Fujitsu announces restructuring, 16,400 job losses

Fujitsu Ltd. disclosed Monday plans to lay off 16,400 workers worldwide as part of a business reform across its entire group. The restructuring, which will hit the company with extraordinary losses of 300 billion yen ($A4.24 billion), is the company's answer to deteriorating business conditions in many of its business units worldwide.

The main strategy of the plan is to shift the company's business activities towards software, said Naoyuki Akikusa, the president and company executive officer of Fujitsu. The company's service and software division was the best performing of its four main internal divisions in the most recent quarter, beating the information processing, telecommunication and electronic devices sectors. The extraordinary losses of 300 billion yen will be made up of 80 billion yen on the information processing group, 45 billion yen on the telecommunication group, 145 billion yen on the electronic devices group and 30 billion yen on the service and software group, the company announced.

The company's restructuring will force a total of 16,400 people out of work, of which 11,400 will be overseas and 5,000 in Japan. In order to reform the company fast, it needs to rebuild the business to return to profit in one region, so most of the job cuts will take place abroad and not in Japan, explained Akikusa. An additional 4,700 people in Japan will be affected as part of personnel transfers to the service and software sector from other sectors, according to Fujitsu.

In the information processing sector the company's decision to stop production of 3.5 inch IDE hard disk drives for desktop PCs, which was announced earlier this month, will result in the loss of 4,500 jobs, of which all but 300 will be in Asia. The company also plans to consolidate domestic manufacturing and concentrate Unix server, storage and processor development work at Fujitsu in Japan, Intel Architecture (IA) server work at Fujitsu Siemens Computers and software development in North America. The telecommunication sector was hit hard by a sudden halt in investment in optical network infrastructure by telecommunication carriers in North America and Europe and 2,900 jobs will be lost in the division, the majority from Fujitsu Network Communications Inc. (FNC) in the U.S. and Fujitsu Telecommunications Europe Ltd. (FTEL) in U.K.

The low investment in optical networking in North America and third generation mobile telecommunication network equipment by European carriers resulted in unpredictable losses, said Takashi Takaya, the vice president of the company. "The broadband optical network sector, the company believed, would flourish more," he added. "But we found out that renting infrastructure to telecommunication carriers cannot grow the broadband business."

In Fujitsu's electronic devices division, the global downturn in the semiconductor market resulted in 2,800 job losses, according to Takaya. A main focus of the restructuring efforts is on the company's plant in Gresham, Oregon.

The plant, which mainly produces flash memory for mobile handsets, was also hit by the rapid change of the telecommunication chip market, which is now in a state of oversupply. Output at the plant has already been reduced to between 20 percent and 30 percent and Fujitsu is hoping to convert it into a joint venture with Advanced Micro Device Inc. (AMD), the company said.

The two companies are currently in talks and, so far, have reached an agreement to form a joint venture which will be owned equally by Fujitsu and AMD, according to Kazunari Shirai, a senior executive managing director for Fujitsu.

The company's semiconductor sector depended too heavily on the telecommunication device market in the U.S., which resulted in an unbalanced supply and demand relationship for chips and revealed Fujitsu's weakness in marketing in that area, Takaya said. By shifting the company's strategy into the software service, Fujitsu hopes to reform and reconstruct the whole company, he said.

With these initiatives, the company expects to earn an operating profit of 40 billion yen in fiscal year 2003. For the current year, however, it expects to report a net loss of 220 billion yen, against a net profit of 8.5 billion yen last year. Net sales are expected to slip from last year's 5.5 trillion yen to 5.4 trillion yen this year.

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