Fujitsu Siemens: PC boom days are over

Adrian von Hammerstein, head of Europe's largest PC maker, says the PC industry is maturing and will not return to its high-growth days anytime soon. However, there is a silver lining
Written by Matthew Broersma, Contributor

The glory days of growth in the PC industry are gone, according to Fujitsu Siemens Computers chief executive Adrian von Hammerstein, who said his company is managing to beat the market only through steep cost-cutting and a tightly focused product line.

The company, the largest European-based PC maker, has completed a complex restructuring process following its creation out of the merger of Siemens' and Fujitsu's PC units, and is now headed toward profitability, said von Hammerstein, speaking at a recent meeting with journalists and analysts in London.

Fujitsu Siemens delivered a profit before tax of 4m euros (£2.8m) for its financial year from April 2002 to March 2003, with nearly flat revenues of 5.3bn euros for the year. It achieved an operating profit of 56m euros for the year, an improvement of 26m euros over the previous year.

Fujitsu Siemens' market share grew in France, Germany and the UK, despite a declining market size in all three countries, von Hammerstein said.

Von Hammerstein said the company's improving position is due to its focus on the few growing segments of the PC market, including mobile devices and high-end enterprise hardware, and its success in cutting administration costs through consolidation of legacy systems.

However, he is far from optimistic about the direction the market is taking. "We expect market growth to continue below five percent for the forseeable future. That means moving from a young, high-growth industry to a mature industry. We're not planning to see a second-half upturn this calendar year. We're planning on a very guarded basis."

Buyers have continued to show real interest only in a few specialised areas, forsaking the desktop PCs that were once the industry's bread and butter, von Hammerstein said. Portable devices such as laptops and PDAs have been doing relatively well, because they can deliver the benefits of mobile working, while companies have been buying into large servers in order to consolidate older systems and cut costs, he added.

Businesses are growing increasingly interested in Linux servers, but von Hammerstein said it was unlikely Linux would make Unix obsolete for high-end servers any time soon. "There is no question that the sweet spot with Linux will remain on the Intel platform. Anybody pretending otherwise is kidding you."

While Linux is already running on mainframes and supercomputer clusters, he said most software development for Linux is focused on servers that handle less demanding applications such as Web or email serving. "This is all about ISV (independent software vendor) attractiveness, and they're focusing on the Intel space, not RISC platforms." RISC (reduced instruction set computing) chips such as Sun's UltraSparc are used in high-end servers typically running the Unix operating system.

Fujitsu Siemens has been increasing its involvement with Linux, recently forming deals with leading Linux providers Red Hat and SuSE Linux that will increase the companies' software in Fujitsu Siemens products. Von Hammerstein said he is unworried by ongoing legal threats by SCO Group, which is alleging that companies that use Linux could be leaving themselves open to legal action.

He said it would be difficult for SCO to prove that any overlap between the source code of Unix and Linux was the result of illegal copying. "You have to remember that Berkeley Unix has been used as a teaching tool in California universities for many years. Everybody who went to school there is contaminated. They worked on the source code, they built extensions, they looked at it. I don't really see how this legal challenge can go anywhere."

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