Fujitsu says possible Eurozone collapse is most obvious risk factor for 2012

As Europe's debt crisis threatens the global economic recovery, the president of Fujitsu Ltd. said he is "very concerned" about a further worsening in the region's sentiment in January, as demand for the Japanese technology firm's products and services in Germany show signs of weakening this month.

"Germany is my biggest worry at the moment," President Masami Yamamoto told reporters at Fujitsu headquarters in Tokyo."A possible financial collapse in Europe is the most obvious risk factor for next year," he added.

Yamamoto's concerns came after the European Central Bank on Wednesday extended a total of EUR489.19 billion in low-interest loans to hundreds of euro-zone lenders to help the region's struggling banking industry.

Fujitsu, Japan's largest information-technology-services provider by revenue, also makes personal computers and mobile phones. While the company generates more than 60% of its sales in Japan, Europe is its biggest overseas market, accounting for nearly 20% of sales.

"Germany's economy has so far been fairly solid, but this month we've seen (clients) becoming more reluctant to make capital investment," Yamamoto said. He added that local demand is also slowing for Fujitsu's PCs and servers.

A deeper crisis in Europe could also hurt Japan's major exporters, which could in turn affect Fujitsu's services for corporate clients, Yamamoto said.

For the current fiscal year through March 2012, Fujitsu forecasts an 8.9% rise in net profit to Y60 billion and a 0.3% rise in revenue to Y4.54 trillion.

Aside from uncertainties in Europe, Fujitsu, like many other Japanese technology sector peers, faces challenges from the yen's strength as well as the impact from the flooding in Thailand.

The Thai flooding has seriously damaged the factories of hard disk drive makers, causing a supply shortage and prompting a rise in prices of the key PC component.

Yamamoto said Fujitsu may slightly underperform its global sales target of 6.6 million PCs for the current fiscal year through March. But more problematic, he said, are the higher hard-disk-drive prices due to the flooding, which are squeezing PC profit margins.

Yamamoto said Fujitsu's smartphones have seen strong demand in Japan and the company's services for mobile carriers have also been solid. Still, the company's smartphone production has been affected by supply chain issues due to the Thai flooding, which damaged smartphone chip makers' factories, he said."We've had situations where we couldn't produce enough smartphones even though demand was strong."

The yen's relentless strength against the dollar and euro has been hurting sales and profits at many Japanese blue chip auto and technology firms.

With the dollar, Fujitsu can offset much of the impact of a stronger yen by making raw material purchases in the dollar, Yamamoto said. With the euro, yen strengthening more directly hurts Fujitsu's earnings, he added.

The yen's strength has forced many Japanese manufacturers to move more of their production overseas or refrain from building new factories in Japan.

"It is necessary for the Japanese government to create an environment where Japanese companies can continue to export their products," Yamamoto said.