches andother issues.Regals terminals also have to respond to a vari-ety of needs,from allowing customers to print out ti

110、cketsreserved on the Web,handling advance tickets,and dispens-ing cash by card,to providing updated movie information.Regal has given our terminals high marks for enabling cus-tomers to enjoy a trip to the movies without waiting in line,and for providing a cashless alternative for quickly picking up

111、reserved tickets for the latest movies.The movie industry today has spread to every corner ofthe globe.The Regal Entertainment Group stands at the cut-ting edge of this industry.So when a trend emerges at Regal,the whole world takes notice.As the future of movies unfolds,Fujitsu,in partnership with

112、Regal,will continue to rise to newchallenges in the industry.19Annual Report 2005Safer,Reliable HealthcareWith Electronic Medical RecordsCancer Institute Hospital(Japan)The digitization of clinical information such as prescriptionsand medical records has been gathering pace in recent years,as health

113、care providers work to improve the quality of careand create more efficient delivery systems.Seventy years ago,the Cancer Institute Hospital inAriake,Tokyo was founded as Japans first hospital specializ-ing in the treatment of cancer.The hospital is also a forerun-ner in the adoption of electronic m

114、edical records,and hasmoved quickly to put in place the necessary infrastructure.In conjunction with the hospitals move to a new facilityin March 2005,we developed,installed and began operating atotal clinical information solution that includes electronicmedical records.All clinical test results and

115、 other details oftreatment are recorded in the patients electronic medicalchart,ensuring everybody involved in providing care to thepatient is literally on the same page.This digitized system isalso being used to prevent medical accidents as part of a thor-ough care management system.Now,for example

116、,prior togiving patients an intravenous drip,the nurse will scan corre-sponding barcodes on the patients wristband and medicinepackaging to ensure the right person is getting the correctmedication.The nurse also uses his or her own ID barcode toverify the whole process.Through the provision of this

117、electronic medical recordsystem,Fujitsu plays a vital role in the Cancer InstituteHospitals comprehensive medical data management frame-work.Going forward,we will continue to leverage the powerof cutting-edge IT to help healthcare providers deliver safemedical services that engender patient trust.Hi

118、ghly Flexible IT Servicesfor the Airline IndustryBritish Midland Airways(United Kingdom)In response to the challenges facing the air transportationmarket after 9/11 and other events such as SARS,BritishMidland Airways Ltd.(bmi),the UK-based airline operatingboth short-haul and long-haul routes,has o

119、utsourced its ITprovision to Fujitsu to reduce costs and better align IT spendwith their changing business.We now deliver the majority of IT and communicationsservices to bmi.In the process of setting up the contract,over50 staff transferred into Fujitsu.The contract is moving the provision of IT fr

120、om a fixedcost to one which varies with bmis business volumes;the ser-vice is charged for on a usage basis.We are also aligning theservice delivery framework to ensure it underpins bmis keybusiness performance indicators.Richard Dawson,bmis Group IT Director,summarizedthe agreement by saying,“Outsou

121、rcing to Fujitsu has allowedbmi to devote more time to managing the business in whatare challenging times for all airlines,secure in the knowledgethat our contract will deliver a flexible IT infrastructure thatwill be responsive to our changing requirements.”20Fujitsu LimitedWe are carrying out cutt

122、ing-edge research and development in fields ranging from IT services to comput-ing and telecommunications systems,as well as in supporting fields such as electronic devices and materialstechnologies.Major Accomplishments in Fiscal 2004 UHF-band electronic tag technology for a broad range of service

123、applicationsOur UHF-band*1 electronic tag technology has promising uses in a variety of different business applica-tions,including inventory management and production monitoring.Not only does the technology enabletagged goods to be identified from a greater distance than with frequency bands used to

124、 date,but togetherwith our proprietary security technology and newly developed tag antenna that offers outstanding commu-nication performance even with goods that contain metals or liquids,it can be used for an even wider rangeof service applications.Technology for improved data reception quality in

125、 next-generation mobile phonesThis technology leverages improvements we have made in data reception quality to enable the high-speeddownload of music,video and other content via next-generation mobile phones.By efficiently reducinginterference caused by the reflection of base station signals off bui

126、ldings and other objects,we are helpingto make mobile phone use more versatile and convenient.Ultra high-speed,high-density CMOS technology for next-generation 65nm LSI devicesOur multilayer wiring technology for next-generation 65nm LSI devices will enable significant improve-ments in speed and pow

127、er consumption compared with the cutting-edge 90nm devices in volume produc-tion today.The use of a combination of copper and nano clustering silica,a highly durable,low-k insulatingmaterial also developed by Fujitsu,proved instrumental in making these ultra-high-speed,high-densityLSI devices possib

128、le.Research&DevelopmentThe adoption of carbon nanotubes in place of copperin circuitry could significantly boost electrical currentdensity and heat conduction.Ultra-secure encrypted transmission is now one stepcloser after our success in emitting a single photon,aworld first.21Annual Report 2005 Sin

129、gle-photon emitter for ultra-secure quantum encryption of data transmission*2We achieved successful emission of a single photon in the 1.3-micron data transmission wavelength,aworld first and key technological step toward achieving bona fide quantum-encrypted data transmission,seen as the ultimate e

130、ncryption method for data transmission security.This accomplishment has also pavedthe way for the realization of data transmission speeds more than 400 times faster than those possible withconventional methods.Direction in Fiscal 2005In tandem with an R&D program that harnesses our comprehensive cap

131、abilities to respond to presentmarket needs,we will pursue research designed to unlock future business opportunities.Creating new solutions leveraging our technology value chainWe will pursue R&D to create high-value-added solutions that leverage and combine our wide array ofcutting-edge technologie

132、s in IT services,computers,networks,electronic devices and other areas.R&D in new and novel fields to support future businessesTo support future business development,we will pursue research in new and novel fields,including intel-ligent transport systems technology,45nm-generation semiconductor tech

133、nology,and nanotechnology.Promoting joint research to expand technological and product possibilitiesWe will aggressively pursue joint research with universities,research institutes and corporations worldwide.Key Research Themes in Fiscal 2005We will focus on the following research themes to help ush

134、er in the ubiquitous networking era:Next-generation server,storage and networking technologies;Ubiquitous computing and devices;Technologies to ensure the reliability and security of IT systems;and,High-end CMOS transistor technology*3 for 45nm-generation devices.*1UHF-band refers to radio wave freq

135、uencies between 952 954MHz.*2This technology was developed together with the University of Tokyos Research Center for Advanced Science and Technology as part of anIT program sponsored by Japans Ministry of Education,Culture,Sports,Science and Technology.Semiconductor crystals used in thisresearch we

136、re developed in collaboration with the Nanomaterials Laboratories of Japans National Institute for Materials Science.*3CMOS transistor technology:A semiconductor circuit processing technology that realizes advanced,high-density chips with low energyconsumption.22Fujitsu LimitedImportance ofIntellect

137、ualPropertyIntellectualPropertyStrategyThe environment surrounding intellectual property has changed significantly with the creation of vari-ous new systems and mechanisms.It will become increasingly important to utilize these effectivelygoing forward.By leveraging intellectual property to support t

138、he development of our own unique advanced tech-nologies,we aim to build an exclusive position as a technology leader in the marketplace.To achieve thisgoal,we are pursuing the following:Implementing strict data protection measures,including initiatives to prevent unintended leaks;Creating a culture

