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Fujitsu Siemens moves into profit

Fujitsu Siemens Computers has posted its first-ever profit and is being viewed by analysts to be in a strong position to benefit from consolidation in the computer market.

The company, founded in October 1999 by Siemens in Munich and Fujitsu in Tokyo, reported a better-than-expected pretax profit of €29m, (£18m) for the year ending March 31, compared to a €71m (£44m) loss the year before.

Revenue dipped to €5.4bn from €5.9bn in the previous year. Adrian von Hammerstein, who took over as president and chief executive of Fujitsu Siemens Computers at the end of last year, attributed the drop in sales to the global economic slowdown, but said he expects sales to increase 5% in the current business year and for the company to post a profit. The vendor, he added, is pinning its hopes on new mobile products and business-critical systems, such as servers and storage devices.

Fujitsu Siemens Computers' notebook sales were up 27% in the first quarter of 2002, compared to the same period a year ago. That compares with the industry average of 1.49%, according to the company. Von Hammerstein aims to have notebooks and mobile devices account for 16% of total sales by the end of the current fiscal year, up from about 10% currently.

Analysts expect the company, based in Maarssen, The Netherlands, to seize channel sales opportunities in Europe arising from the merger of Compaq Computer and Hewlett-Packard.

"Fujistu Siemens is the only major vendor actively courting European distributors to win some of the volume business expected to be up for grabs now that HP and Compaq have finalised their deal," said Brian Gammage, a principal analyst with Dataquest, a unit of Gartner.

"The company hired Bernd Bischof from HP, which has had the leading channel program for volume products in Europe," Gammage said. "Bischof has been instrumental in introducing a channel strategy for volume products at Fujitsu Siemens. In addition, of the 400 people hired over the past year, half of them are targeting distributor accounts. No other major vendor has put money on the table and invested in people to do that."

Still, Fujitsu Siemens has been known to give a fuzzy picture of where the company is headed. Announcements have been "contradictory" at times, Gammage said. Although Fujitsu Siemens has said it intends to shift revenue away from volume products, such as PCs, to higher-margin enterprise products, including mainframes, servers and storage devices, "the vendor has also said it aims to increase sales to small and medium-sized enterprises, which buy volume products."

The strategy for low-margin consumer products, however, is fairly clear. Von Hammerstein said earlier this year at the CeBIT trade show in Hanover, Germany, that sales of PCs and notebooks to private users would drop to 56% in the previous business year from 60% the year before. He intends to lower that to less than 50%in the current business year.

As a result of fewer consumer sales and a freeze on spending by large companies, Fujitsu Siemens saw its share of the German computer market drop to 40% at the start of this year from 55% in 2000, according to Dataquest.

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