The proposed acquisition of 80% of ICL by Fujitsu Ltd has given rise to whole string of anxieties about the future of the company, most of which are clearly misplaced. Justified is the sentimental attachment to ICL as the flagship of the British computer industry and the sadness that the company can no longer be indigenously supported, justified too the sense of failure and betrayal left by the feeling that Britain, which made the biggest contributions in the efforts that led to the digital computer no longer has a national industry worthy of the name. Yet who now feels deep regret that television, also invented here, went the same way many years ago. Isn’t the national feeling – even if only partially justified – that we have the best television services in the world: at least it recognises that it is the software, not the hardware, that matters. All the other worries and fears over the future of ICL seem wildly misplaced.
Grandchildren
The first thing to understand is that while Fujitsu certainly conceived of one day becoming a major shareholder in ICL back in 1981 when Robb Wilmot signed it to the technology sharing agreement, Fujitsu saw the agreement as an investment for its children and its grandchildren, certainly not for the generation that signed the agreement. Fujitsu will have thought in terms of taking perhaps a 10% or 15% stake in ICL around 1993 or 1994, and moving on to something between 40% and 49% at around the turn of the century. Computergram has banged on about it for years, but it is still far too little appreciated that the Japanese are in everything they touch for the long term. That being the case, when the STC Plc negotiators said they weren’t interested in Fujitsu taking a minority stake, it had to be a big majority stake, now, for Fujitsu it was as if 10 years of Christmasses (yes, they celebrate Christmas in a secular way in Japan) and 10 years of birthdays had come together on one day. It couldn’t believe its good luck. But the Japanese are nothing if not adaptable, so the feeling of euphoria would have lasted for a few minutes before they switched effortlessly into negotiating mode: they knew they had what they wanted and much more, but that was no reason not to strike a good hard Japanese bargain and not pay more than they absolutely had to for the prize. The fact that Fujitsu got all that it wanted much sooner than it expected in its wildest dreams is the reason why there need be little concern about the future of ICL in the short-to-medium term. Fujitsu expected that when it took control of ICL it would be taking on a clapped out company that had collapsed into its arms because its mainframe base had withered to the point where it was no longer viable, and it did not have adequate new products to fill the gap. Then indeed there would have been no alternative but for Fujitsu to shut down large parts of the company and turn it into a marketing operation for Japanese products. Instead it gets a thriving ICL with a still strong mainframe base and a healthy array of new products. For ICL’s VME mainframe users that makes it certain that there will be fully adequate resources to develop the next generation of mainframes and to keep the VME operating system right up to date.
Phasing out
Series 39 and VME look set fair for the rest of the decade, and their longevity depends entirely on how long users go on buying the things in adequate numbers to justify continued investment and that is likely to be longer under Fujitsu than it would have been with ICL independent: the next financial crisis at the company would have likely seen the slow phasing out of mainframes and VME. The Series 39 base represents about half what Fujitsu has bought and the company is not so stupid as to squander its investment – whereas acquisition of ICL by a US or a European company would have seen a quick decline in local research and development and a phasing out of VME. The second worry in the mainframe arena is that ICL will have to start marketing Fujitsu’s IBM-compatible mainframes. Fujitsu would certainly like
it too, and it will be a test of the company’s intelligence whether it makes ICL do it or not. It has already tried it once, with the so-called ICL Atlas 10 in 1981 and 1982: ICL took to the alien task with so little enthusiasm that it sold three of the things – or was it four? – in 18 months, and Fujitsu sighed and said OK, you’ve proved your point: you don’t have sell them any more. Fujitsu already gets the benefit of Amdahl Corp’s sales in the UK, and its IBM-compatible strategy for Europe should be centred on Siemens-Nixdorf Informationssysteme AG and not ICL. Siemens is in the UK in a small way at last – a big way when Nixdorf is added in – and Siemens’ mainframe base – IBM-like but not IBM-compatible, looks much more vulnerable than the VME base. Siemens and Fujitsu are still bes’ friends, and it is surely only a matter of time before Siemens starts selling IBM-compatible Fujitsu machines, initially at the top of its line, again. Fujitsu is acquiring ICL not to asset-strip it but to learn much more about the European market and way of doing business: it has acquired ICL not to take a competitor out of the market – as would have been the case had ICL gone to a US or continental company, but to build it up into the company it is capable of becoming with sufficient resources. To that extent the deal is very bad for ICL’s US and European competitors, very good for the UK in terms of employment prospects – particularly for the most highly-skilled computer scientists. It might even mean more money for the challenging work on optical computing being done on a shoestring up in Edinburgh. ICL will likely become – in addition to all its present activities – a manufacturing base for other Fujitsu products for the European market – but that just means that ICL plants that would have been closed over time will no remain open and may be joined by new ones. The third misconception that should be laid to rest is the idea that this is the thin end of the wedge and that Japanese computer companies are now going to be stomping all over Europe buying up everything in sight. As we made clear at the start, this was no timely culmination of a planned Fujitsu strategy, it was a completely unexpected windfall.
Blue Moon
There is no tradition of hostile takeover bids in Japan, and this was not a hostile deal. NEC Corp, with 15% of Bull HN Information Systems, certainly expects its children and grandchildren to inherit a much larger presence in the parent company as well as the US-UK offshoot, but it can only look on green with envy at Fujitsu’s amazing good fortune. There is no clear single Japanese company with a clear title to help clear up the mess that Unisys Corp is likely to be in in three or four years’ time, but Hitachi Ltd will be keeping its fingers crossed while hoping that it can also win a privileged position at both Memorex Telex International NV and Ing C Olivetti & Co SpA. Why Olivetti? Well Olivetti does sell Hitachi mainframes in Italy, you know. How have the Japanese approached Europe up to now? NEC, Toshiba Corp, Canon Inc, Ricoh Co, Sharp Corp, Hitachi, Sony Corp? Apart from the odd joint venture with Olivetti, they have all moved in with greenfield start-ups and laboriously built them up: Fujitsu hit the jackpot, but the casino only pays out a jackpot like ICL once in a blue moon.