139、that values and protects intangible assets;Taking an uncompromising stance on infringement of intellectual property rights.Guided by these three core principles,we areworking to secure and utilize intellectualproperty in order to provide products and ser-vices that are anchored by powerful techno-lo

140、gical capabilities and enhance customersatisfaction.1.Patent Rights(1)Global Patent Portfolio and Promotion OrganizationCentered on Japan,but including Europe,the US and elsewhere in Asia,we are working to secure power-ful patents on a global basis.We have dispatched specialist personnel to the US i

141、n particular to promotepatent acquisition activities and actively leverage our patent rights.Intellectual Property20042003200202,0004,0006,0004,7004,8005,100 Europe20042003200205,00010,00015,00013,10013,00014,30020042003200201,0002,0003,0002,9002,6002,40020042003200205,00010,00015,00013,40010,90010,

142、300 Japan North America Asia/AustraliaGlobal Patent Portfolio(number of patents held)Maintain Superior CompetitivenessActively secure and utilize intellectual property to moreeffectively differentiate our products and services.Ensure Business FlexibilityWork to develop a strong intellectual property

143、 portfolioto ensure and enhance business flexibility and obtain morefavorable terms in collaboration agreements with othercompanies.Secure Business ProfitabilityUse specialist divisions to aggressively market our technolo-gies,including efforts to generate revenue from licensing fees.23Annual Report

144、 2005(3)In-house InventionsWe have adopted an approach to in-house inventions where individual inventors are initially responsiblefor evaluating the merits of their own inventions.Based on these evaluations,we rank the inventions andprovide compensation accordingly.We also issue commendations for in

145、ventions to promote acquisition ofvalid patents.Going forward,we will strive to create a favorable environment for in-house invention byimproving the transparency of the compensation system,gaining further support from employees byengaging them in dialog on these issues,and raising incentives.2.Resp

146、ecting Other Companies RightsThe impact of infringing upon the rights of other companies goes beyond having to pay significant fees.Inthe worst case,it could have a major economic impact on our company due to the loss of business opportu-nities and other issues.In addition,it could prevent us from p

147、roviding products and services,thereby se-verely inconveniencing our customers.We are creating a culture at Fujitsu that respects the patent rightsof other companies,as well as building an infrastructure that allows all our technicians to utilize the ATMS/IR system to research rights held by other c

148、ompanies.3.Ensuring Strict Information Management“Maintain confidentiality”is a key element of the Code of Conduct in The FUJITSU Way,the core set ofprinciples guiding the corporate and individual actions of the Fujitsu Group.Emphasizing this as a funda-mental behavior,we are working to raise employ

149、ee awareness of the importance of carefully managingFujitsu confidential information,personal information,and information from third parties that we hold inconfidence.At the same time,we have established three internal regulations to provide concrete guidanceon information management.Principal Paten

150、t Results in Fiscal 2004Mission-critical Servers(PRIMEQUEST/PRIMEPOWER)We filed 400 domestic and international patents relat-ing to core functionality such as system synchroniza-tion and mirroring technologies.Vein Pattern Authentication TechnologyWe filed over 120 domestic and international patents

151、for biometric authentication technology,interfaces andperipheral technologies.(2)Key Themes Driving Patent Acquisition ActivitiesWe are striving to strengthen our patent portfolio guided by key themes in each of our business areas.Using ATMS/IR,our proprietary patent data search system,we are workin

152、g to strategically acquire pat-ents by closely following the latest technology trends,creating patent maps and taking other steps.TRIOLE(software)We filed over 200 domestic and international patents inareas including flexible I/O and reliability technologies.65nm and 90nm Transistor Product Technolo

153、giesWe filed over 200 domestic and international patentsrelated to technologies for stable production of lowpower consumption/high-speed transistors.Contactless palm vein authenticationsystemPRIMEQUEST server24Fujitsu LimitedSocial and Environmental ActivitiesGuided by The FUJITSU WayCoexisting with

154、 communities and society as a good corporate citizen is one of our key objectives.Guidedby the aims of The FUJITSU Way,we are striving to ensure our business activities are conducted in har-mony with,and for the benefit of,global and local communities.We contribute to society in a variety ofways usi

155、ng our unique position as an IT company.Below are just some of the activities we were involved induring fiscal 2004.Reforestation Activities OverseasSince 1997,we have supported efforts to regenerate tropical forests in Southeast Asia.One hallmark ofthis project is the role of employees,who provide

156、donations and travel at their own expense to target sitesto participate in reforestation work.In January 2005,for example,41 employee volunteers from Japanhelped plant more than 2,600 dipterocarp trees in Malaysia.Relief for Victims of the Sumatra Earthquake and Indian Ocean TsunamiThe earthquake th

157、at struck off the coast of Sumatra,Indonesia on December 26,2004,and the IndianOcean tsunami it triggered,affected more countries and claimed more lives than any comparable naturaldisaster in recorded history.At Fujitsu,the outpouring of support that emerged in the wake of thisunprecedented disaster

158、 came in a variety of forms and from across the Group.Corporate contributions aswell as money and supplies collected from employees were donated to national and local government agen-cies,as well as to the Red Cross and other organizations supporting relief and recovery efforts.Web-based Charitable

159、ActivitiesIn Japan,our ISP subsidiary,NIFTY Corporation,posted special charity content on its nifty portal siteto aid victims of the Sumatra Earthquake and the Chuetsu Earthquake,which struck Niigata Prefecture,Japan.Pictures of scenery and photographs submitted by amateur photographers and others w

160、ere offeredfor sale on the site.Proceeds from about 10,000 transactions,matched by donations from NIFTY,weregiven to the Community Chest of Niigata Prefecture in December 2004 and UNICEF Japan in March2005 to support people affected by the disasters.Support for the Mathematical Olympiad Foundation o

161、f JapanWe continue to support the Mathematical Olympiad Foundation of Japan,which seeks to foster math-ematical creativity and young talent and advance mathematics education.The foundation selects and sup-ports Japans representatives for the International Mathematical Olympiad.Mathematical Olympiad(

162、Fiscal 2004)Overseas tree-planting activities25Annual Report 2005Fujitsu and the EnvironmentAt Fujitsu,we consider environmental protection a key management priority.Leveraging our position asan IT company with advanced technologies and the power to innovate,we are working to help realize asustainab

163、le society.We carry out our own environmental protection activities in addition to strictly com-plying with environmental laws and regulations related to our business activities.And as part of our effortsto ensure the worlds resources are preserved for future generations,we are pursuing a range of p

164、rogressiveenvironmental initiatives across our entire organization and embedded in individual behavior.Below arejust some of the steps we took to help protect the environment in fiscal 2004.Eco-friendly Next-generation LSI Factory Comes On LineIn April 2005,a new facility came on stream at our Mie P

165、lant for the volume production of logic chipsutilizing 300mm-diameter wafers and 90nm and next-generation 65nm process technology.The facilityincorporates a number of features designed to reduce environmental impact.Along with installing thelatest in eco-friendly production equipment,the use of heav

166、y oil has been eliminated and other measurestaken to help fight global warming.Equipment for compacting alkali solids was introduced to cut downindustrial waste,and bioprocessing techniques adopted to reduce chemical emissions in the wastewaterrelease cycle.The facility is also the first of its kind

