Friday, April 16, 2021

Fujitsu Identifies 20 M&A Goals in $ 5.8 Billion Spending Campaign

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Fujitsu has shortlisted 20 acquisition targets as part of a $ 5.8 billion investment campaign to capitalize on a pandemic-induced increase in demand for its digital services.

Takahito Tokita, chief executive, told the Financial Times that the surge in mergers and acquisitions will accompany an acceleration in the divestiture of non-essential assets to focus the Japanese group’s attention on technological and consulting services

Under the leadership of Mr. Tokita, the company is trying to regain its international presence. It is looking to move from a traditional IT vendor to competition from IBM and Accenture, the professional services company.

Fujitsu struggled to get rid of its hardware-only image even after sale its mobile telephony and laptop activities to refocus on cloud computing and artificial intelligence technologies.

“Instead of just strengthening our hardware, we are considering various M&A options with a global impact that will strengthen our software and services,” Tokita said.

The acquisitions will be funded from a five-year budget of up to 600 billion yen ($ 5.7 billion) for investments in alliances, technology development and recruitment.

Mr Tokita declined to identify or provide details on the 20 M&A targets and said no decision has been made.

Fujitsu’s M&A strategy is led by Nicholas Fraser, an acquisitions specialist seconded from McKinsey, the professional services firm, in March. He joined as part of Mr. Tokita’s diversity promotion involving hires from competitors such as PwC, Microsoft and SAP, the largest software company in Europe.

As the coronavirus has forced many companies to cut IT spending, Fujitsu expects appetite for 5G, cloud services and artificial intelligence to increase digital service revenue to 1.3 billion yen in three years, which would represent 37% of global sales.

Like with NEC home peer, Fujitsu sees the US-China trade dispute and the sanctions against Chinese telecommunications group Huawei as a chance to get back into the global race to supply 5G equipment.

“There is no doubt that opportunities will arise from excluding Chinese companies, and we are in fact receiving offers,” Tokita said.

In June, the US satellite company Dish agreed to use Fujitsu radio units, a deal Tokita hopes will provide an avenue for expansion in North America.

The shift from hardware to software, however, is a challenge that has long plagued the once powerful Japanese consumer electronics giants.

While Japanese companies excel at making customized products for their customers, they have fallen behind in creating technologies and services that can be applied globally, Tokita said.

Fujitsu’s reputation was hit in October when a hardware glitch in the trading system it developed triggered a one day outage on the Tokyo Stock Exchange.

But Mr Tokita’s promises of change and profitability have bolstered investor confidence, as shares of Fujitsu have risen 89% since taking office in June 2019. For the fiscal year ending in March, the company forecasts operating profit of 212 billion yen, the highest in two decades.

As part of a redesign alongside The Tokyo push For a “digital transformation” of Japan Inc, Fujitsu announced plans to halve office space and permanently shift its 80,000 employees in the county to telecommuting.

“The coming year will be a very big challenge for us in terms of whether we can really change our traditional image,” Mr. Tokita said.

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