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Fujitsu Global Services Business remains focused on filling gaps with alliances and pushing into the cloud market, however yen appreciation is limiting geo expansion

Below is TBR’s commentary on Fujitsu Global Services Business’ 4Q10 earnings (fiscal 3Q10). Please feel free to use the below content, or call/email Erin Hichman (603-758-1826/ erin.hichman@tbri.com) for additional commentary.

Fujitsu Global Services Business remains focused on filling gaps with alliances and pushing into the cloud market, however yen appreciation is limiting geo expansion

Is the Japanese yen Fujitsu Global Services Business’ primary threat?

          The appreciation of the Japanese yen continued to impact Fujitsu Global Services Business’ global expansion efforts with reduced profitability. The negative impact of the yen appreciation was amplified by the lingering economic downturn in Europe, where Fujitsu Global Services Business’ infrastructure services sales were adversely impacted, accounting for an estimated 6.3% decline year-to-year in Japanese yen.

          The yen and instability in Europe caused the organization to regress in its goal of generating 40% of revenue outside of Japan by 2012. Overseas revenue in local currency on a trailing 12-month basis decreased from 36.6% in 4Q09 to 36.4% of services revenue in 4Q10.   

          TBR believes Fujitsu Global Services Business should pursue acquisitions outside of its home market over the next few quarters in an effort to bolster its expansion outside of Japan.

SMBs are the best route for Fujitsu Global Services Business’ cloud offerings

          Fujitsu Global Services Business remains focused on its push into the cloud market by highlighting its cloud transition services, which assist clients moving to a cloud environment. TBR believes Fujitsu Global Services Business’ primary target is Japan, its core market; though is rolling its cloud offerings out to all regions as part of its effort to offer standardized services and solutions at the global level. However, TBR believes that due to lingering economic conditions in Europe, we anticipate Fujitsu Global Services Business to be more aggressive in the Americas and Australia/ New Zealand to offset the delayed spending improvements in Europe.

          TBR believes that as Fujitsu Global Services Business is just one bird in the sky offering cloud services and solutions, targeting the SMB market is the best route due to the low-cost and high-volume nature of the cloud business. TBR expects SMBs will be earlier adopters of cloud environments due to its low cost, scalability and flexibility. We believe Fujitsu corporate’s push to expand its cloud services will lead to opportunities to up-sell and cross-sell and grow in the cloud market.  

Alliances allow Fujitsu Global Services Business to fill portfolio gaps and rapidly enter new markets

          Fujitsu Global Services Business continued to establish new partnerships in 4Q10 to incorporate innovative technologies into its service portfolio. One such alliance was with RM5 Software, where Fujitsu will integrate RM5 Software’s IdM management software into its identity management service to provide enhanced e-services. In addition, Fujitsu partnered with Boeing to collaboratively develop a service that offers more effective aircraft maintenance support.

          TBR believes the trend towards leveraging partner abilities continues to drive innovation in Fujitsu Global Services Business’ new solutions and services to attract new audiences worldwide. In addition, we believe that by leveraging partner technologies with its own, the organization can deliver a shorter turnaround of new offerings at a reduced cost by avoiding increased R&D investments.