167、 built with hybrid seismic isolation construction,whichminimizes the risk of environmental contamination and human injury in the event of an earthquake.Plant-based Plastic Used in Notebook PC HousingsLaunched as part of our spring 2005 PC lineup,the FMV-BIBLO NB80K is the worlds first notebook PCwit

168、h the main plastic housing made from environmentally friendly plant-based plastic.Jointly developed withFujitsu Laboratories and Toray Industries,Inc.,this new plastic is made from 50%natural materials andconsists mainly of polylactic acid derived largely from corn and other starch sources,thereby h

169、elping to reduceconsumption of petroleum resources.When used in notebook PC housings,this plastic reduces CO2 emis-sions over the entire product lifecycle by about 15%compared to petroleum-based plastics.Comprehensive ISO 14001 Certification Obtained for Domestic Group CompaniesBolstering environmen

170、tal management is a key theme of the Fujitsu Group Environmental Protection Pro-gram(Stage IV).One of the specific objectives of this program is to establish a group-wide environmentalmanagement framework by March 31,2006,anchored by a well-developed environmental managementsystem.Marking a major st

171、ep in this direction,in March 2005,we received comprehensive ISO 14001certification for our environmental management system covering 97 domestic Group companies and some100,000 employees.New eco-friendly semiconductor fabrication facility at ourMie PlantFMV-BIBLO NB80K Notebook PC with corn-basedpla

172、stic housingISO 14001 Certificate26Fujitsu LimitedManagementBoard of Directors Representative DirectorsNaoyuki AkikusaChairmanHiroaki KurokawaPresidentKunihiko SawaPresident and Representative DirectorFuji Electric Holdings Co.,Ltd.Hiroshi OuraDirector and Senior Executive AdvisorAdvantest Corporati

173、onIkujiro NonakaProfessor of Hitotsubashi UniversityGraduate School of InternationalCorporate StrategyAkira TakashimaVice ChairmanMasamichi OguraCorporate Executive VicePresidentToshihiko OnoCorporate Executive VicePresidentChiaki ItoCorporate Executive VicePresidentMichiyoshi MazukaCorporate Execut

174、ive VicePresident PresidentHiroaki Kurokawa Corporate ExecutiveVice PresidentsMasamichi OguraToshihiko OnoChiaki ItoMichiyoshi Mazuka Corporate Senior VicePresidentsHirohisa YabuuchiHideaki YumibaIchiro KomuraTetsuo UranoTakashi IgarashiHaruki OkadaKoichi HironishiYoshiyuki TanakuraKimihisa ItoHirom

175、ichi Hirata Corporate Vice PresidentsTakashi AokiKazuhiko KatoKuniaki NozoeNobutake MatsumuraTakashi NakamuraYoshihisa NaganoYasuo KoikeKyung-Soo AhnShigeru FujiiYasuaki AraKazuya WadaTakumi NakamuraHideo SekineJunichi MurashimaShinichi HasegawaStatutory AuditorsCorporate Executive Officers Standing

176、 AuditorsTakashi TakayaHiromasa Inagaki AuditorsYoshiharu Inaba(President and CEO,Fanuc Ltd.)Tamiki Ishihara(President,Seiwa SogoTatemono Co.,Ltd.)Megumi Yamamuro(Professor,University of TokyoGraduate Schools for Lawand Politics)Makoto MatsubaraShinichi KurumaYoshifumi MitaKazuo IshidaHirosada ToneF

177、ujio OharaAkira YamanakaTsuneaki OharaMasanobu KatohKazuo MiyataTerumi ChikamaTakashi HarimaJiro SugawaraKiyonobu IshidaMasami Yamamoto Directors26Fujitsu Limited27Annual Report 2005Corporate GovernanceOur Basic Stance on Corporate GovernanceWe believe that the concurrent pursuit of efficient manage

178、mentand the proper control of business risks are essential to achievingsustainable improvement in corporate value.Recognizing thatstronger corporate governance is vital to realizing this goal,wehave actively appointed outside directors to help ensure sound andtransparent management.At the same time,

179、by separating man-agement oversight and operational execution functions we havepromoted faster decision-making while further clarifying manage-ment responsibilities.We believe that clear separation of thesefunctions is helping to realize greater transparency and efficiency.Corporate Governance Struc

180、tureOverview of Corporate InstitutionsFujitsus Board of Directors is responsible for management over-sight,supervising the execution functions of the ManagementStrategy Council and the Management Council under its author-ity.As an executive organ,the Management Strategy Council dis-cusses and decide

181、s upon fundamental policies and strategyregarding business management.The Management Council makesdecisions on important matters regarding operational execution.Issues discussed by the two councils and a summary of theirdebates are reported to the Board of Directors,which makesdecisions on items of

182、particular importance.The auditing function is carried out by statutory auditors,who review the Board of Directors as well as operationalexecution functions.The Board of Directors is composed of eight internal direc-tors and two outside directors,for a total of 10 members.TheBoard of Auditors consis

183、ts of five statutory auditors:two stand-ing auditors and three outside auditors.Audits by Statutory Auditors and Internal AuditsFujitsu has adopted a statutory auditor system.Auditors attendimportant management meetings,including those held by theBoard of Directors,the Management Strategy Council,an

184、d theManagement Council to express opinions,and through direct inter-views with operational units when needed and other methods,theyaudit the Board of Directors and operational execution bodies.Additionally,the Corporate Internal Audit Division has beenestablished within the Corporate Center to serv

185、e as an internalaudit group.This division audits the internal affairs of the com-pany and its affiliates,proposes improvements in their businesspractices,and regularly reports its audit findings to the Manage-ment Council.Initiatives to Enhance Corporate Governance in Fiscal 2004In July 2004,we esta

186、blished The FUJITSU Way Promotion Coun-cil,a body reporting directly to the president.This council ischarged with further accelerating the groupwide penetration andimplementation of the mission,values and code of conduct thatcomprise The FUJITSU Way.We also set up a Compliance Com-mittee to enhance

187、risk management and promote structures andprocedures for internal compliance based on these core tenets.In addition,the Risk Management Committee and Environ-mental Committee,which had both operated independently,wererealigned under The FUJITSU Way Promotion Council.Theiractivities are helping to ac

188、hieve good corporate governance inaccordance with The FUJITSU Way.Compliance Committee(newly established)This committee is responsible for promoting structures and sys-tems to ensure strict compliance with external as well as internalrules,regulations and norms of behavior.To support these efforts,w

189、e have operated a“help line”system since September 2004 toserve as a confidential liaison point for receiving reports fromemployees and providing guidance to them on matters of conduct.Risk Management CommitteeThis committee works to obtain information regarding specificincidences of risk and to mit

190、igate their impact on customers andthe Fujitsu Group.Serious issues are reported to the Manage-ment Council or Board of Directors for discussion and response.In this way,risk issues and countermeasures are disseminatedthroughout the Fujitsu Group,strengthening our overall riskmanagement posture.Envi

191、ronmental CommitteeThis committee is responsible for promoting and strengtheningthe environmental protection activities of the Fujitsu Group,which are based on The Fujitsu Group Environmental Policy andThe Fujitsu Group Environmental Protection Program.Corporate Governance FrameworkGeneral Meeting o

192、f ShareholdersBoard of DirectorsPresidentManagementStrategy CouncilManagementCouncilAuditors(Management strategydecision-making)(Business executiondecision-making)Matters of specialsignificanceAuditingAuditingElectionElectionDesignationManagement supervisionSupervisionExecutionThe FUJITSU Way Promot

