Mixed responses to Siemens-Fujitsu merger

Siemens and Fujitsu are to merge their European computer operations in an attempt to leapfrog to a top three position worldwide alongside Compaq and IBM.

The new company -- Fujitsu Siemens Computers -- will become operational in October, with shares divided 50/50 between the two firms. The newly created computer company will develop, manufacture and sell the whole range of computer devices from mobile computers, PCs, servers to mainframes.

Siemens spokesman Stefan Denig told ZDNet that the merger was intended to boost penetration in both the corporate and consumer markets, "Siemens is strong in the corporate sphere and Fujitsu in the consumer so the deal will be complementary," he said. He claimed the merger was about leverage. "The PC is a significant market and unless you are a certain size you won't be able to compete. Siemens is too small and, in order to make progress, has been looking for a partner for some time," he added.

Analysts agree the merger will secure Siemens a major place in Europe, especially in Germay where Siemens is already number one. In Europe as a whole, both Fujitsu and Siemens are in the bottom half of the top ten for computer sales across Europe. "Together they have the capacity to become a major European force," according to IDC analyst Andy Brown, "and they could well become a strong force against the Dells, IBMs and Compaqs". He also predicted that Fujitsu's strong position in the Asian and US markets will allow Siemens to gain a foothold in the worldwide market.

The merger does not include the two companies' chip fabrication divisons, at least for the present. For Fujitsu the merger will consolidate its place as a computer company. The shedding of its semi-conductor operations will follow Brown predicts. "Fujitsu has its fingers in a lot of pies and is now looking to consolidate operations. It is inevitable it will get rid of its chip business and is stamping itself as a PC manufacturer," he said.

Not everyone is convinced the marriage between the German and Japanese giants will be a happy one. Gartner group analyst Pete Day is surprised Fujitsu would choose to link up with Siemens. "Fujitsu has been doing very well in France and Germany and has been making inroads in the UK market with inventive marketing in supermarkets and garages. I'm not sure they need help," he said. He believes the merger may have more to do with the business market than the consumer one. Both Fujitsu and Siemens have around 1 percent market share in the UK consumer market.

Dataquest analyst Ed Thompson is sceptical it will be successful. "I can't think of a single example of a successful joint venture in hardware," he said. "In hardware it tends to be either acquire or be acquired. Someone has got to be in charge." He remains unimpressed with the decision -- unless the companies decide to spin-off into a separate entity. "Then things could get interesting," he said.

Experts agree that job losses will inevitable follow the merger. "There may well be cutbacks in Siemens desktop operations," IDC's Brown predicts. A Siemens spokesman claimed losses would be minimal. "There will be complete integration and little overlapping and we do not expect big losses," he said.

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