Three’s A Cloud For Big Blue
Illustration by Phil Couzens
Three of Japan’s top information technology companies, Fujitsu Ltd., NEC Corp and Hitachi Ltd., are joining forces for a global marketing offensive in cloud computing in a bid to take on industry leader IBM Corp.
In a shift from hardware to software, the trio is counting on their cutting-edge, telecommunications technology backed cloud computing services to take the market by storm and prove a serious contender to IBM, which logged a pretax profit of $18.1 billion in 2009.
By restructuring their Internet-based, on-demand computing services, the manufacturers aim to offer uniform services to clients around the world. Costs saved from this restructuring will help keep their annual operating profits in the 100-200 billion yen range over the next few years, according to a report by the Nikkei.
NEC President Nobuhiro Endo is confident the company will keep reporting a 100 billion yen group operating profit from this year onwards. Helping to boost this bottom line is the merger of NEC Electronics Corp—a subsidiary whose 300 billion yen in net losses over five years weighed on earnings—with Renesas Technology Corp. to create Renesas Electronics Corp.
Fujitsu improved its earnings through a series of divestments, including the sale of its hard disk drive business. The company is targeting a group operating profit of 185 billion yen for the current fiscal year, nearly double last year’s result.
Hitachi expects its information and telecommunications business to post an operating profit of 100 billion yen, up 6 percent. However, the firms still trail far behind foreign IT giants such as IBM in terms of profitability and their shares of key global markets. Indeed, the firms are no match for IBM in terms of global operations, sales volume and software services.
IBM had already sold off low-margin hardware businesses such as its HDD, personal computer and printer units, while acquiring an array of software developers and consulting firms, giving it the lead in terms of software and service operations.
Moving on, IBM is expanding its global operations by capitalizing on growing demand in emerging markets, and cutting costs through leveraging on its worldwide network. Sales in markets outside of North America accounted for over half of IBM’s total worldwide sales in 2009, compared to 37 percent for Fujitsu, which has been on an overseas expansion drive in Europe.
IBM controls 32 percent of the global market for servers, while NEC, Hitachi and Fujitsu comprise 5 percent or less each, according to U.S. IT research firm Gartner Inc. As part of its offensive, Fujitsu will fork out tens of billions of yen this fiscal year to boost the capabilities of its data centers in five countries. NEC has developed a new telecom technology-based system that allows companies to halve their initial investments in data centers.
Generating Global Green Opportunities
Japan’s major trading houses have been trying to get a spot in the sun overseas given the bright growth prospects of the solar power generation business. Sojitz Corp, which plans to bring strategic solar power investment opportunities to Japanese utilities, announced it will be taking a minority stake in U.S.-based Solar Power Partners Inc. (SPP) via a 10 billion yen investment.
California-based SPP, the third-largest participant in the U.S. solar industry, owns, manages, and operates over 50 solar energy systems totaling approximately 23 million watts. SPP plans to build five to ten solar farms, each capable of generating 10-20 megawatts, mainly in the states of California and Arizona.
Sojitz also intends to buy an interest in a solar farm operator to be created by SPP, which has already developed 50 farms. Japanese manufacturers will supply solar panels through Sojitz to the U.S. partner.
Itochu Corp. and U.S. giant General Electric have agreed to a comprehensive collaboration on renewable energy operations such as wind and solar power infrastructure, according to official company announcements.