193、ion CouncilChair:PresidentRole:Promoting thorough implementation of The FUJITSU WayChair:Corporate executive vice presidentRole:Ensure thorough compliance with laws,regulations and internal rules and standardsChair:PresidentRole:Minimize risk and strengthen crisis management structureChair:Corporate

194、 executive vice presidentRole:Promote and strengthen environmental activitiesPromotion of The FUJITSU WayManagement CouncilComplianceCommitteeRisk ManagementCommitteeEnvironmentalCommittee28Fujitsu LimitedBusiness and Other RisksListed below are the principal business and other risks affectingthe Fu

195、jitsu Group(Fujitsu Limited and its consolidated subsid-iaries)that we believe may influence investors decisions.Witha view to proactively disclosing information to investors,we havealso included items that may not necessarily have significantbearing on such decisions.We are aware of these risks and

196、 aremaking efforts to prevent them from materializing,avoid po-tential risks altogether,and immediately confront risks shouldthey occur.Among the risks listed below are some items relatedto future developments,but the list only includes items that theGroup deemed necessary to publicly disclose as of

197、 the date ofsubmission of its securities report(June 30,2005).1.Economic and Financial Market TrendsEconomic and financial market trends have an impact on theGroups business results,financial base and other aspects ofits operations.Examples of such risks are listed below.(1)Economic Trends in Key Ma

198、rketsThe Fujitsu Group provides IT products and services,tele-communications infrastructure equipment,as well as semicon-ductors,hard disk drives(HDDs)and other components,tocorporate clients and consumers in every region of the globe.Hence,sales and income generated from these operations aregreatly

199、 affected by economic conditions in each respectivemarket.This is particularly true of Japan,North America,andEurope,our key markets,where economic trends can signifi-cantly impact Fujitsu Group operations.(2)Hi-tech Market VolatilityThe IT sector is periodically subject to dramatic changes inthe ba

200、lance of supply and demand that exceed the scope ofcyclical market variations.This tendency is particularly evi-dent with regard to semiconductors,PCs and other general-purpose products.The Fujitsu Group gives ample consideration to marketcycles and volatility when deciding to launch new products,in

201、itiate volume production,or scale back production,amongother actions.Nonetheless,we may fail to accurately forecastmarket changes,or changes in market conditions could exceedour forecasts.Accordingly,there is a risk that we may beunable to recoup investment costs,as well as the risk ofopportunity lo

202、sses.Further,the Group continuously implements structuralreforms in a bid to respond to market changes.However,dras-tic market changes could force us to enact structural reformson a far greater scale than initially expected,resulting in a tem-porary increase in related expenses.(3)Exchange RatesThe

203、Fujitsu Group imports a substantial amount of compo-nents and materials and exports various products.Whileimport and export costs tend to roughly balance out over thecourse of a given year,sudden fluctuations in exchange ratesand other factors could force the Group to incur losses onforeign currency

204、 translation adjustments.There is also the riskthat exchange rate fluctuations could lead to the depreciationof overseas assets held by the Group,as well as appreciation offoreign currency-denominated liabilities.(4)Interest RatesIn fiscal 2004,the Fujitsu Group reduced the level of interest-bearing

205、 loans by a substantial margin.The balance of theseloans,however,is still in excess of 1,000 billion,and includesitems that are directly impacted by interest rate fluctuations.Consequently,rising interest rates could result in an increasein the interest burden from interest-bearing loans,while theri

206、sk of higher financing costs in the future could affect ourefforts to procure necessary funding for our operations.(5)Capital MarketsStock market trends in Japan and overseas have a substantialeffect on the value of Group stockholdings in other companiesand the management of pension assets.Weak stoc

207、k marketperformance could thus force us to incur losses on the devalu-ation of marketable securities held or a reduction in pensionassets,exposing the Group to the risk of higher losses.2.CustomersFujitsu Group operations are highly influenced by the busi-ness trends of strategic key customers.Examp

208、les of potentialrisks are described below.(1)Customer Performance and Business ConditionsA large proportion of our IT systems and services,as well ascommunications infrastructure and other business is with tele-communications carriers,financial institutions,and largemanufacturers.Business conditions

209、 within these industries,including structural reforms,could lead to changes in customerinvestment trends having a significant impact on Group salesand profitability.In semiconductors,HDDs and other opera-tions where the Group provides components and other prod-ucts,both demand and prices are impacte

210、d to a large extent bycustomers ability to sell PCs,digital home electronics,mobilephones,automobiles and other products in which these partsare used.Accordingly,soft demand and falling prices for cus-tomers products,or a decline in customers market share,could negatively impact Group sales and earn

211、ings.(2)Ability to Maintain Lasting Ties With CustomersThe Fujitsu Group is committed to bolstering ties withcustomers,striving to serve as a business partner and providesolutions across the full IT system lifecycle.For semiconduc-tors,HDDs and other operations where the Group providescomponents and

212、 other products,business stability hinges onmaintaining lasting ties with customers that represent keysources of demand for our products.An inability to secure29Annual Report 2005repeat business with such customers could therefore affectsales and profitability.(3)Changes in Customer IT Investment Tr

213、endsA major portion of Group sales and earnings is dependent onthe provision of IT systems and services to enterprises,publicinstitutions and other customers.Changes in customer ITinvestment behavior,including reductions in corporate ITspending,can have a profound effect on Group sales and prof-itab

214、ility.Alongside corporate clients,national and local gov-ernments represent another important customer base for theFujitsu Group.In the UK,for example,government-relatedprojects are an especially important part of our business.Accordingly,changes in the approach to e-Government andother national-lev

215、el IT utilization policies being promoted inJapan and elsewhere could impact sales and profitability.3.Competitors/IndustryThe IT sector is characterized by intense competition and fast-paced technological innovation.Events within the industry oractions by competitors could therefore have a substant

216、ial im-pact on our business results.Examples of such potential risksare listed below.(1)Price CompetitionIntensifying competition is directly linked to declining pricesfor products and services.Anticipating such technology-andcompetition-driven price erosion,we are pursuing a variety ofmeasures to r

217、educe costs,including the introduction of ToyotaProduction System reforms,standardization of system devel-opment methodologies,and software modularization,as wellas efforts to expand sales of new products and services.Despitethese steps,the Group still faces the risk of larger-than-expecteddeclines

218、in prices,as well as the risk of being unable to achievesufficient cost reductions and sales growth due to fluctuationsin the price of semiconductors and other components,eitherof which could negatively impact Group sales and profitability.(2)Competition From New Market Entrants and OthersIn additio

219、n to challenges posed by existing industry peers,com-petition from new market entrants continues to intensify inthe IT sector.Today,new entrants continue to emerge inmarket areas where the Fujitsu Group wields a competitiveadvantage,thus entailing the risk that we may lose our com-petitive edge,or f

220、ail to secure a clear competitive advantage infuture business operations.(3)Competition in Technology DevelopmentTechnological advancement in the IT sector occurs at anextremely fast pace,leading to rapid turnover in new productsand technologies.In this context,remaining competitiverequires the cont

221、inuous development of state-of-the-art tech-nology.While the Fujitsu Group does its utmost to maintainhighly competitive technologies,a loss in competitiveness ver-sus other companies in the race to develop innovative tech-nologies could lead to a decline in the Groups market shareand profitability,

