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@: ci: PS/Ms Hewitt
Alastair Macdonald
PS/SOS Bill Macintyre Cll
David Sibbick CGBPS
From: John Reynolds CU
Dick Hopkins CIIS
Tracey Churchyard Katherine Hathaway Cllsa
Cilsa Gerry Moran IBB
“[51 BPR
3 November 1999
OF FUJITSU ON 4 NOVEMBER AT 1500
1 Attendees
For Fujitsu/ICL For DTI
Mr Akikusa, President Bill Macintyre, CII
George Hall, Director Corporate Affairs, ICL ple
Keith Todd, Chief Executive, ICL ple
(Interpreter)
2. Contents of the brief
Objective and steer
Points to make and defensive lines
Background on Fujitsu; ICL; Horizon; EMU; Envisioning Centre
Biographies on Mr Naoyuki Akikusa and Keith Todd
TRACEY CHURCHYARD
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@ continue to rebuild the relationship with Fujitsu and ICL subsequent to Horizon
Pathway.
Steer
This is one of a series of regular meetings with this important inward investor aimed at
ensuring ongoing dialogue and collaboration. Fujitsu are known to be concerned about the
UK’s stance on EMU and need to be reassured. They are also developing a significant e-
commerce capability which is expected to benefit the UK. It is important that we establish
what the impact of their plans will be. This meeting also provides an opportunity to
determine Fujitsu’s view of the implementation of Project Horizon.
Points to make
e Acknowledge that the Post Office has formally accepted ICL’s Horizon automation
system. Emphasise the importance to the commercial success of the Post Office attached
to ICL and the Post Office achieving roll-out of the system by the target date of March
2001. Ask for Mr Akikusa’s perspective on latest progress.
e Thank Fujitsu for their positive approach to the closure of Newton Aycliffe which has
contributed to the successful transfer of the site to Filtronic ple.
e Ask Fujitsu about their plans for developing their e-commerce capability and the impact
of this in the UK.
e Explain the UK Government’s policy on monetary union and stress the great importance
of economic stability to investment. (If pressed - stress that if the UK does not join,
inward investors will still be able to conduct business in Euro’s).
¢ Ifraised explain why you did not refer to the envisioning centre in your speech to the
CBI and stress how much you value this initiative.
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.
(1) Fujitsu Limited is the number one computer company in Japan and has 34
manufacturing sites throughout the world. It’s principal activities are the manufacture and
sales of computers and information processing platforms, telecommunications systems,
semiconductors and electronic devices, software and services. Turnover in 1998 saw
Fujitsu’s first full-year net loss since 1994, partially caused by big write-offs at the
company’s UK operations (namely the closure of Newton Aycliffe semiconductor plant
and the provision against the failure of ICL’s Horizon project) [1997: net profits were
Y5.5bn]. Fujitsu’s semiconductor manufacturing plant in Newton Aycliffe was closed in
1998 and has recently been sold to Filtronics ple. (Fujitsu played an important part in
securing employment for the majority of employees).
The Fujitsu Group has over 180,000 employees in over 100 countries world-wide, including
over 4,000 in the UK. In order to develop their e-commerce capabilities Fujitsu recently
unveiled a series of e-commerce deals in banking, securities and online shopping and, (in
June), announced plans to merge their European computer activities with Siemens
providing the necessary economies of scale to become one of the world leaders in the sector
and enabling Fujitsu to become one of Europe’s top five computer producers.
Key areas of Fujitsu’s UK business include Telecommunications Europe Ltd (FTEL) which
has its headquarters at Birmingham. Fujitsu have also located core telecomms R&D
capability in the UK since 1990 mainly working on transmission systems, wireless
communication and network management systems. Many of the network operators of the
UK are FTEL’s customers although their main customer is BT with whom they have been
collaborating on ADSL trials in West Croydon. As a result, Fujitsu has recently announced
the award of a £multi-million contract by BT and will be playing a leading role in BT’s
£5bn programme to transform standard copper telephone lines to carry new high speed
multi-media and internet services.
