Fujitsu Siemens: No Joint Venture Is Forever

Aug. 7.08 | About: Siemens AG (SIEGY)

On Wednesday, the WSJ and Forbes reported that Siemens would like to dump the Fujitsu Siemens joint venture. The 9-year-old joint venture has annual revenues of about €6.6 billion ($10 billion).

The original JV made a certain sense. The PC industry is a commodity business with low margins and some economies of scale. Since the industry uses commodity technologies there were no major incompatibility to be solved. Fujitsu and Siemens were top vendors in their home markets without presence in the other, so the two businesses had some upside and not much downside.

The last public figure I could find (2005), the JV had a 3% global share. I guess if I gave IDC or Dataquest $10K I could see the real estimates. Some stories (without any supporting evidence) claim the JV is losing market share. Of course, we don’t have public information on the JV’s P/L.

Apparently Fujitsu still wants to have PCs. The reason IBM kept PCs (long after it made money off of them) was the claim that it was necessary to have a full line of computers to serve MNCs. Hitachi (with far less share) quit the PC market last year.

The new Siemens CEO, Peter Löscher, is dumping losing divisions — either using the (old) Jack Welch rule or just to appear to be doing something. If they are dumping money losing divisions, what about Nokia Siemens telecommunications networks? Speculation says this is also on the block.

Historically, joint ventures fail within a few years. Perhaps the parties can’t agree on a strategic direction. Or perhaps one party wants to learn everything they can from their partner and then use that information to become a direct competitor — think Chinese automakers.

Here the issue is just simply choosing to stay in a lousy industry. Some might claim the JV has underperformed, but it seems the real answer is that Siemens should have bailed out of PCs nine years ago — or at least three years ago when IBM dumped the PC that it created back in 1981.