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Apr. 28, 2011 3:03 PM ET
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Seeking Alpha Analyst Since 2011

Erin Hichman is currently an Analyst within TBR’s IT services practice. Since joining TBR in 2008, Erin has assessed the business strategies and financial performance of companies in the professional services area. Erin also contributes to the benchmarking activity for the IT services practice area, including a quarterly report that tracks the operational and financial performance of 30+ professional services providers. Additionally, she performs custom research for client inquiries and financial modeling projects. Prior to joining TBR, Erin worked as a consultant for Deloitte Consulting, and also held positions with Lockheed Martin and McCormick & Company. She received her M.S. and B.S. degrees in Industrial Engineering from California Polytechnic State University.

Fujitsu continued to face unfavorable yen appreciation, but IT spending in Europe improved

  • The rising value of the Japanese yen remains the largest detriment to services segment revenues, as it continued to have a negative impact on Fujitsu’s top-line throughout fiscal 2010 (year ending March 31, 2011). As a result, total services revenue declined 2.6% year-to-year in Japanese yen in CY1Q11. There was little variation in sub-segment year over year growth performance in 1Q11, with the Solutions/SI segment falling 2.8% and Infrastructure Services declining 2.4% in local currency.
  • TBR believes improved IT spending in Europe helped drive a 6.8% year-to-year increase (in yen) in services revenues outside Japan to 34.0% of total revenue in 1Q11; up from 31.0% in 1Q10. Demand in the U.S. also showed improvement, particularly for Infrastructure Services; however, the increase in international revenue streams, combined with the impact of the tsunami in Japan and the appreciating yen has resulted in yet another quarter of year-to-year decline in yen terms. We anticipate Japanese yen appreciation to continue in 2011 as a result of rebuilding efforts in Japan and uncertainty surrounding the stability of federal funding commitments in the U.S. and debt constraint issues that continue to plague Western European markets.

Fujitsu is committed to shaping catastrophe into opportunity

  • Fujitsu responded to the natural disasters in Japan by opening its cloud services to local businesses, government agencies, hospitals and other tsunami victims to aid in the restoration of their IT infrastructures and recover lost data. In addition, Fujitsu has deployed engineering teams to help address IT issues and restore organizations’ infrastructures. The company will continue to support recovery efforts throughout 2011, which will provide users a taste of what to expect from Fujitsu’s cloud offerings. TBR believes there is significant opportunity for Fujitsu to tap into the Japanese SMB market by providing free services and server access, as it will help demonstrate the utility and cost benefits of using its cloud-based solutions to customers who may not have previously been interested in purchasing cloud services. In addition, we believe there will be opportunity for international expansion in the cloud services space as firms respond to the tsunami in Japan by investing in solutions that reinforce their IT infrastructure and secure mission critical data in preparation for potential disasters in their countries.

Fujitsu continued to push its way into the cloud by broadening its service spectrum

  • Cloud services remained a key area of investment in 1Q11, as Fujitsu continued to build out its higher value cloud service capabilities. Fujitsu announced a new consulting service geared towards aiding CIOs in gaining a better understanding of how their organizations can leverage the advantages of cloud computing.

Fujitsu launched six cloud support services that leverage open source software (OSS) for enhanced customer flexibility. The services will be available to domestic Japanese customers. TBR believes that by integrating higher value consulting services and a suite of add-on support services into its overall cloud solutions portfolio, Fujitsu will be able to cover the full services spectrum of a client’s transition to the cloud, effectively lengthening client engagements for more consistent and sizeable revenue streams.

To support cloud expansion outside Japan, Fujitsu launched its standardized Global Cloud Services portfolio in Australia and New Zealand. The introduction of the hybrid cloud platform in Australia marks the start of its global rollout plan to expand the service portfolio across major geographic markets by the end of calendar 2011, which will leverage data centers in Singapore, US, UK, and Germany. Fujitsu will continue to build its capabilities with plans to invest more than $500 million in cloud services throughout calendar 2011.

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