Fujitsu Buys Siemens Out Of FSC
Fujitsu Siemens (FSC) was founded in 1999 and incorporated in Holland (I remember providing the ‘industry perspective’ in between dancing, singing and corporate speeches at the launch event hosted by TV presenter Amanda Spoor). It was an interesting arrangement, with each parent vendor holding exactly 50% of the new venture. It would only have taken a 1-cent sale of shares either way for the company to become either Siemens or Fujitsu – but Fujitsu was more generous than that – reaching an agreement in November to purchase Siemens’s half for €450m. The transaction was completed on 1st April 2009. Changes so far have included Bernd Bischoff’s departure as CEO and his replacement by Kai Flore (the CFO), but the company appears to have decided to retain its old name – at least for the time being.
Perhaps if it knew what was coming next Fujitsu would not have been so generous, posting revenue declines of 19% and 22% respectively in its last two quarters of its financial year (ended March). For the year revenues were down by 12% at Y4,693b ($47.9b).
Fujitsu Is Offloading Its Hard Disk Drive Businesses
Offloading and outsourcing its businesses is now on the agenda, with Fujitsu taking a number of actions. In particular:
- It outsourced some of its semiconductor manufacturing to Taiwan Semiconductor Manufacturing Company (TSMC). It has said publicly that it has suffered from a big fall in demand for semiconductors.
- It is offloading its hard disk media business to SDK, which specialises in making aluminium and glass media.
- It is offloading the rest of its hard disk manufacturing operation to Toshiba for Y24B. It has admitted that this business is a big loss-maker for Fujitsu. In fact Toshiba has taken on Y5B of debt associated with the business, which has plants in the Philippines and Taiwan. It has around 7,000 employees (including about 800 in Japan).
However Fujitsu isn’t just engaged in cutting expenses as (in addition to Siemens half of Fujitsu Siemens) it has also announced other acquisitions. Such as:
- The KAZ Group and Supply Chain Consulting Pty in Australia.
- Comneon’s software development centre in Linz, Austria and in Langen, Germany.
Fujitsu is also undergoing restructuring in a number of places. In America for instance it has merged Fujitsu Consulting and Fujitsu Computer Systems Corporation to form a single Fujitsu Limited under the president and CEO Farhat Ali.
I think there are a number of issues contributing to Fujitsu’s currently problems. In particular…
Hard Disk Revenues Decline By 28% Worldwide in Q109
The global downturn in demand for IT products is partially responsible for the drop in sales in disk drives. It is certainly not the only vendor to be suffering. Being a market researcher I have added a view of the hard disk drive market in Figure 1. I’ve looked at the combined revenues of Fujitsu, Toshiba, Western Digital, Seagate and Hitachi from these product types. As with my forecast of the PC market – this is neither user spending nor the total revenues from the sector, but I think it’s a big enough sample to be interesting.
As with my PC forecast I believe the downturn will last some significant time, with positive growth returning only by Q210. In 2009 I believe that hard disk revenues will decline by 25% against 2008 levels.
Declines In Market Values Are Worse In Yen
There are a number of Japanese players active in the hard disk market. Because the Yen has declines strongly against the dollar, the market looked at in this currency has been worse than those suppliers doing business in $US like Seagate and Western Digital. I’ve shown the difference in growth in history and my forecast in Figure 2.
For the hard disk drive market instead of the 25% dollar decline in Q109, the decline in Yen has been 36%. For more in the differences of currency see my earlier analysis. The relative weakness of the Yen in recent months makes all market growth look worse for Japanese suppliers of course.
What About Sun Sparc Chips?
Fujitsu makes claims that its hard disk and other businesses have been better positioned because they play more in the server (than PC) area. Both SDK and Toshiba press statements claim that the addition of server components will enhance their offerings. However the current downturn is affecting both areas – even if the stalling of demand has been noticeable first in the consumer purchases of the PC market.
I’ve already analysed Oracle’s upcoming acquisition of Sun. It is interesting to speculate about the possibility that it will look to offload the Sparc chip. While Fujitsu might normally be considered a natural buyer – given that it has a joint development agreement and already manufactures Sparc chips – I would say it is highly unlikely in the present circumstances. Perhaps IBM…
Filed under: Fujitsu, Hard Disk Drive, Surviving The Downturn Tagged: | Disk Drive, downturn, Fujitsu, Fujitsu Siemens, HDD, Hitachi, IBM, it-forecast, it-market, KAZ Group, Martin Hingley, Oracle, SDK, Seagate, semiconductors, Siemens, Sun, Supply Chain Consulting, Taiwan Semiconductor Manufacturing Company (TSMC), Toshiba, Western Digital, Yen
