The president of Japanese computer giant Fujitsu has told staff that losses made in the past by its UK services arm cannot be recouped within five years.
But the statement from Fujitsu president Hiroaki Kurokawa, posted on the company’s staff intranet, insisted the UK subsidiary, formerly known as ICL, was now profitable.
Kurokawa issued the message to staff after a shock forecast of £1.2bn losses for the 2006 financial year, driven by problems at Fujitsu Services, which holds a number of high-profile UK government contracts.
Kurokawa said: “In financial terms, the bulk of the loss on devaluation of subsidiaries' stock relates to Fujitsu Services.”
The UK services subsidiary, bought by Fujitsu in 1990, had benefited from structural reforms since 2000 and was now “capable of delivering steadily increasing earnings”, Kurokawa said.
But he added: “However, in the past it generated large losses, and the value of its net assets is significantly lower than the book value of our initial investment in the company.”
Fujitsu had previously intended to float the services business, but Kurokawa confirmed: “We no longer intend to publicly list or sell it.”
He added: “Now, with the change in our basic stance regarding Fujitsu Services, we have had to deal with our past investment in the company on our balance sheet.”
Kurokawa explained that Japanese accounting practices require it to recoup the investment made “within about 5 years”, if there is no intention to publicly list or sell a subsidiary company.
“Given the level of previous losses, we decided that recovery of that amount would not be possible within 5 years,” he said.
Kurokawa added that Fujitsu Services was now considered “a pillar of our business in the EMEA region and a key contributor to raising the corporate value of the entire Group”. This was why Fujitsu Services executive chairman Richard Christou had been appointed as corporate senior vice president of Fujitsu Limited and head of EMEA operations for the Fujitsu Group, he said.