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Weak Windows 8 Demand Saps PC Sales, Fujitsu President Says

December 28, 2012

Weak Windows 8 Demand Saps PC Sales, Fujitsu President Says

U.S. retail sales of devices running Windows fell 21 percent from a year earlier in the four weeks after Microsoft released Windows 8 on Oct. 26 2012. Source: Microsoft Corp.

Fujitsu Ltd. (6702), Japan’s biggest provider of computer services, said the company will miss its annual shipment target for personal computers amid slow demand for Microsoft Corp. (MSFT:US)’s Windows 8 operating system.

Initial appetite for the software, introduced in October, is “weak,” Fujitsu President Masami Yamamoto, 58, told reporters in Tokyo yesterday. Slumping demand in Europe amid the sovereign-debt crisis will also erode sales, he said. PC deliveries for the year ending March 31 may be more than 6 million units, compared with an October estimate of 7 million, he said.

U.S. retail sales of devices running Windows fell 21 percent from a year earlier in the four weeks after Microsoft released Windows 8 on Oct. 26, according to a Nov. 29 report by Port Washington, New York-based NPD Group Inc. The decrease has been fueled by a 24 percent drop in sales of notebook computers as customers opt for Apple Inc.’s iPad or tablets powered by Google Inc.’s Android software.

“We can’t be optimistic about the PC industry,” said Yoshihisa Toyosaki, a Tokyo-based analyst at Architect Grand Design, an electronics research and consulting company. “PC makers’ bet on Windows 8 has failed, as cheaper tablet computers are taking away customers.”

Fujitsu is focusing on information technology services, helping it weather a slump in electronics sales that contributed to record losses at Sony Corp. (6758), Panasonic Corp. (6752) and Sharp Corp. (6753) Yamamoto said his company doesn’t plan to lower prices for its PCs, which along with mobile phones accounted for a combined 20 percent of Fujitsu’s revenue in the year ended March 31, according to data compiled by Bloomberg.

Strengthening Services

“Fujitsu doesn’t plan to join its competitors that are discounting” to sustain sales, Yamamoto said. The company needs to strengthen its services in overseas markets, shifting from a product-focused approach, he said.

The company had said earlier it was counting on shipments in Europe and other overseas markets to account for more than half of total PC sales in the current fiscal year.

Fujitsu, a supplier to Samsung Electronics Co. (005930), fell 0.8 percent to 360 yen at the close of trading on the Tokyo Stock Exchange. The stock has declined 10 percent this year, compared with a 23 percent gain in the benchmark Nikkei 225 Stock Average.

Microsoft advanced 0.4 percent in New York trading yesterday and has gained 3.9 percent this year.

Restructuring Plan

Dell Inc. (DELL:US), the world’s third-largest PC maker, said Dec. 12 it’s seeing strong demand for computers and tablets running Windows 8. Interest in the operating system is “quite high,” Dell Chief Executive Officer Michael Dell said at a conference in Austin, Texas.

Microsoft plans to overhaul how it develops its flagship Windows operating system in a strategic shift aimed at keeping pace with nimbler rivals Apple and Google, people familiar with the matter said last month.

Microsoft aims to upgrade the software more frequently, about once a year, rather than every two or three years as it’s done in the past, the people said. The world’s largest software maker has floundered as personal computers, where it has long dominated, have lost ground to the smartphones and tablets championed by Apple and Google.

Fujitsu, the maker of the K supercomputer, will decide on a restructuring plan for its unprofitable chip business by March 31, Yamamoto said, declining to provide details. The company is trying to rely more on other companies to make its chips instead of running its own chip-fabrication plants.

LSI Chips

Fujitsu is among Japanese companies suffering from plunging demand for LSI chips used in televisions, along with Panasonic and Sharp.

To stem a drop in profits, Fujitsu plans to reduce costs by 1 trillion yen ($11.6 billion) in three years from the 12 months ending March 31, 2013, Yamamoto said. The measures include lowering purchasing costs and relocating system engineers to other divisions, he said.

Fujitsu lowered its net income forecast in October by 58 percent to 25 billion yen for the year ending March 31. That would be its third straight year of declining profit as a worsening European economy dents demand for its computers and services, including system integration and cloud computing.

To contact the reporters on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Shunichi Ozasa in Tokyo at sozasa@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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