Fujitsu Apologizes for Cut-Throat Bids

The president of Japanese computer giant Fujitsu apologized today for his company’s cut-throat bidding on software contracts and acknowledged the behavior could hurt Japan’s position in trade talks with the United States.

“I apologize for causing problems to those involved,” Takuma Yamamoto told a news conference.

“I don’t know whether it will be a cause of further Japan-U.S. friction,” he said. “But we put the Japanese government at a disadvantage in negotiating.”

Fujitsu said Tuesday it was withdrawing its 1-yen (less than 1-cent) bid made last week for a contract to write software for a computerized waterworks mapping system in Hiroshima.

Yamamoto said an internal investigation found Fujitsu had made three similar rock-bottom bids, including a 1-yen bid last month to design a computer system for a prefectural library. That bid has also been withdrawn.

An official at another large computer maker said big discounts are standard practice when breaking into new fields.

Fujitsu is far from the only Japanese company to make unprofitably low bids in the hope of getting contracts that will not only win them experience in developing fields but also pave the way for lucrative hardware sales, analysts said.

Rival NEC Corp. matched Fujitsu’s 1-yen bids in at least two cases, an NEC spokeswoman said.

“This is not an unusual practice,” said Tom Murtha, analyst at Baring Securities. “They don’t see it as dumping (selling below cost); they look at it as an investment in their future business.”

But the 1-yen bids have not only taken the practice to an extreme, they have also provided American critics of Japanese business practices with fresh ammunition, analysts said.