WSJ Fuhitsu Enters Handheld Market with MSFT C/E O/S:
Nov 21,2000
Fujitsu Siemens Plots Turnaround,
Will Enter Hot Handheld Market
By David Pringle
Staff Reporter of The Wall Street Journal
Racked by losses in the cutthroat European computing market, Fujitsu Siemens Computers is gambling on a change of direction.
Although it currently earns most of its 6 billion euros in annual revenue selling desktop personal computers, the year-old joint venture between Siemens AG of Germany and Fujitsu Ltd. of Japan now plans to focus on selling servers and mobile computers to businesses. It also intends to enter the increasingly crowded market for handheld computers.
In Europe, demand for servers, laptops and personal organizers is growing rapidly, but arch-rival Compaq Computer Corp. of the U.S. is already targeting these same markets aggressively and Fujitsu Siemens has a lot of catching up to do. Fujitsu Siemens ranks No. 2 in the wider European computer market behind Compaq.
"We have lost market share in the first year and that was unsatisfactory," Paul Stodden, the company's chief executive, said in an interview. In the third quarter of 2000, Fujitsu Siemens' share of the European computer market was 10.1% compared with 11.9% for its constituent parts the previous year, according to U.S.-based research firm Dataquest.
In announcing its results for the third quarter of 2000 earlier this month, Siemens said the weak performance of its information and communication mobile unit was partly due to "increased losses" at Fujitsu Siemens.
Mr. Stodden, who joined the company in April, has been under increasing pressure to articulate his vision for the joint venture, which was racked by infighting in its first six months. The original co-presidents were unable to agree on whether the joint venture should target the consumer or business markets.
The new strategy suggests Mr. Stodden wants to focus on the business sector, but he said the company has no plans to withdraw from the low-margin consumer market for desktop PCs, which Fujitsu Siemens leads in Europe.
Under the new strategy, the joint-venture plans to invest 750 million euros ($636.5 million) over three years on developing and marketing Internet servers, which can handle large numbers of simultaneous visitors to Web sites, portable computers and back-end wireless technology. Moreover, 80% of the company's 1,625 research and development staff will work on products for these markets.
But Steve Brazier, an analyst with U.K. research firm canalys.com, estimates that Fujitsu Siemens generates three-quarters of its revenue selling desktop PCs, and he said that the new focus on notebooks and servers amounts to a high-risk strategy.
Indeed, Fujitsu Siemens lags behind rivals in these fast-growing markets. Thomas Reuner, an analyst with Dataquest, said the company's performance in the Internet server market is "patchy" outside its stronghold in Germany. "Compaq has already laid claim to this ground -- it is a little bit 'me too,' " added Jeremy Davies, senior partner at U.K. research firm Context.
Fujitsu Siemens ranks only sixth in the European market for notebooks, according to Dataquest. "Fujitsu has a pretty good pedigree in the notebook market, but it has been underexploited ," said Mr. Davies.
The personal-organizer market is dominated by Palm Inc. of Santa Clara, California, but is also attracting the attention of consumer-electronics giants such as Sony Corp. and Nokia Corp. Mr. Stodden said Fujitsu Siemens will use Microsoft Corp.'s Pocket PC operating system in its organizers, but he declined to say when the first product will be available.
Rival computer makers Compaq and Hewlett-Packard Co. already have pocket PC-based organizers selling in Europe. Compaq, in particular, is ramping up production rapidly, having underestimated demand for its iPaq organizer.
Although it wouldn't reveal sales figures, Compaq said recently it expects to sell four times as many iPaq organizers in Europe in the fourth quarter of 2000 as it did in the third. Francois Bornibus, vice president of commercial PCs and e-commerce, said Compaq is targeting the fledgling corporate market for handheld PCs. One unnamed European bank has ordered 200,000 iPaqs to give to customers as part of a service package to be unveiled next year, he added.
Compaq also plans to open a "wireless competence center" in Stockholm on Nov. 27 to showcase its mobile computing devices and servers.
By comparison, Fujitsu Siemens has been slow to enter the handheld computer market, partly because parent company Siemens sells organizers to complement its range of mobile phones. But the two companies made a joint announcement Monday that they will work together on the development, manufacturing and marketing of handheld computers.
The link-up with Siemens, a major player in the mobile-phone market, may give Fujitsu Siemens an edge over U.S. computer companies that are relatively new to the European wireless market. But some analysts question whether Fujitsu Siemens has the necessary design skills to compete with consumer-electronics specialists.
"With Sony in this market," said Mr. Brazier at canalys.com, "they are going to have to come up with something pretty desirable." |
