Consolidation and yet more consolidation. Japanese firm Fujitsu is apparently considering merging its computer business with Chinese firm Lenovo. The company, which has seen its PC business struggle for long, now wants to prop it up by a merger with the Chinese smartphone and PC maker.
In case you are struggling to remember where you heard the name Fujitsu before, it is a Japanese multinational information technology equipment and services company, with its HQ in Tokyo. The company was once a major player in the Personal Computing space however, with the advent of competitors from both the east and the west, Fujitsu’s PC business has been struggling of late.
We reported rumors of the merger weeks ago, and it appears as if the talks between the companies are finally getting somewhere. A merger would really solve a lot of Fujitsu’s issues and let it focus on other niches. The company tried doing something similar with Toshiba and Vaio, however, none of the deals fell through.
According to Fujitsu, it is in the process of merger talks with Lenovo. The talks center around,
exploring a strategic cooperation in the realm of research, development, design and manufacturing of personal computers for the global market.
The companies are apparently also bringing in the government-backed Development Bank of Japan for financial and strategic assistance.
The deal holds a lot of importance from the Japanese computer manufacturer and IT service provider’s perspective. The company has been straggling on the PC front and would like to focus its attention on the much more profitable IT services it provides. In 2015, Fujitsu’s IT operations were recognized as the world’s fourth-largest IT services provider measured by revenue.
From Lenovo’s perspective, the deal would increase its footprint in PC while also increasing its purchasing power. It would not be the first acquisition or collaboration of the sort for Lenovo, which bought the PC division of IBM in 2005 and went on to create a PC joint venture with NEC Corp in 2011.
Commenting on the possibility of a merger, Fujitsu president Tatsuya Tanaka said,
Our priority option is to team up with Lenovo Group which has global PC operations.
The deal would almost certainly also result in layoffs, and Fujitsu trims down its 1,50,000+ workforce. The company is already in middle of a restructuring that could see almost 3,000 employees laid off from their jobs. However, the company’s cost cutting efforts are also paying off. Net profit for the six months to September equated up to around $113 million — a significant reversal from a net loss of $151 million during the same period a year ago.
Despite a 7 percent loss in sale, Fujitsu’s operating profit reached $246 million, up from an operating loss of $118 million a year ago. The company also expects to clock somewhere around $800 million in net profits this year.
Following the news of Fujitsu considering a merger of its PC operations with Lenovo, the Japanese firm’s shares rose by 7.8% to close at 599.3 yen.