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Siemens, Fujitsu Explore Creation
Of a New European PC Maker
By MATTHEW ROSE
Staff Reporter of THE WALL STREET JOURNAL
Siemens AG and Fujitsu Ltd. of Japan are in discussions to create a European joint venture that would rank as the Continent's second-largest computer maker, according to people familiar with the talks.
The negotiations are still "sketchy," said a person familiar with the discussions, and final details are being worked out. If a deal is reached, it should be announced before the end of the month, this person said.
Spokespeople for Siemens and Fujitsu declined to comment.
A joint venture between the two companies would create one of Europe's largest personal-computer vendors. Based on first-quarter data from Context, a London-based market-research firm, the combined company would have a market share of 12.6%, trailing only Compaq Computer Corp.'s 17.5%.
For Munich-based Siemens, one of Europe's largest industrial conglomerates, the negotiations represent the latest in a string of attempts to grapple with its computer-market strategy. After years of botched restructuring efforts, Siemens last year agreed to sell its manufacturing facilities and PC brand name to Acer Inc. of Taiwan, only to see the agreement collapse as the Asian economic crisis hurt Acer's finances.
Although Siemens has seen PC sales grow strongly since it brought manufacturing back under the company's control, many analysts said the PC unit is unprofitable. The company doesn't break out profits for its PC business.
The deal, which was first reported in the German weekly newspaper Wirtschafts Woche, would be a coup for Fujitsu's European chief, Winfried Hoffmann. Mr. Hoffmann has shaken up the local PC industry by offering computers less expensively than rivals through unusual outlets such as supermarkets. In the first quarter, unit sales rose 47% from a year earlier, faster than the growth posted by Dell Computer Corp., according to Context.
Some analysts suspect Fujitsu of cutting prices below cost and riding the wave of strong consumer demand, a charge Mr. Hoffmann rejects. Instead, he says Fujitsu is able to maintain attractive margins on its manufacturing business because of a lean production system.
European PC companies have been struggling for ways to get bigger in order to purchase components less expensively. Amid plunging PC prices, even larger, mostly U.S. competitors such as Dell and Compaq have struggled to maintain margins. In the last 18 months, most of Europe's smaller national competitors, such as Tulip Computers NV and Olivetti Computers Worldwide, have run into financial difficulties. Tulip filed for bankruptcy-court protection last year.
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