* Q2 op profit 37.16 bln yen vs 30.4 bln yen consensus
* Keeps Y185 bln 10/11 profit forecast, in line with estimate
* Cuts annual sales forecast by 2.7 pct on lower IT spending
* British government spending cuts hurt sales -exec
* Fujitsu shares close up 1.9 pct before results
By Sachi Izumi
TOKYO, Oct 27 Fujitsu Ltd (6702.T), Japan's
largest IT services vendor, beat expectations with a doubling of
quarterly operating profit but cut its annual sales outlook as it
copes with a firmer yen and corporations rein in IT spending.
Fujitsu's lower sales forecast, while not a surprise to
analysts, underscores the increasingly murky outlook for IT
services providers as a fragile global economic recovery prompts
companies and governments to review their investment plans.
Fujitsu, which ranks third in the global IT services sector
behind IBM (IBM.N) and HP (HPQ.N), said it had been hurt by a
drop-off and delays in U.S. and European IT investment, as well
as the yen's JPY= rise to a 15-year high on the dollar.
"The economic recovery in the United States and Europe was
unfortunately slow and we could not get as many contracts in the
private sector as we had hoped," Fujitsu Chief Financial Officer
Kazuhiko Kato told a news conference in Tokyo, adding that the
company has been hard hit hard by spending cuts by the British
"But our business negotiations have been going well in
regions like central Europe and the Nordics, and we would like to
see how these will turn out in the second half."
For the July-September quarter, Fujitsu said its operating
profit totalled 37.16 billion yen ($456.4 million), against an
18.9 billion yen profit a year ago. Sales fell 3.7 percent to 1.1
The firm yen and the euro's drop against the dollar cut into
the profits of the company, which has large operations in Europe,
but strong sales of its network products such as optical
transmission devices helped offset some of the losses.
Fujitsu, which competes with NEC Corp (6701.T) and Hitachi
Ltd (6501.T) in Japan, stood by its full-year forecast for a 185
billion yen operating profit, but lowered its sales outlook by
nearly 3 percent to 4.67 trillion yen.
It now assumes 85 yen to the dollar for the second half,
revised from its previous 90 yen/dollar estimate.
Fujitsu's operating profit forecast is in line with a
consensus estimate in a poll of 19 analysts by Thomson Reuters
I/B/E/S, and would be the company's biggest in three years.
"They've been saying from around summer that (corporate IT
spending) may not be as strong as they'd expected so in that
sense that seems to have been reflected in the lowered revenue
forecast," said Deutsche Securities analyst Takeo Miyamoto.
Last week, IBM reported a decline in services and outsourcing
contracts for July-September, overshadowing a gain in its overall
profits and triggering a fall in its shares from a record high.
Fujitsu's Kato said U.S. elections in November and the
British government's budget cuts are clouding its business
Britain's coalition government has announced plans to cut 80
billion pounds ($126 billion) from government spending to try to
drive down its deficit, currently running at around 11 percent of
national output. [ID:nLDE6720PZ]
"The (British) government is being so stingy about its
spending that large contracts we won in the private sector do not
cover (the loss from this)," Kato said.
Fujitsu's overall earnings have also been supported by a
strong performance in its mobile phone business, which it merged
with the handset operations of Toshiba Corp (6502.T) this month.
Its chips and other electronic devices returned to a profit
in July-September, helped by brisk sales in Asia and cost cuts.
Prior the the results, Fujitsu's shares closed up 1.9
percent, outperforming a 0.3 percent rise in the electric
machinery sector index .IELEC.T.
Fujitsu's stock is down 9 percent so far this year, against a
6 percent drop in the sector index.
(Reporting by Sachi Izumi; Editing by Anshuman Daga and Joseph