222、which would negatively impact sales andearnings.Further,sales and profitability could be affected bythe development of groundbreaking technologies and otheractions by competitors that would severely compromise thevalue of the Groups products and services.4.Partners,Alliances,etc.In the course of its

223、 operations,the Fujitsu Group conducts busi-ness and forges alliances with a range of different companies.Accordingly,any significant changes in relationships with theseand other business partners could affect Group operations.(1)ProcurementThe Fujitsu Group utilizes sophisticated technologies to pr

224、o-duce a range of products.There is therefore a risk that we mayencounter difficulties in procuring a stable supply of certainkey components,or,in cases where regular supply channelsare unavailable,that we may be unable to secure alternativeprocurement sources.There is also the risk that the Groupma

225、y be unable to sufficiently procure certain parts in the largevolumes required.Moreover,natural disasters,accidents andother events,as well as any deterioration in business condi-tions at suppliers,could hinder the ability of business partnersto provide the Group with a stable supply of required com

226、po-nents.These and other events could cause delays in productshipments,resulting in postponement in the delivery of prod-ucts to customers and opportunity losses,among other prob-lems.In respect to component procurement,foreign exchangerate fluctuations,tight supply and demand conditions,andother pr

227、essures could drive procurement costs higher thaninitial estimates,leading to diminished returns on products,as well as lower sales due to the need to raise product prices.Additionally,while we make every effort to ensure the qualityof procured components,we cannot guarantee that all compo-nents pur

228、chased will be free of defects.The discovery of suchissues could result in processing delays,as well as defectiveproducts,opportunity losses,repair costs,and disposal costsfor defective goods,plus the potential obligation to pay dam-ages to customers.(2)Collaborations,Alliances and Technology Licens

229、ingTo enhance competitiveness,the Fujitsu Group works with alarge number of companies through technology collaborations,joint ventures and other means,a practice that we intend tocontinue for the foreseeable future.If,however,as a result ofmanagerial,financial,or other causes,it becomes difficult to

230、establish or maintain such collaborative ties or to gain suffi-cient results from them,the Groups business could beadversely affected.Moreover,many of our products and ser-vices employ other companies patents,technologies,software,and trademarks with the consent of their owners.However,30Fujitsu Lim

231、itedthere is no guarantee that other companies will continue togrant or license the right to use their property under termsacceptable to the Fujitsu Group.(3)Stability of Partner Financial InstitutionsDeterioration in the business conditions of financial institu-tions with which the Group has dealin

232、gs could lead to changesin financing terms and other developments that could affectthe ability to procure required funds.5.Public Regulations,Public Policy,and Tax MattersThe business operations of the Fujitsu Group are impacted bya variety of public regulations and trends in public policy,aswell as

233、 laws pertaining to tax and taxation.Specifically,wher-ever it operates,the Group must comply with a variety of regu-lations,such as authorizations for business or investment,import/export regulations and restrictions,as well as laws per-taining to antimonopoly policies,intellectual property rights,

234、consumers,the environment and recycling,labor conditions,and taxation.The failure to strictly comply with these lawsand regulations may result in the revocation of permission toconduct business,the termination of bids for certain projects,and lead to other issues that could adversely impact Groupsal

235、es and profitability.Earnings might also be affected byincreased compliance costs associated with stricter or other-wise revised regulations.We also provide solutions in certainfields and business domains such as healthcare and communi-cations that are subject to other public regulations,meaningthat

236、 regulatory trends in these sectors may potentially impactGroup businesses.6.Other Operational RisksThe Fujitsu Group can offer no guarantee of its ability toalways achieve the optimal outcome desired in the course ofexecuting business operations.Some of the specific risks facedin this respect are d

237、etailed below.(1)Deficiencies or Flaws in Products and ServicesQuality is a core value of the Fujitsu Group.We are commit-ted to improving quality at the design and development stagesas well as in manufacturing.We are also promoting stricterquality control when purchasing components from externalsup

238、pliers.These efforts notwithstanding,it is impossible tototally eliminate the possibility of deficiencies or flaws occur-ring in products,including software.While the Group is alsopromoting software modularization and standardization ofdevelopment work in order to improve the quality of systemdevelo

239、pment and other services,the possibility of defects aris-ing cannot be excluded.In the event that such deficiencies orflaws occur,the Group may have to initiate product recalls orrepairs,engage in system recovery work,pay damages to cus-tomers or suffer opportunity losses,all of which would nega-tiv

240、ely impact Group sales and profitability.(2)Project ManagementDue to such factors as the increasing scale of systems and morerigorous demands from customers,as well as the advance ofopen system environments,system development work isbecoming increasingly complex.At the same time,greater com-petition

241、 is leading to increasingly intense pricing pressures.Infiscal 2003,the emergence of certain loss-generating projectsprompted the Group to implement extensive risk managementmeasures,including standardized guidelines for projects of aset scale and above,the introduction of the percentage ofcompletio

242、n method,and other measures to help prevent theoccurrence and facilitate the early identification of suchprojects.In fiscal 2004,we strengthened these efforts byestablishing a new organization to screen projects at the con-tract negotiation phase and curtail the occurrence of projectswith deteriorat

243、ing profitability.Additionally,in April 2005,we established the Systems Integration Assurance Unit,a bodywith enhanced powers that reports directly to the presidentand is charged with bolstering efforts to prevent new incidencesof loss-generating projects.Along with these measures,theGroup continues

244、 to maintain reserves for losses as necessary.Nevertheless,in spite of these measures,there is a possibilitythat we may be unable to completely prevent the occurrenceof loss-generating projects.(3)Investment DecisionsIn the IT industry,large investments in R&D and facilitiesand equipment are necessa

245、ry to maintain competitiveness.Accordingly,the success or failure of investment choices has aprofound effect on the business results of the Fujitsu Group.When making such investment decisions,we give ample con-sideration to a range of factors such as market trends,customerneeds,the superiority of Gr

246、oup technologies and our businessportfolio.There is,however,the risk that promising marketsand technologies identified by the Group may fail to grow asanticipated,or that supply and demand imbalances or priceerosion may be more severe than expected.Investment in semi-conductor facilities and equipme

247、nt represents one such areawith a high degree of risk.In addition to substantial fundingrequirements,this field is characterized in particular by shortproduct cycles,major changes in the market landscape and stiffcompetition from other companies.The Group takes a num-ber of steps to mitigate this ri

248、sk,including responding to theseinherent fluctuations by dividing investment into multiplephases and forging agreements with customers prior to invest-ment.Nonetheless,there is no guarantee that the Group cangenerate sufficient returns on such investments.(4)Intellectual Property RightsThe Fujitsu G

249、roup has accumulated technologies and exper-tise that help distinguish its products from those of othercompanies.Legal restrictions in certain regions,however,may impair our ability to fully protect some of the Groups31Annual Report 2005proprietary technologies,with the result that we could be un-ab

250、le to effectively prevent the manufacture and sale of similarproducts developed by third parties using the Groups own in-tellectual property.Moreover,the creation of comparable orsuperior technologies by other companies could erode the valueof the Groups intellectual property.The Group has institute

251、dinternal policies,including stringent clearance procedures priorto launching new products and services,to ensure that noinfringement of other companies intellectual property occurs.However,there is the possibility that the Groups products ortechnologies may be found to infringe on other companiesin

