Commoditization drives Fujitsu to spin off PC, phone businesses into separate companies

Fujitsu Ltd. said Thursday that it plans to spin off its PC and phone businesses this coming February, evidence that both markets are simply becoming too cutthroat to be palatable to the parent company.

Beginning Feb. 1, Fujitsu said that it would spin off its PC business into one company (known, for now, as Company Split A) and its phone business into another (known as Company Split B). 

Why this matters: Fujitsu said it simply has become too difficult to carve out its own niche within both markets—and without something unique to offer, its profit margins have presumably deteriorated. Those are the same forces affecting other PC and phone makers; Hewlett-Packard, for example, completed its own spinoff of its PC business this past November. Like HP, Fujitsu has apparently had enough.

Fujitsu's explanation

“With the ongoing commoditization of ubiquitous products, mainly of PCs and smart phones, it has become increasingly difficult to achieve differentiation, and competition with emerging global vendors has intensified,” the company said in a statement.

Fujitsu said it had instituted each of the “company splits” to “clarify management accountability, to enable swift management decisions, and to pursue comprehensive efficiency by creating independent companies for the PC business and the mobile phones business, respectively”. It also wants to establish an integrated system covering all aspects of research, development, design, manufacturing, sales, planning, and after-sales services, it said.

Neither Fujitsu’s phone nor its PC business had been able to climb into the top five companies in either market, according to market researchers. For its fiscal year ending in March, Fujitsu’s PC business recorded 303 billion yen ($2.5 billion) in revenue and its phone business had recorded 157.1 billion yen ($1.3 billion).  Fujisu’s said that its PC business also owned 261 billion yen ($2.2 billion) in assets and its phone business owned 119 billion yen ($990 million) in assets.

Analyst firm IDC said recently that it expects worldwide PC shipments to fall 10.0 percent in the fourth quarter of 2015, for an overall decline in the worldwide PC market of 10.3 percent.

"With inventory issues still in effect and with demand expected to remain soft in the next quarter, 2015 is shaping up to be an abysmal year for the global PC market,"  Linn Huang, IDC's research director of devices and displays, said in a statement. "2016 will likely bring further contractions, but we expect some stabilization shortly thereafter."

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