David Herro Comments on Fujitsu

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Oct 12, 2022
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Fujitsu (

TSE:6702, Financial) (Japan) is a technology solutions company that offers a wide array of technology services, solutions and products. Fujitsu is going through a significant transformation, including bringing in new management, selling low-quality assets, reducing fixed costs and improving margins. In our view, Fujitsu is no longer the company it once was, and the new management team is driving significant value creation. Japan is behind most developed nations in digitizing its economy. As a result, we believe corporate Japan, as well as the government, will be required to increase IT investments over the next decade. This demand, combined with a massive shortage in IT engineering talent, means that Japanese system integrators should enjoy significant, long-term topline growth, which we believe will also lead to healthy margin expansion. In terms of Fujitsu’s core system integrators business, more than two-thirds of its sales are recurring, the business is capital light, and it generates what we view as healthy free cash flow. Fujitsu management also plans to return the majority of its free cash flow to shareholders through buybacks and dividends. The current buyback authorization is for YEN 150 billion, or 4.6% of shares outstanding, and we expect this to be ongoing—an especially attractive proposition given that the stock is yielding around a 6% dividend today. Finally, we like that the independent chairman has been a change agent for the company and improved corporate value. He also brought an activist investor onto the board, Ichigo, who owns about 7% of the company.


David Herro (Trades, Portfolio)'s Oakmark International Fund third-quarter 2022 commentary.

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