252、tellectual property.In addition,the Group has previouslyinstituted a program to compensate employees for innovationsthat they make in the course of their work,and will continue toimplement this program in the future in accordance with therevision of Japans patent laws.Nevertheless,the Group facespot

253、ential risk from lawsuits initiated by employees in regard tocompensation for innovation created in the workplace.(5)Human ResourcesThe growth and profitability of the Fujitsu Group dependsheavily on human resources.As such,a major issue for theGroup is the ability to recruit and foster talented res

254、earchers,system engineers,managers and other key personnel;the in-ability to do so could negatively impact Group growth andprofitability.(6)Environmental PollutionWhile committed to minimizing environmental burden inaccordance with the Fujitsu Group Environmental Policy,theGroup cannot guarantee tha

255、t environmental pollution willnever occur as a result of its operations.Moreover,althoughwe monitor soil and wastewater as well as engage in clean-upactivities at former factory sites,this does not mean that pol-lution will not be found at such sites in the future.In the eventthat environmental poll

256、ution were to occur or be identified,clean-up and other costs could be incurred that adversely affectGroup earnings.(7)Information ManagementIn order to safeguard the personal and confidential informa-tion of customers and business partners,the Group has estab-lished strict regulations and institute

257、d training programs foremployees.Nevertheless,the Group cannot absolutely guar-antee that information will not be leaked.In the unlikely eventthat this should occur,trust in the Fujitsu Group could declineand the Group may be obligated to pay damages to customers.(8)Credit Ratings and Other Factors

258、that Affect Trustin the GroupIn addition to having a major influence on capital procurement,credit ratings by outside institutions serve as reliable sourcesof information when conducting transactions with businesspartners.Lower credit ratings caused by failure to meetearnings targets,deteriorating f

259、inancial conditions and otherreasons could influence our ability to procure needed funds,and place the Group at a disadvantage in bidding for projectsand in other business dealings.7.Natural Disasters and Unforeseen IncidentsNatural disasters and other unforeseen situations could havea major impact

260、on the business results and financial standingof the Fujitsu Group.Examples of the potential risks posedare found below.(1)Damage From Earthquakes,Other Natural Disastersand AccidentsThe Group has taken measures to make its business sites moreresistant to earthquakes and conducts regular inspections

261、 anddisaster readiness drills.Nevertheless,there is a possibility thatthe Group may be prevented from continuing operations dueto damage to facilities and equipment or interruptions in thesupply of electricity or water as a result of earthquakes andother natural disasters and accidents.Such occurren

262、ces couldinterrupt shipments to customers or disrupt shipments of partsfor the Groups internal use,thereby affecting factory produc-tion at other Group business sites.Semiconductor fabs andother plants where high-precision processing is carried out areparticularly susceptible to the effects of earth

263、quakes and simi-lar events.In the wake of such incidents,some time may berequired to resume normal operations due to the array of highlyspecialized equipment and devices used at these sites.Damagecaused by natural disasters may also hinder our ability to pro-vide information system support for Group

264、 customers,whichcould interrupt their business activities.We have a well-developed system in place to ensure theintegrity and stable operation of critical in-house networks,which are a key element of our business infrastructure.How-ever,the Group cannot guarantee its ability to prevent inva-sive com

265、puter viruses and other disruptions from impedingnetwork operations.(2)Geopolitical RiskConflicts,political instability,currency crises,natural disas-ters,epidemics or other events in nations or regions where theFujitsu Group operates could have a significant impact on itsbusinesses.32Fujitsu Limite

266、dYenU.S.dollars(millions)(thousands)(excluding per share data,D/E ratio,and number of employees)200120022003200420052005Net sales5,484,4265,006,9774,617,5804,766,8884,762,759$44,511,766Operating income(loss)244,026(74,426)100,427150,342160,1911,497,112Income(loss)before income taxesand minority inte

267、rests157,564(594,733)(147,606)157,018223,5262,089,028Net income(loss)8,521(382,542)(122,066)49,70431,907298,196Total assets5,200,0714,595,8044,225,3613,865,5893,640,198$34,020,542Shareholders equity1,214,383853,756702,390827,177856,9908,009,252Amounts per share of common stock(Yen and U.S.dollars):E

268、arnings(loss)Basic4.3(193.0)(61.3)24.515.4$0.144Diluted4.3(193.0)(61.3)22.213.90.130Cash dividends10.05.03.06.00.056Shareholders equity614.2426.5350.8413.2414.23.871Interest-bearing loans1,636,2241,760,6261,763,7691,277,1211,082,788$10,119,514D/E ratio(times)1.352.062.511.541.26Free cash flow129,653

269、(102,892)53,382371,434262,1032,449,561R&D expenses 403,405 349,855 285,735 250,910 240,222$2,245,065Capital expenditure438,043306,966147,620159,795181,4021,695,346Number of employees187,399170,111157,044156,169150,970Net sales by business segment(excluding intersegment sales):Software&Services2,014,

270、3752,085,8632,025,7902,094,2612,070,444$19,349,944Platforms2,349,8542,015,2261,612,0161,608,1781,705,12415,935,738Electronic Devices759,723546,555618,632734,320733,8666,858,561Financing107,246114,472119,27950,391Other operations253,228244,861241,863279,738253,3252,367,523Total5,484,4265,006,9774,617

271、,5804,766,8884,762,759$44,511,766Net sales by customersgeographic location:Japan3,590,2823,460,9153,280,6653,378,2653,340,664$31,221,159Europe725,756643,260568,763605,051633,2435,918,159The Americas765,288542,144390,482324,269320,9712,999,729Others403,100360,658377,670459,303467,8814,372,719Total5,4

272、84,4265,006,9774,617,5804,766,8884,762,759$44,511,766Notes:1.See Note 17 of Notes to Consolidated Financial Statements for specific calculation of basic and diluted earnings per share.2.The U.S.dollar amounts stated above and in the following Managements Discussion and Analysis of Operations have be

273、en translated from yen,for readers convenience only,at the rate of 107=US$1,which was the approximate rate on the Tokyo Foreign Exchange Market at March 31,2005.3.Cash dividends per share of common stock for the year ended March 31,2005 are the total of interim and year-end dividends approved by the

274、Companys board of directors on October 28,2004 and at the Annual Shareholders Meeting on June 23,2005,respectively.4.The capital expenditure stated above excludes intangible assets.Five-Year SummaryFujitsu Limited and Consolidated SubsidiariesYears ended March 3133Annual Report 2005Managements Discu

275、ssion and Analysis of OperationsThe following section,Managements Discussion and Analysisof Operations,provides an overview of the consolidated financialstatements of Fujitsu Limited(the“Company”)and its consoli-dated subsidiaries(together,the“Group”)for the year endedMarch 31,2005(fiscal 2004).Forw

276、ard-looking statements in thissection are based on managements understanding and best judg-ment as of March 31,2005.1.Analysis of ResultsBusiness EnvironmentWith regard to the business environment during fiscal 2004,over-seas,the US and China experienced a temporary slowdown ingrowth as a result of

277、surging oil prices and rising interest rates,but both these countries as well as Europe were able to maintaineconomic growth,and factors tempering growth appear to be eas-ing.In Japan,there was a shift from the robust conditions thathad prevailed in the digital consumer electronics sector until theb

