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Fujitsu Siemens: PC boom days are over

The head of Europe's largest PC maker says the industry is maturing and will not return to its high-growth days anytime soon. But there is a silver lining.

The glory days of growth in the PC industry are gone, according to the CEO of Fujitsu Siemens Computers, 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 Europe-based PC maker, has completed a complex restructuring that followed its creation out of the merger of Siemens' and Fujitsu's PC units and is now headed toward profitability, said Adrian von Hammerstein, speaking at a recent meeting with journalists and analysts in London.

Fujitsu Siemens delivered a profit before tax of $4.7 million (4 million euros) for its financial year from April 2002 to March 2003, with nearly flat revenue of 5.3 billion euros for the year. It achieved an operating profit of 56 million euros, more than double the level of the previous year.

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

The company's improving position, he said, stems from its focus on the few growing segments of the PC market, including mobile devices and high-end enterprise hardware, and its success in cutting administrative 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 5 percent for the foreseeable future," von Hammerstein said. "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 specialized 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 that Linux would make Unix obsolete for high-end servers anytime 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 e-mail serving. "This is all about ISV (independent software vendor) attractiveness, and they're focusing on the Intel space, not RISC platforms." Reduced instruction set computing (RISC) chips such as Sun Microsystems' 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 that will increase the companies' software in Fujitsu Siemens products. Von Hammerstein said he is unworried by 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," he said. "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."

ZDNet UK's Matthew Broersma reported from London.