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Perspectives on building technology businesses and AcceleratorIndia from Cartezia

Fujitsu buys out Siemens stake in Joint Venture

Wednesday, November 5, 2008

Fujitsu of Japan is buying Siemens' 50% stake in their European IT joint venture. The takeover is the latest example of consolidation in the technology industry in response to intense competition and sluggish demand. Fujitsu will pay about €450m ($584m) for Siemens' stake in Fujitsu Siemens Computers, which supplies PCs, servers and other IT hardware in Europe.

IT is a core business for Fujitsu but Siemens would like to focus on industry, energy and health, accoridng to Kuniaki Nozoe, Fujitsu's president. The sale is in line with Siemens' declared strategy to dispose off non-core subsidiaries. The Joint Venture employs 6,200 workers in Germany and Fujitsu says there are no plans to reduce this number at present.

The deal has heightened speculation that Fujitsu will sell or announce a partner for one or more of its weaker electronics divisions. Fujitsu has targeted an operating margin of 5% by 2009, following a 3.8% margin for 2007. Margins at the joint venture, however, are only 1.1%, so unless it sells other low-margin operations that goal is likely to be hard to achieve.

FSC made a net profit of €68m on sales of €6.6bn in 2007. It has been profitable since 2000 but is expected to show a loss of €150m this year, mainly caused by poor sales of consumer PCs, as European economies slide into recession. FSC is expected to drop the Siemens name from the Company branding following completion of the acquisition.