278、eginning of the period,and the market for electronic compo-nents rapidly deteriorated,leading to a temporary flattening outof overall economic growth.Despite this,there appear to be pros-pects for a mild recovery in fiscal 2005.Looking at trends in IT investment,while the prospects forIT spending ov

279、erseas appear to be bright,led by an aggressivespending posture among global corporations,in Japan the out-look varies according to industry,company size,or region,andthere is a continuing lack of intensity overall.On the other hand,spending on open architecture IT infrastructure systems isenjoying

280、strong growth in both qualitative and quantitative terms,and there is rapidly increasing demand for greater stability andefficiency in such systems.In addition,with more attention beingpaid to security issues as a result of the enactment of the PersonalInformation Protection Act in Japan this year,t

281、here is greaterdemand than ever for the capabilities that IT can deliver in sup-porting internal controls and other measures to enhance security.Consequently,an increase in IT spending on public infrastruc-ture systems as well as by individual corporations can be expected.In the world of ubiquitous

282、networking,made possible bysophisticated IT infrastructure comprised of high-performance,high-reliability servers,networks and software seamlessly inte-grated in an open environment,it will be possible to securely andconveniently deliver advanced services in such areas as shopping,banking,and health

283、care.As a leading provider of server and net-working technology and services essential to the ubiquitous net-working era,Fujitsu seeks to provide comprehensive solutions thatbring together high-performance,high-quality products and ser-vicessuch as biometric authentication technology for enhancedsec

284、urityto meet the specific needs of individual customers.Net SalesConsolidated net sales for fiscal 2004 were 4,762.7 billion($44,512 million),a decrease of 0.1%compared to the precedingfiscal year.On a continuing operations basis,excluding the impactof restructuring,this represented an increase of 2

285、.8%.Deteriorat-ing market conditions reduced sales of products such as plasmadisplay panels(PDPs)and liquid crystal displays(LCDs),and inJapan,a sluggish recovery in IT spending restrained sales of serversand solutions/system integration services.Overseas,sales ofoutsourcing services,UNIX servers,op

286、tical transmission systems,PCs and compact hard disk drives(HDDs)improved.Net Sales by Business Segment(excluding intersegment)2005(Billions)20042003200220014,7624,7664,6175,0065,484Software&ServicesPlatformsElectronic DevicesFinancingOther Operations(Years ended March 31)34Fujitsu LimitedCost of Sa

287、les,Selling,General&AdministrativeExpenses,and Operating IncomeIn fiscal 2004,the cost of sales rose 51.6 billion to 3,512.5 billion($32,828 million),while selling,general and administrative(SG&A)expenses declined 65.5 billion to 1,090.0 billion($10,187 million).The cost of sales ratio deteriorated

288、by 1.2 percentage pointsfrom the prior fiscal year to 73.8%,while the ratio of SG&Aexpenses to net sales improved by 1.4 percentage points to 22.8%as a result of increased efficiency,benefits from restructuringcarried out primarily at overseas operations and the reclassifica-tion of certain subsidia

289、ries as equity method affiliates.As a resultof the foregoing,the overall operating income margin rose by 0.2percentage points.Operating income was 160.1 billion($1,497 million),up 9.8billion over the previous fiscal year.Although operating incomewas adversely impacted by lower prices and losses on p

290、rojects withdeteriorating profitability in the Software&Services segment,inthe Platforms and Electronic Devices segments,despite intenseprice competition,operating income grew as a result of increasedsales,progress on cost-cutting and expense controls.Operating Income and Operating Income MarginOthe

291、r Income(Expenses)and Net IncomeOther income,net of other expenses,totaled 63.3 billion($592million).Net interest,comprising interest and dividend incomeand interest charges,resulted in a loss of 9.6 billion($90 million),an improvement of 7.0 billion mainly owing to a decrease ininterest-bearing loa

292、ns.Equity in earnings of affiliates,net was 3.6billion($34 million),an increase of 4.5 billion from a loss postedlast year.Amortization of unrecognized obligation for retirementbenefits was 39.2 billion($367 million),an improvement of 17.6billion due to an increase in stock prices last year and the

293、transferof the substitutional portion of employees pension funds.Besides the previously mentioned items,other income(expenses),during fiscal 2004 included gains from the sales ofmarketable securities to bolster our financial position,as well ason the transfer of the PDP business.Details are as follo

294、ws:Gain on sales of marketable securities 133.2 billion($1,246 million)Sales of part of our holdings in Fanuc Ltd.and AdvantestCorporation on February 22 and 23,2005(129.2 billion)wererecorded as gain on sales of marketable securities.Gain on business transfer 36.5 billion($341 million)A formal agre

295、ement was reached on March 25,2005 for thetransfer of our PDP business to joint venture partner Hitachi,Ltd.We recognized proceeds from this and other business trans-fers as gain on business transfer.Restructuring charges 20.0 billion($188 million)Restructuring charges were recorded as expenses rela

296、ting toreductions and relocation of personnel and disposal of assets pri-marily at domestic manufacturing subsidiaries.Real estate valuation losses 15.2 billion($143 million)Valuation losses on idle property holdings were reported.We recognized 185.5 billion($1,734 million)as incometaxes,which combi

297、nes current and deferred income taxes,against223.5 billion($2,089 million)of income before income taxes andminority interests.The income taxes included a valuation allow-ance of 93.5 billion($874 million)for deferred tax assets,inaddition to normal tax expenses.Having significant tax loss carryforwa

298、rds from the restruc-turing of operations since fiscal 2001,we calculated deferred taxassets at fiscal year-end based on projected future taxable income.At that time,in light of the delayed recovery of taxable incomeprimarily from the Companys business operations,we recordeda valuation allowance to

299、cover the amount in excess of what wewere likely to recover,as based on estimates of the next fiscal yearstaxable income.After deducting minority interests of 6.0 billion($57million),net income for the year was 31.9 billion($298 million),a decrease of 17.7 billion from the prior fiscal year.20052004

300、2003200220012444.4(1.5)2.23.23.4(74)100150160Operating Income(Billions)Operating Income Margin(%)(Years ended March 31)35Annual Report 20052.Segment InformationNet sales below refer to sales to unaffiliated customers.Business Segment InformationAlthough operating income in the Software&Services segm

301、entdeclined sharply in fiscal 2004,the opposite was true for thePlatforms segment,where income was substantially higher.TheElectronic Devices segment also saw income growth.Software&ServicesConsolidated net sales were 2,070.4 billion($19,350 million),roughly on par with fiscal 2003 when excluding th

302、e impact ofthat fiscal years restructuring of overseas subsidiaries.Sales in Japandecreased,primarily due to the slow recovery in IT investment,sluggish sales in solutions/systems integration services,and areduction in earnings from public infrastructure systems deals.Overseas,buoyed by successive l

303、arge-scale government-sectoroutsourcing wins by Fujitsu Services in the UK,orders and salessteadily increased,with sales rising 9.8%on a continuing opera-tions basis.Consolidated operating income in this segment declined by25.7 billion to 113.0 billion($1,057 million).Increased earn-ings from large-

304、scale government-sector outsourcing deals byFujitsu Services in the UK and the benefits of last years restruc-turing of Fujitsu Consulting in the US led to improved results ateach of these subsidiaries.In the domestic solutions/systemsintegration business,however,development costs significantlyincre

305、ased for projects with deteriorating profitability,resultingin a substantial drop in operating income.Along with an increase in losses related to loss-generatingprojects completed during fiscal 2004 that far surpassed previ-ous-year estimates,we also booked unexpected additional lossesfor projects s

