Fujitsu Spinning Out PC, Smartphone Businesses

Company officials say the ongoing commoditization in both markets makes it difficult for Fujitsu to differentiate itself from its competitors.

PC business

Fujitsu is spinning out its PC and smartphone businesses into separate companies as officials continue to look for ways to manage product lines that are becoming increasingly commoditized.

Fujitsu officials announced the decision last week, saying that the new companies—Fujitsu Client Computing Ltd. (PCs) and Fujitsu Connected Technologies Ltd. (smartphones)—will begin operations Feb. 1, 2016. It's only the latest move by a major system vendor to navigate its way through a PC market that has seen declining shipments worldwide since late 2011, and an indication that the smartphone space also could be heading into difficult times.

In a statement, Fujitsu officials noted the challenges in both the PC and smartphone markets.

"With the ongoing commoditization of ubiquitous products, mainly of PCs and smartphones, it has become increasingly difficult to achieve differentiation, and competition with emerging global vendors has intensified," the officials said, adding that Fujitsu is spinning out the units "in order 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, and to establish an integrated system covering all aspects of research, development, design, manufacturing, sales, planning, and after-sales services."

Other vendors over the past couple of years have made similar moves. Hewlett-Packard Nov. 1 split into two companies, creating a new PC business called HP Inc. and Hewlett Packard Enterprise, which sells enterprise IT solutions and services.

As part of a larger restructuring effort, Sony in 2014 spun out its Vaio PC business to focus more on its mobile devices. Toshiba officials later in the year announced the company was shifting the focus of its PC business from consumers to commercial systems. NEC in 2011 spun out its PC business in 2011 to form a joint venture with Lenovo, which is the world's top PC maker.

Fujitsu's decision could be related to reports earlier this month that it and Toshiba were considering merging their struggling PC businesses in hopes of creating a stronger vendor to compete in the shrinking global market and ridding themselves of struggling businesses. In addition, some news reports said Vaio also was involved in the negotiations, and that a merged PC company would keep the Vaio name. Vaio CEO Yoshimi Ota told the Wall Street Journal earlier this month that his company would consider such a deal, though he hadn't received proposals from any other companies.

Toshiba CEO Masashi Muromachi said he expected to announce what the company plans to do with its PC business by the end of 2015 and that its options included an agreement with Fujitsu and Vaio. Company officials last week announced that Toshiba would lose as much as $4.5 billion this year—its largest loss ever—and that it was cutting another 7,800 jobs, with most coming from the consumer electronics business. Toshiba also is still struggling with the fallout from a $1.2 billion accounting scandal.

The struggling PC market—which has taken a hit with the rising popularity of such devices as smartphones and tablets—has caused problems for a lot of PC and component makers, such as Intel and Advanced Micro Devices. Industry observers are hoping that the combination of Microsoft's Windows 10 operating system and PCs powered by Intel's new "Skylake" 10-nanometer processors will drive adoption of new systems by consumers and businesses users. In addition, Intel, Lenovo, HP and Dell partnered on a multimillion-dollar ad campaign to highlight the capabilities of the latest systems on the market.

However, IDC analysts in August said that any rebound in the market from Windows 10 and Skylake most likely will not be felt until 2017, which would make 2016 another difficult year. The analysts said worldwide PC shipments will fall 10 percent in the fourth quarter and 10.3 percent for all of 2015.

In the smartphone space, Gartner analysts earlier this year said that demand for affordable devices in emerging markets was the key driver behind a 15.5 percent year-over-year growth in sales during the third quarter. Sales in emerging markets increased 18.4 percent, while jumping 8.2 percent in mature markets.