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Wednesday, September 3, 2008

Siemens Set to Pull Plug On Venture With Fujitsu

In a move that could set the stage for the sale or dismantling of a leading European maker of personal computers, Siemens AG has informed Fujitsu Ltd. that it wants out of their nine-year-old joint venture, people familiar with the matter say.

Fujitsu has a right of first refusal to buy Siemens's 50% stake in Fujitsu Siemens Computers, though it is unclear whether the Japanese technology company is interested in acquiring Siemens's half. Fujitsu President Kuniaki Nozoe said at a news conference Tuesday that mobile phones are a more promising way to boost sales overseas than PCs, raising doubt about the company's commitment to the venture.

FSC, as the joint venture is known, had €6.6 billion ($10.29 billion) in sales in its latest fiscal year. However, it has failed to live up to expectations amid fierce competition from rivals such as Dell Inc. and Hewlett-Packard Co. Siemens Chief Executive Peter Löscher, who joined Siemens last year as part of a management shake-up in the wake of a bribery scandal, hasn't been happy with the performance of the venture.

If Fujitsu didn't want Siemens's stake, other global PC makers could try to buy out both parties. The PC division of International Business Machines Corp. was acquired by Lenovo Group Ltd. in 2005, part of a wave of consolidation in the industry brought on by cutthroat pricing and shrinking margins.

One banker estimated the Fujitsu Siemens venture could be valued at between €2 billion and €3 billion, or between $3.12 billion and $4.65 billion.

A spokesman for Siemens, Europe's largest engineering company by revenue, declined to comment. Representatives for Fujitsu and the PC joint venture couldn't be reached.

Since 2005, Munich-based Siemens has been aggressively selling assets in a bid to raise its profitability. Last week, the company said it would sell two telecom assets, including an 80% stake in its cordless-handset unit. Siemens, which aims to focus on the industrial, energy and health-care segments, recently outlined plans to cut 16,750 jobs world-wide, or about 4% of its work force.

FSC, which also makes mainframes and servers, had a pretax profit of €105 million in its last fiscal year. The agreement between Siemens and Fujitsu calls for their venture to be extended to 2014 if neither side alerts the other this year that it wants to exit.

By: Dana Cimilluca
Wall Street Journal; August 6, 2008