Fujitsu to Takeover Toshiba's Mobile Unit
By JURO OSAWA
TOKYO—Fujitsu Ltd. will effectively take control of Toshiba Corp.'s struggling cellphone handset business, aiming to take a leadership position in the domestic market while coping with challenges from foreign rivals such as Apple Inc.'s iPhone.
Fujitsu and Toshiba said Thursday they have reached a basic agreement to merge their mobile-phone operations, a move that will create Japan's second largest handset maker. Fujitsu, the larger of the two, will take a majority stake in the new joint venture to be launched Oct. 1.
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Toshiba's handset models include the "TG-02" mobile phone. The venture with Fujitsu could help turn around the unprofitable business.
"Our handset business is profitable and strong as it is, but we can't assume it will remain so," said Fujitsu spokesman Etsuro Yamada. "Competition is also coming from the outside," he said in a reference to the popularity of the iPhone in Japan.
The merger plan is the latest in a series of realignment steps in Japan's large but nearly saturated domestic cellphone market. Japanese handset makers are under pressure to streamline and consolidate, as they come under attack in the crowded home market from newcomers such as the iPhone, Research in Motion Ltd.'s Blackberry and Taiwanese handset maker HTC Corp.
With additional resources from Toshiba, Fujitsu could have a better shot at a chunk of Japan's still-nascent market for smartphones, one of the few growth areas in the country's rather sluggish handset market. Tokyo-based MM Research Institute forecasts that the Japanese market for smartphones will expand 41% to 3.3 million units in the current fiscal year through March, from 2.34 million units last fiscal year.
The move would also help Fujitsu diversify its customer base. Fujitsu currently makes handsets exclusively for Japan's largest cellphone carrier, NTT DoCoMo Inc., while Toshiba supplies all three major carriers.
For Toshiba, the merger is an attempt to distance itself from unprofitable operations by letting Fujitsu effectively oversee its cellphone business.
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"For us, this (merger) agreement is one of our restructuring steps," said Toshiba spokesman Keisuke Ohmori. In the fiscal year ended March, Toshiba's mobile phone business made an unspecified operating loss, while its revenue dropped 44% to about 90 billion yen ($985 million).
According to MM Research, the merger would give the combined entity a market share of about 18.7%, putting it in second place after Sharp Corp., which held a 26.2% share in the year ended March, and ahead of Panasonic Corp.'s mobile-phone unit, which had a 15.1% share.
The industry has experienced a flurry of consolidation over the past few years as the domestic cellphone market shrank.
Earlier this month, NEC Corp., Hitachi Ltd. and Casio Computer Co. joined forces to create a single mobile-phone company. In 2008, Kyocera Corp. bought Sanyo Electric Corp.'s cellphone operations.
However, even after pooling resources to become more competitive, most Japanese cellphone makers still have little overseas presence. The new entity to be formed by Fujitsu and Toshiba would have less than 1% global market share combined, according to data from the U.S. market research firm Strategy Analytics.
The two companies will continue to discuss the specific details of the deal, and will sign a final accord around the end of July, they said.
