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Business deals

Fujitsu to sell mobile phone business to Polaris Capital

The deal, valued at over $360m, allows the company to focus on IT services

Fujitsu's Arrows brand is expected to continue under Polaris.

TOKYO -- Fujitsu has ended its search for a buyer for its mobile phone business, reaching a basic agreement with Tokyo-based investment fund Polaris Capital Group.

The Japanese information technology company will sell a majority stake in wholly owned subsidiary Fujitsu Connected Technologies to Polaris for 40 billion yen to 50 billion yen ($367 million to $459 million). An official agreement is expected as early as this month.

Fujitsu will exit an increasingly competitive field and focus on its core IT services. It derives about 70% of its sales from such operations as system development and server sales.

Fujitsu Connected is expected to be removed from Fujitsu's consolidated balance sheet and become an equity-method affiliate.

Keeping the mobile unit's staff and factories intact was one of the conditions of the deal and thus will likely remain so. Fujitsu's mainstay Arrows brand of mobile phones is expected to continue under Polaris.

Fujitsu ranked fourth in Japan's mobile phone market by shipments in the April-September period, trailing Apple, Sharp and Kyocera, according to the Tokyo-based MM Research Institute. Osaka-based Sharp is owned by Taiwanese iPhone manufacturer Hon Hai Precision Industry, better known as Foxconn.

Fujitsu, which makes smartphones at a Hyogo Prefecture factory, touted its made-in-Japan credentials as a selling point. But with hardware becoming increasingly commoditized, overseas manufacturers have advanced rapidly. Fujitsu's sale volume for fiscal 2017 is projected at 3.1 million units, down by half from peak levels.

Fujitsu's mobile phone business had long brought in stable earnings, counting telecommunications giant NTT Docomo among its key clients. But Fujitsu spun off the business, which it concluded has scant prospects for future growth, into a separate company in February 2016 and began seeking partnerships with other companies.

Annual sales from the mobile business are seen at about 150 billion yen, and operating profit at about 10 billion yen. Hereafter, the mobile unit is expected to use technologies cultivated through phone development -- related to miniaturization, communications and sensors, for instance -- to bolster other operations such as corporate telecom services in the field of the "internet of things."

Fujitsu has been hurrying to cut loose of noncore businesses. In November, it agreed with China's Lenovo Group to merge their PC operations.

Fujitsu's effective retreat leaves Japan with few domestic makers of handsets, such as Kyocera, Sharp and Sony. The business environment is getting worse for them as competition heats up with Apple and Samsung Electronics as well as a host of low-cost players from China.

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