Fujitsu Advances on Job Cuts, Chip Reorganization

Fujitsu Ltd., a Japanese maker of computers and telecommunications gear, rose to the highest in 10 months in Tokyo trading on plans to eliminate 5,000 jobs and merge its LSI chip business with that of Panasonic Corp.

Fujitsu jumped 5.1 percent to 434 yen, the highest since April 2. The venture will design large-scale integration, or LSI chips, and contract out their manufacture, according to a joint statement yesterday. The state-backed Development Bank of Japan was asked to help finance the venture, the companies said.

Fujitsu joins the list of Japanese electronics makers that have shed or pared lower-margin businesses as they struggle to compete with South Korean and Chinese rivals. The Tokyo-based company will take 112 billion yen ($1.2 billion) in charges for restructuring its chip business by March 31 and will also move 4,500 workers to new ventures, it said yesterday.

“The company marked a step toward a full-scale restructuring,” Hitoshi Shin, a Tokyo-based analyst at Mitsubishi UFJ Morgan Stanley, said in a report to clients. “There’s a strong possibility that the company can maintain a balance of earnings and expenses, even as there’s some risk remaining” under the restructuring plan, he said.

Shin raised his recommendation on Fujitsu to outperform from neutral, boosting the target price to 475 yen from 320 yen.

LSI Venture

Fujitsu may move a production line in Japan’s Mie prefecture to a new chip foundry and is in talks with Taiwan Semiconductor Manufacturing Co. to set up a chipmaking venture, Fujitsu President Masami Yamamototold reporters yesterday.

“Fujitsu will still have the burden of bringing the new joint venture to profitability, and we do not expect profit growth commensurate with the staff reductions,” Ikuo Matsuhashi and Sen Yao, Tokyo-based analysts at Goldman Sachs Group Inc., said in a report.

Fujitsu, which has about 170,000 employees, plans to cut about 3,000 jobs in Japan, including contract workers, and 2,000 overseas, the company said yesterday.

The company forecast a net loss of 95 billion yen in the year ending March, compared with a previous projection for net income of 25 billion yen, it said in a statement.

Panasonic, which is scheduled to announce a mid-term plan by the end of next month, is restructuring as it heads toward a second straight annual loss. The Osaka-based company has cut more than 38,000 jobs since April, halted smartphone sales in Europe and closed plants making lithium-ion power cells.

Panasonic fell 5.4 percent, its biggest drop since Nov. 5, to 716 yen.

The company’s devices division, which includes system-LSI, broke even in the three months ended December, compared with a loss of 13.1 billion yen a year earlier.

Funding by the Development Bank of Japan for Fujitsu would come after state-backed funds have invested in Renesas and a liquid-crystal display venture formed by Sony Corp., Hitachi Ltd. and Toshiba Corp.

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net