(2) ICL ple is Fujitsu’s software and services arm and has been wholly owned by Fujitsu
Limited since September 1998, although the two companies are run as separate entities to
protect share values. It is intended that when ICL floats in 2000, Fujitsu will still retain a
significant shareholding. ICL’s core activities are systems integration, out-sourcing,
technology and IT services and it has over 22,000 employees operating in over 40 countries;
the majority are in Europe, with around 16,000 in the UK.
ICL reported a loss in their March 1999 accounts of £118m compared to £27m in 1997.
This was largely caused by provision made for the Horizon project. The 1999 accounts
cover a 15 month period therefore the figures are not directly comparable.
Keith Todd has announced two new businesses; (1) a global partnership with Fujitsu to
exploit their groupware product, “TeamWARE” world-wide, and (2) an interactive services
business to help customers exploit the world of the Internet and other on-line services.
Major focuses for the future are electronic commerce and smart cards.
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In May 1998 ICL announced a major global alliance with Microsoft to develop new
@onsumer-focused” IT systems. ICL are also a “Microsoft Solution Provider Authorised
Support Centre” which allows the company to develop and market services built around
Microsoft products. This alliance has had a major impact on the company’s growth.
(3) Previous contacts with Government
You met Mr Akikusa, President of Fujitsu and Mr Naruto, Vice Chairman of Fujitsu and
Chairman of ICL on 13 June in Japan. You also met Keith Todd, Chief Executive, ICL in
April of this year.
Ms Hewitt was due to meet Keith Todd of ICL on 2 November, however due to diary
commitments this has been rearranged to take place on 8 November.
Ms Hewitt has also agreed to contribute a short statement on video when Keith Todd
announces the expansion of ICL’s E-commerce activity on 17 November. ICL intends to
recruit over 2,000 engineers of which at least 1,000 will be based in the UK.
(4) Horizon
You last met Mr Akikusa in Tokyo in June this year, not long after the Government’s
decision in May to drop the benefit payment card from the Horizon project. At this time,
Mr Akikusa described the problems over the project and the result of the final deal which
put them into the red, as unfortunate.
He explained that Fujitsu want to strengthen ICL in order to make it independent in due
course and in the meantime are overseeing ICL’s activities more closely. The revised
Horizon contract was finalised at the end of July and the Post Office accepted the system on
24 September.
(5) EMU
Fujitsu went public about their concerns over the UK’s delay in joining EMU in an FT
article dated 4 October. The UK has the policy of preparing and deciding when it is in the
UK’s interest to join, but given that we remain in the single market and the centre of Europe
there is no reason why this policy should affect investment in this country. Inward investors
are able to conduct business in Euros should they wish to irrespective of whether the UK
joins or not. The importance of investment, both domestic and overseas is recognised by
the Government and the views of inward investors will be taken into account when deciding
whether or not to recommend membership.
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© vision
Envisioning Centre
e
You were due to officially announce in your recent speech to the CBI collaboration with
ICL on a joint venture on establishment of the envisioning centre (called futurefocus@dti)
in 1 Victoria Street. The other private sector partners are SGI and Trimension. The
building of the centre will commence shortly with the aim of opening in April 2000. The
value of the private sector contribution will be about £1.5m over three years.
Despite the fact that the joint venture partners were proposing to issue press releases to
coincide with your speech to the CBI, you did not make any reference to it.
Biographi
(7) Naoyuki Akikusa
Mr Naoyuki Akikusa joined Fujitsu Limited in April 1961 after graduating with a Bachelor
of Arts in Political science and Economics from Waseda University.
He has held a variety of positions in Fujitsu Software and Software Business, Promotion
Groups, Large Scale Projects Groups, and Systems Engineering.
He was promoted to Board Director in June 1988 and became Senior Vice President in June
1991. He held the position of Executive Vice President in June 1992 and attained Group
President, Software and Service Business Promotion Group in 1996. He has held
responsibility for the ICL Business Group since 1997 and became President of Fujitsu
Limited in June last year.
(8) Keith Todd
Keith Todd joined the company in 1987 as Finance Director after a career in finance with
GEC/Marconi. He was appointed Chief Executive of ICL in 1995. He is a fellow of the
Chartered Institute of Management Accountants and of the Royal Society for the
Encouragement of Arts (RSA).