Fujitsu seeks acquisitions this year

By Mayumi Negishi and Noriyuki Hirata

TOKYO (Reuters) - Japan's Fujitsu Ltd (6702.T: Quote, Profile, Research, Stock Buzz) is seeking acquisitions abroad this year to expand in software services, and is keen on France, an executive said on Wednesday.

Fujitsu, which faces a saturated home market, seeks growth in the lucrative IT services sector, while it struggles with losses at its unit that produces microchips, used to control devices such cameras and flat TVs, and its hard drive operation.

"We will continue to seek M&A this year, and France is one of the three major markets in Europe, along with the U.K. and Germany," Fujitsu Senior Executive Vice President Chiaki Ito told the Reuters Global Technology, Media and Telecoms Summit in Tokyo. "We will also seek acquisitions on a smaller scale in Asia."

Fujitsu launched a hostile bid for French computer services firm GFI Informatique (GFIP.PA: Quote, Profile, Research, Stock Buzz) last year. That deal fell through after management demanded a higher price.

Fujitsu aims to get more share in a highly fragmented IT services market, in which clients tend to favor local firms. The world's biggest six companies together only hold about 20 percent of the market.

IT services firms in France include Capgemini (CAPP.PA: Quote, Profile, Research, Stock Buzz), Atos Origin (ATOS.PA: Quote, Profile, Research, Stock Buzz) and Groupe Steria (TERI.PA: Quote, Profile, Research, Stock Buzz).

NICHE PLAYER

While its consulting and outsourcing business have been lucrative, Fujitsu has so far been unable to keep up with price falls in its loss-making chip and hard drive operations.

Ito denied that Fujitsu was in talks with rival Toshiba Corp (6502.T: Quote, Profile, Research, Stock Buzz) about a microchip partnership.

Fujitsu needs a partner to make system chips and other chips using next-generation 32-nanometre technology, which compared to older 45 nanometer technology, crams more processing power onto a smaller chip.

But Ito said the company is focusing on embedded software design and intellectual property to gain a niche in the semiconductor market before going ahead with a partnership.

"We are not going after volume and scale," he said.

The costs of developing newer, smaller and more powerful chips as well as producing circuitry that grows ever finer has forced rivals to work together.

Alliances so far announced include unlisted Renesas and Matsushita Electric Industrial Co (6752.T: Quote, Profile, Research, Stock Buzz) and NEC Electronics Corp (6723.T: Quote, Profile, Research, Stock Buzz) and Toshiba Corp (6502.T: Quote, Profile, Research, Stock Buzz). Toshiba has also joined a IBM-led (IBM.N: Quote, Profile, Research, Stock Buzz) group to develop more powerful semiconductors.

Although Ito denied any talks were in progress, he said that "Fujitsu has close ties with other Japanese chip makers and we frequently exchange information."  Continued...