August 1, 2001 6:50 PM PDT

Fujitsu exits desktop hard-drive business

Fujitsu Computer Products of America announced late Wednesday that it will exit the desktop hard-drive business to focus on the more profitable notebook and server markets.

In addition to scanners and magneto optical drives, Fujitsu makes hard drives for desktop PCs, notebooks and servers. The desktop hard-drive business is notorious for its highly competitive environment, which is thick with competitors, but thin with margins.

"The desktop hard-drive business is very saturated, and the low margins make it an especially limited-growth market," Fujitsu Vice President Mike Chenery said. "In order to take a leadership position in a market, it helps to be one of the first players in that market. We weren't there with desktop drives, but we stand a better chance in the notebook market."

The move should alleviate some of the price pressure in the industry and could help to turn the market around once the economy starts to pick up, said David Reinsel, an IDC analyst.

"Fujitsu's competitors will welcome the move because they can get the additional business," Reinsel said. "Fortunately for Fujitsu, they have businesses in mobile and enterprise to support this move."

Fujitsu had counted Maxtor, Seagate, Western Digital, IBM and Samsung as competitors in the desktop hard-drive business. Fujitsu was fifth in market share with about 9 percent of the market.

The profit margin for desktop hard drives is in the single digits. In the notebook and server markets where Fujitsu will now turn its attention, margins are in the high teens to low 20 percent range, according to IDC. And Fujitsu has a more solid position in both markets compared with desktop hard drives.

Fujitsu lost share in the first half of 2001. Fujitsu will halt desktop hard drive production later this year.

 

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