Fujitsu Gets A Helping Hand From An American Buddy

These are trying times for Fujitsu Ltd., Japan's biggest computer maker. With a global recession sapping demand for its chips, telecom gear, and computers, the company recently reported its first-ever annual loss, dropping $281 million on sales of $30 billion. What's worse, Fujitsu customers in Japan will soon start shifting from mainframes to networks of smaller machines--the same downsizing process that for years has caused such pain at IBM in the U.S. and Europe.

But for Fujitsu, the downsizing may turn out to have a bright side. Even in recession, Japanese companies are snapping up workstations, especially those built by Sun Microsystems Inc. And that has brought a modest windfall for Fujitsu, which has been distributing Sun machines in Japan under its own brand since 1988. Fujitsu expects to sell 10,000 units in Japan this year--more than any other Sun distributor there. The success has prompted Fujitsu to expand ties with Sun, including an agreement in June to share software. "No other company is working so closely with Sun Microsystems," says Yoshiro Yoshioka, a Fujitsu director.

The two companies are now deeply intertwined, providing a textbook case of how a leading U.S. company--without Washington's help--can weave itself into the fabric of Japan. In the mid-1980s, Sun enlisted Fujitsu's design and manufacturing assistance to launch its sleek, stripped-down microprocessors, called Sparc. "They were the first company willing to stick their necks out to build them," recalls Scott McNealy, Sun's president. Fujitsu soon became the main supplier of Sparc chips for Sun computers. In return for Fujitsu's help in hoisting Sun to global workstation dominance, the U.S. company now equips its machines with mostly Fujitsu-made memory chips, disk drives, and high-resolution monitors.

There's more. Fujitsu's two largest foreign affiliates--Amdahl Corp. in the U.S. and ICL PLC in Europe--are designing Sparc chips into a wide range of computers. And in the research lab, Fujitsu engineers have linked up more than 1,000 such chips in a parallel machine that tears through some calculations faster than most supercomputers. From here on, says Fujitsu's Yoshioka, "we're planning to use Sparc from the top to bottom." And after years of investment, the Sun-related business is starting to turn a profit. Fujitsu now accounts for about 25% of Sun's Japanese sales of $700 million a year, while Sun annually buys an estimated $200 million worth of components from Fujitsu.

BIG LEAD. As competition in the workstation business stiffens, Sun is counting on Fujitsu to polish the technology and pull in more top-tier customers around the world. Industry sales of workstations are poised to double, from 563,000 units in 1992 to 1.6 million in 1997, according to International Data Corp., a market researcher based in Framingham, Mass. Today, Sun enjoys an overwhelming lead, with 38% of global shipments. But the company is already under siege from Hewlett-Packard, IBM, Digital Equipment, and Silicon Graphics--all of which have bested Sparc on sheer processing speed. And Intel Corp. poses an even greater challenge with its lightning-fast Pentium processors that let desktop PCs double as workstations.

Fujitsu and Sun view Intel's near-monopoly in PC microprocessors as a kind of plague, leaving little room for other computer manufacturers to add value. In contrast, Sun's approach is largely open. For a $99 license fee, anyone can buy the basic tools to make new Sparc chips. Together, Fujitsu and Sun hope to spread that gospel. As the competition intensifies, what started as a simple alliance is looking more and more like a promising growth business.