Separating the telephone division: the founding of Fuji Tsushinki (1935)

How to read a decision to divide the capital

Money was as tight as ever — that is how Wada Tsunesuke described the company just after it reached its first dividend. The more orders grew from being designated a supplier to the Ministry of Communications, the more new equipment the telephone works required, and paying for that from the same purse as heavy-electrical capital spending was untenable. Standing up ¥3 million of separate capital outside the company looks like a form chosen under a financing constraint. It reads not as a decision to let a business go, but as a decision to give a growing business a purse of its own.

That the separation was right can be said only because we know the spun-off side became Fujitsu. At the time, telecoms was a business leaning on a single government customer, and putting it outside meant loading the swings of that demand onto a small new company. The outstanding question of NEC’s patent rights had not been settled either. Even after the capital was divided, the presidency was held concurrently by a Fuji Electric director, and through the war Wada oversaw both companies. That dividing the capital did not mean dividing the management is a point to be discounted in reading this.