Fujitsu, Lenovo in talks for PC business merger

Japan’s Fujitsu said yesterday it was in talks to merge its struggling PC business with Chinese computer giant Lenovo, sending its shares soaring as the company also announced a recovery in profits.
The talks come as Japanese personal computer makers work to scale back their businesses as consumers shift to smartphones and tablets.
Tokyo-based Fujitsu said it and Lenovo, the world’s largest PC maker, are “exploring a strategic cooperation in the realm of research, development, design and manufacturing of personal computers for the global market”.
The two firms, which are yet to reach an agreement, are also talking with government-backed Development Bank of Japan for financial and strategic support.
The market is rife with speculation that the two firms may merge their PC operations, with Lenovo taking the majority stake in the new venture.
That should free up Fujitsu to pour more resources into its profitable IT services operations, while also pushing ahead with a sweeping restructuring programme that will see 3,200 job cuts.
Fujitsu president Tatsuya Tanaka told a press conference that his firm wants to improve the competitiveness of its PC business.
“Our priority option is to team up with Lenovo Group which has global PC operations,” he said, according to public broadcaster NHK’s website.
Investors welcomed the news, as Fujitsu shares rose by 7.8% to close at ¥599.3. The company had been in talks with Toshiba and Vaio to merge their once high-flying personal computer businesses, but those negotiations failed to result in a deal.
Once-mighty Japanese firms have struggled to reorganise in the face of stiff competition from lower-cost rivals overseas, including in China and South Korea. Earlier this year, Taiwan’s Hon Hai, better known as Foxconn, took over struggling Japanese electronics maker Sharp after it faced huge losses and mounting debts.
In a separate announcement, Fujitsu said its net profit for the six months to September came to ¥11.8bn ($113mn).
The recovery marks a reversal from a net loss of ¥15.9bn during the same period last year, thanks to cost-cutting efforts particularly in the PC and mobile phone operations.
Operating profit stood at ¥25.9bn, up from an operating loss of ¥12.4bn the year before, while sales fell 7% to ¥2.08tn.Fujitsu also slightly revised down its annual sales forecast to ¥4.5tn, ¥100bn lower than an earlier forecast due to revised exchange rate assumptions, but kept annual net profit projection at ¥85bn.