306、cheduled to be completed in fiscal 2005 and beyond.In an effort to maintain delivery schedules and quality on large-scale loss-generating projects,development resources werediverted to these projects throughout the period.The result wasa decline in overall efficiency in our solutions/systems integra

307、-tion business.As of the end of March 2005,the balance of the reserve forlosses on loss-generating projects that will be completed in fiscal2005 or beyond was 28.0 billion($262 million).Of the loss-generating projects uncovered to date,approximately 75%on avalue basis were completed by the end of fi

308、scal 2004,and of theprojects expected to be completed in fiscal 2005,the majority areexpected to involve systems that begin operation by the third quar-ter of fiscal 2005.Moreover,the major portion of losses sustainedto date have been on projects that were contracted and on whichdevelopment work beg

309、an prior to the end of the first half of fiscal2003.For projects initiated since the second half of fiscal 2003,atwhich time we implemented comprehensive countermeasures start-ing from the initial project discussion phase,the incidence of losseshas dramatically declined.Reviewing the concrete measur

310、es implemented to date toimprove project risk management procedures,in February 2004we established an organization to review project business discus-sions at every stage in order to prevent the occurrence of loss-generating projects.Since that time we have expanded ourorganizational resources in thi

311、s area,strengthening our projectrisk management organization and reforming our contractualprocedures.In April 2005,we established a new Systems Inte-gration Assurance Unit with broader authority that reportsdirectly to the president in order to further enhance our proce-dures to prevent the occurren

312、ce of problematic projects.We havealso implemented a real-time project management tracking sys-tem and,since the beginning of fiscal 2005,have been applyingthe percentage of completion method to all software developmentcontracts in order to maximize project visibility.In June 2004,we realigned our s

313、olutions business organizationin Japan by unifying our sales and systems engineering groups alongcustomer lines.Along with reforming our organization andapproach to more quickly respond to our customers changing busi-ness environments,this has clarified organizational responsibilityfor ensuring proj

314、ect profitability from the order stage.We alsorestructured and consolidated our systems engineering companiesin the Tohoku,Shikoku,and Chugoku regions.As a result,weexpect considerable improvement in the profitability of systemsintegration projects going forward.In addition,in order to augment full

315、IT system lifecycle man-agement(LCM)support for customers,in October 2004 we madeFujitsu Support and Service Inc.a wholly owned subsidiary ofFujitsu Limited through an exchange of shares.In January 2005,we consolidated into a single location nearly 2,500 employees ofboth companies who had previously

316、 been dispersed in multiple cen-ters throughout the Tokyo metropolitan area,and we consolidatedredundant service centers in regional locations throughout Japan.Continual cost reductions are essential in order to meet cus-tomer expectations regarding pricing.Accordingly,we intend toexpand the utiliza

317、tion of our SDAS comprehensive system36Fujitsu Limiteddevelopment framework to all new deals,and thoroughly improveefficiency by reducing development times and other measures.Moreover,we intend to intensify the use of custom-made develop-ment tools like our TRIOLE templates,which provide pre-verifie

318、dsystem construction patterns for open environments and greatlyimprove overall system reliability.PlatformsConsolidated net sales in the Platforms segment grew 6.0%overthe previous fiscal year to 1,705.1 billion($15,936 million).Salesof UNIX servers overseas were strong,particularly in Europe andNor

319、th America,and sales of transmission systems,primarily toEuropean and North American telecommunications carriers,showed double-digit growth.Although sales of PCs in Japan weresluggish,primarily as a result of intense pricing competition in theretail sector,overseas sales of high-function,high-qualit

320、y notebookcomputers registered especially large gains.Sales of our HDDs(foruse in notebook computers and servers),which enjoy a reputationin the marketplace for high quality and excellent reliability,alsoshowed significant growth,especially overseas.Operating income for the sector nearly doubled fro

321、m the pre-vious year,increasing by 25.7 billion to 55.0 billion($514million).Continued progress was made in lowering costs throughimprovements in manufacturing processes as well as reducingdevelopment costs and increasing efficiencies for such productsas optical transmission systems,IP networks and

322、servers.Amiddeclining prices and increasing volumes in PCs,we made furtherefforts to increase efficiencies in our manufacturing and deliveryinfrastructure and to lower procurement costs for components.However,with the deployment of financial terminals to accom-modate new Japanese banknotes having ru

323、n its course,profitabilitydeclined in the Server-related sub-segment,and although sales ofnew mobile phone handsets increased with the shift to third-generation(3G)communications under way in Japan,equippingthe new handsets with sophisticated functionality delayed costreductions and adversely impact

324、ed profitability in this area.In June 2004,we began global sales of new UNIX serversequipped with 64-bit processors employing our leading-edge90nm semiconductor technology.In April 2005 we announcedthe global launch of PRIMEQUEST,our new mission-criticalIA server with mainframe-class performance and

325、 reliability.Pro-viding the economy of an open architecture server together withthe high reliability of a mainframe computer,PRIMEQUESTbreaks new ground as the worlds most powerful open architec-ture server in the mission-critical space.Based on a strategy of active collaboration with global part-ne

326、rs in order to help strengthen our business,in fiscal 2004 weworked with IBM to establish standards for autonomic systemtechnology,with Cisco Systems in routers and switches,with Inteland Microsoft in the IA server field,and with Sun Microsystemsin the area of UNIX servers.In the hard disk drive bus

327、iness,we merged the operations ofour drive-head assembly division in the Philippines with TDKssubsidiary in the same country,and the new entity began opera-tion in December 2004.This move helps to ensure an adequatesupply of drive heads to meet future surges in demand.In light of the Personal Inform

328、ation Protection Act that cameinto effect in Japan in April 2005 and recent increases in counter-feit credit card-related crimes,there are growing calls for tech-nology solutions to help protect information security.Ourpioneering palm vein recognition technology has been adoptedby many financial ins

329、titutions for use in their ATMs,and a num-ber of these systems are already in operation.Electronic DevicesConsolidated net sales in this segment were 733.8 billion($6,859million),an increase of 4.6%over the previous year on a continu-ing operations basis excluding the impact of restructuring.Althoug

330、h price competition in PDPs and LCDs intensified as aresult of deterioration in the market supply/demand balance,increased orders for leading-edge products and strong sales byour components subsidiaries contributed to the overall increasein sales.Operating income was 32.5 billion($305 million),aninc

331、rease over last year of 5.0 billion.Continuing progress inimproving manufacturing efficiency and increased revenue fromcomponents subsidiaries offset the impact of lower sales ofPDPs,LCDs and other products,contributing to the overallincrease in operating income.In February 2005,pilot testing was co

332、mpleted at our newMie Plant facility for the mass production of 300mm wafers uti-lizing our leading-edge 90nm and 65nm process technology,andoperations officially commenced in April.With market demandfor leading-edge technology continually increasing,the plant issteadily progressing toward the start

333、 of volume productionplanned for September 2005.37Annual Report 2005In March 2005,we reached formal agreement with Hitachi,Ltd.regarding the transfer of our PDP operations.Accordingly,we transferred to Hitachi,Ltd.a portion of the stock we held inFujitsu Hitachi Plasma Display Ltd.,as well as certain intellec-tual property relating to PDPs.In addition,in April 2005 wesigned an agreement with Sharp