Ambitious Fujitsu aims high

Don't accuse Fujitsu of lacking ambition. The Japanese computer giant aims to become one of the world's top three manufacturers of personal computers and hard drives. Both are businesses which the company began pursuing outside Japan only a few years ago. Fujitsu also is setting a target of more than doubling the revenue of its recently acquired mainframe computing subsidiary, Amdahl, to US$4 billion by 2000 from $1.68 billion recorded in 1996. In Asia, not including Japan, Amdahl aims to increase sales of mainframe and Unix hardware by $30 million for the next three years. That would be about an additional $6 million this year, with 30 per cent annual growth afterwards, said John Wholley, Amdahl general manager for Asia. With revenues of $36.3 billion in fiscal 1997, Fujitsu already is the third-largest computer company in the world, behind IBM and Hewlett-Packard. It is a leading maker of telecommunications equipment and semiconductor chips. But like its chief rival, NEC, Fujitsu is not yet a truly global player, having made only 29.8 per cent of its revenues outside Japan, according to US-based Annex Research. Many of Fujitsu's 440 subsidiaries, including systems integrator ICL and Amdahl, are better known outside Japan than Fujitsu itself. The company also is struggling to please shareholders by reporting hefty profits. For its year ending March 31, the company already has announced that profits would be 78 per cent below original forecasts. Fujitsu predicts that net profit will be only $81 million on revenues of nearly $42 billion, compared with $372.6 million in profits it predicted earlier. Low prices for dynamic Ram memory chips were blamed, as well as weaker than predicted sales of PCs. Fujitsu's then president Tadashi Sekizawa stepped down in February as a result. At such skinny profit margins, Fujitsu was starting to look more like a Japanese bank than a top computer company, Bob Djurdjevic, analyst with Annex Research, wrote last year. 'Their margins are very low,' said Miho Kinnas, analyst for technology consultancy Dataquest Hong Kong. The company is reining in subsidiaries, touting the group brand name, and looking at two new engines for increasing revenues and profits. As of April 1, the company has renamed ICL, the British company it bought in 1990, as Fujitsu Ltd in Asia. Amdahl, a business partner since the 1970s that was bought out by Fujitsu last September for $850 million, is being integrated into the Fujitsu Computer Group, though it will retain its own name. Most importantly, Fujitsu wants to focus on delivering services and software to corporate customers as part of an overall package. A customer did not just need hardware, but needed solutions, Kazuto Kojima, president of Fujitsu's International Computer Business Group, said. Among the IT giants focused on corporate customers, services is the latest trend. PC computing giant Compaq bought Digital Equipment Corp in January primarily for Digital's formidable $6 billion services business, which it hopes will provide increased corporate PC sales. Computer Associates' aborted takeover of Computer Sciences Corp was driven by a need for skilled services staff. Companies such as IBM and Oracle are their role models. IBM made $78.5 billion last year, with more than half coming from the high-margin areas of software and services. Oracle, best known for its database software, already makes more than half of its revenue from supporting products such as Oracle8. Fujitsu's computer group is its largest division, comprising about 60 per cent of the company's turnover. About 40 per cent of that division's revenue comes from services. 'The customer has many requirements and he wants one supplier,' said Yau Kan, Fujitsu Hong Kong's director. The Fujitsu computer division employs 215 people in Hong Kong and another 85 in the mainland. 'We are looking to expand 5 to 10 per cent this year,' said Mr Kan. Not only are services highly profitable, they should help Amdahl to win mainframe contracts in the region, Mr Wholley says. 'Mainframe computers are a commodity market,' he said. Vendors needed to distinguish themselves on more than price and performance. Fujitsu expects more than half of Amdahl's $4 billion in revenue in 2000 to come from services. Fujitsu's targets in other parts of its computer business also are immodest. One of the top makers of removable magneto-optical drives, Fujitsu wants to become the third-largest vendor in the much larger hard-drive market by 2000. Fujitsu's hard-drive sales grew 85 per cent last year to $2.4 billion, according to US consultancy, Trend Focus. Already ranked fifth among hard-drive makers, Fujitsu was blamed by rivals such as Quantum and Seagate Technology for starting a price war which is causing them to lose money. Meanwhile, Fujitsu was coming near the stage of making profits, Mr Kojima said. However, the weak global personal computer market hurt the company's progress towards becoming a top-three PC maker by 2000. It expects final tallies to show that it shipped 3.2 million PCs in the past fiscal year, up from 2.8 million units the previous year, when it was the eighth-largest PC maker in the world. Japanese shipments still make up nearly two-thirds of that total, with most of the rest in the US and Europe. Fujitsu expects to sell only 50,000 PCs in Asia outside Japan. Fujitsu's new strategies may have least impact in Hong Kong and China. Mr Kan said that because Amdahl's IBM-compatible mainframes - the company calls them global servers - required specialised knowledge, many staff would not service or sell them at first, although Fujitsu planned to take over all Amdahl distribution. In addition, Fujitsu would keep a separate Amdahl identity because customers knew the high performance, efficiency and reliability, Mr Kojima said. 'Our strategy is to get the whole group stronger by utilising the capability of each individual group.'