Three Japanese conglomerates are in talks to combine their PC businesses. But is cramming three mediocre units into one a good idea?
Three venerable Japanese computer makers are seeking to combine operations as the global PC industry continues to contract.
Toshiba, Fujitsu, and Vaio are in talks to combine their personal computer businesses, Nikkei reported on Friday. The report suggests that Vaio would be the surviving entity, and it would absorb PC businesses spun off from Toshiba and Fujitsu, with all three companies likely to invest around 30% each in the new venture. The new company could make its debut as early as April.
In a statement, Toshiba responded to the news report by saying that it has “made no such announcement, and these reports are not based on information provided by the company.” But it confirmed that it was considering “business restructuring with other companies.”
Toshiba has been under pressure from investors to cut costs since an accounting scandal earlier this year resulted in $1.3 billion in write-downs. Toshiba has also approached several non-Japanese computer manufacturers, according to the Wall Street Journal.
Fujitsu said in October that it was seeking to spin off its PC division. Vaio was previously Sony’s laptop brand before it was spun off in 2014, an example of Japanese technology conglomerates’ recent zeal to spin off unprofitable units into separate subsidiaries.
The combined company would have about $9.8 billion in sales and would be better equipped to produce economies of scale as profit margins in the PC industry continue to shrink.
The Japanese PC makers are considering consolidation during one of the worst stretches the global PC market has ever seen. In the most recent quarter ending September, worldwide PC shipments fell 10.8% despite Windows 10’s official launch during the quarter. (Historically, a new version of Microsoft Windows has driven demand for new PCs.) The double-digit declines are due to a variety of factors, but perhaps the biggest is the rise of tablets and smartphones. Instead of replacing an older PC, consumers are increasingly opting to purchase less expensive mobile devices instead.
If the three-way merger were to happen, the combined entity would be Japan’s largest computer maker, but it might not have as big an impact on the global PC market. The joint venture would only be the seventh-largest PC maker worldwide, accounting for 6% of total PC shipments in 2014. It would still be significantly behind market leaders Lenovo and HP, which had 19.9% and 19.7% of the market, respectively, according to research firm IDC.
If the new venture were to expand and find success, it would likely need to claw market share away from other companies. Overall, the consumer PC market is projected to continue shrinking through 2019.
The three companies in talks have a lot of history between them. The Vaio brand first appeared on computers in 1996, and it still has strong name recognition in Japan and worldwide. Toshiba claims it sold the first commercial laptop in 1985.
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