Angel Dobardziev
Fujitsu Services posts solid 2006/07 numbers
Fujitsu Services today released a solid set of results for its year ended 31 March 2007. Reported revenues were up by 5% year-on-year to £2.46bn, or up 4% on a comparable basis. Operating profits were up by 12% to £163m, amounting to a slightly improved operating margin of 6.6%. Fujitsu's order book was marginally up to a record £6.6bn, up from £6.5bn in the previous year. Comment: These are a solid, if unspectacular, set of numbers for Fujitsu Services. In pure financial terms, Fujitsu's performance is mid table among its Western IT Services peers: not quite in Accenture's or Indra's league, players which reported double digit comparable growth and operating margins, but better than Atos Origin and Getronics which struggle with low single digit growth and operating margins. There is no lack of ambition about the company. In yesterday's call, CEO David Courtley reiterated Fujitsu's ambition to expand beyond its traditional UK Government heartland into the commercial sectors both in the UK and, more importantly, Continental Europe. We also note the underlying drive to move beyond its primarily desktop-led infrastructure services base, and into application services and BPO. The December 2007 acquisition of €100m-a-year, double-digit-operating-margin TDS in Germany was a small but positive step to execute on this vision. If Fujitsu can convince GFI Informatique's shareholders to sell at a price its own masters find palatable, it will further strengthen its base in France and Spain. Furthermore, the deal with Germany's Allianz in May, worth €400m over five years, has given further boost to its confidence. While Fujistu is doing a lot of things right, there could be a case for even bolder thinking in terms of M&A, and certainly in its global delivery strategy. Even if it is successful with GFI, Fujitsu will remain a sub-scale player in continental Europe and it will remain in the trail of market leaders IBM, Accenture, EDS and Capgemini, particularly when its comes to realising its aspirations of winning larger, multinational deals. If more mergers and acquisitions are on the cards, the case for more radical M&A options with the larger players such as Siemens IT Services (it already has a joint product division with Siemens), LogicaCMG and Atos Origin need to be examined much more closely.More importantly, following its disposal of its 30% stake in Zensar, Fujitsu doesn't have a presence in India and its overall nearshore count is around 600 staff in Russia, or around 3% of its workforce - well below the 15-16% average among its peer group. Without offshore presence, Fujitsu will struggle in achieving deeper expansion into commercial verticals, particularly with application services and BPO service lines. So, while Fujitsu has done reasonably well to get to where it is now, it has an awful lot to do to get to where it wants to be in a few years' time.
