The worse-than-expected figures erased earlier gains on the Tokyo Stock Exchange as investors fretted over the health of the IT sector, analysts said.

Cost-cutting efforts narrowed Fujitsu Ltd.'s net loss in the three months to June to 39.8 billion yen (333.7 million dollars) from 56.4 billion yen lost the previous year.

But its recurring loss for the period grew to 55.1 billion yen versus a loss of 51.2 billion, while revenue dropped 4.5 percent to 938.7 billion yen.

"Lower sales of platforms products and other factors contributed to the overall decline in sales," Fujitsu said in a statement.

A major restructuring drive to reduce costs generated between 16 and 20 billion yen, said chief financial officer Masanichi Ogura, but this was offset by sluggish sales.

Revenue from software and services in the US decreased, "reflecting the overall weakness in IT spending," the firm said. Ogura, however, hinted Fujitsu expected the information technology environment to improve going forwards.

"We cannot say IT investment is on a complete recovery path but we are seeing some recovery signs in our talks with individual customers," he told a news conference.

Mobile phone sales in April-June were hurt by a delay in shipments of handsets equipped with cameras, which will now be moved in July.

Fujitsu also suffered unexpected costs of 4.7 billion yen after a major earthquake measuring 7.0 on the Richter scale rocked Miyagi prefecture, about 300 kilometres (180 miles) north of Tokyo, on May 27, forcing the firm to halt semiconductor production temporarily at a plant there.

At the same time, a decision to sell part of its equity stake in Fanuc Ltd., a leading maker of industrial robots, earned Fujitsu 26.9 billion yen.

For the full year to March, the firm left its forecasts unchanged as it expected a rise in orders for personal computers, but it retained a cautious tone due to fears of intensified price competition.

Fujitsu projects to return to the black with a 30 billion yen net profit, a 60 billion yen recurring profit and revenue of 4.8 trillion yen.

News of Fujitsu's earnings, which came out half an hour before the stock market closed, sent the headline Nikkei-225 average down 5.60 points or 0.06 percent to 9,834.31, after it earlier traded in positive territory.

It "rattled the market near the close, prompting active selling among hi-techs," said Koichi Seki, market analyst at Chuo Securities.

Fujitsu lost 21 yen, or 3.7 percent to 547.

SPACE.WIRE