When Unisys revealed it was pulling out of PC production last month, manufacturers began scrambling to pick up the business.
This is where Hitachi will step in, as it is expected to win the OEM rights to produce Unisys' hardware. Hitachi is keen to get the rights as it has a missing product line, despite the fact it is the world's largest electronics company with nearly $70 billion revenue. The company makes nearly every computer product one can think of bar two - and they happen to be the two most important ones - PCs and Intel servers.
Hitachi provides mainframes, Unix parallel super computers, and Risc server workstations. It makes laser printers, disks, disk sub-systems, notebook PCs, monitors, LCDs, DVD devices and CD-Roms, as well as producing combined NC/NetPC. It makes a handheld Windows CE device and an embedded Risc processors.
But this missing link in its product line-up is affecting the company.
In the 1997 financial year, Hitachi allowed the top post in profits among Japanese electronics firms to go to Toshiba. Both firms were hit by sluggish chip prices, but Toshiba managed to cushion the blow with booming PC sales, unlike Hitachi.
Hitachi has a substantial Unix element in its product line-up, but has no NT presence. It has also invested in PowerPC technology. With the rise of Intel and NT in the workstation and server space, both are looking like poor long-term bets. Compaq has a leadership position in the workstation market, having overtaken Sun. It must be apparent to Hitachi management that Intel PCs and NT/Intel servers are fundamental technologies they must have, which the Unisys Aquanta manufacturing facility gives it both.
Martin Sexton, Unisys VP of communications Europe, said: 'We are talking to a number of vendors, which may or may not be Hitachi.' Various Unisys sources have confirmed that Hitachi and Unisys are involved in talks.
Unisys has invested millions in its Aquanta PC/server line with manufacturing plants in San Jose and Villers Ecalles in France. Yet it's stuck at the 300,000 units per year level and cannot break the million units per year level needed for economies of scale. Its prices are too high and profits too low, notwithstanding its BTCO manufacturing model which only builds systems.
Therefore Unisys wants to offload its PC/low-end server plant to someone better at making and selling commodity computing devices. Hitachi is good at this.
Hitachi has ambitions to get into the PC and server business. The corporate position is that the company will build 'a leadership position in the US PC market', Hitachi Data Systems chief executive officer John Staedke 'started the diversification into client-server, mid-range systems', according to Makoto Endo, chairman of the executive committee of Hitachi Data Systems (HDS).
In an attempt to bridge this product gap, Hitachi has an arrangement with Legend Group - a Chinese computer company - to ship PCs into China.
The two companies will develop PCs, which means Hitachi will need a PC manufacturing capability.
Hitachi actually has a PC company called the Hitachi PC Co, but it does not make PCs, it makes the company's notebooks. It is a subsidiary of Hitachi and Hitachi US and has its headquarters in San Jose, California, virtually next door to the Unisys Aquanta manufacturing facility.
Hitachi PC Co is run by Dave Hancock, ex-senior VP of marketing for Apple US. Mark Yahiro, VP of strategic marketing and business development, came from SCO.
But strangely the Hitachi PC Co declined to comment about its relationship with Unisys.
Historically, it is Japanese companies that have entered the PC and server market through alliances with, and takeovers of, ailing western companies, witness NEC and Packard Bell/Zenith. The Japanese get ready-made manufacturing, distribution, sales and market facilities. A Unisys/Hitachi deal matches this model.
Hitachi can supply Unisys with Aquanta PCs and servers from the San Jose plant.
It had been thought that Compaq may have been interested in the plants.
But Compaq UK managing director Joe McNally played down the suggestion.
There has been speculation that because Unisys has a contract to supply Compaq subsidiary Tandem with Aquanta servers which are fitted with servernet technology and sold on as Tandem systems - Unisys' largest server supply contract - it was an obvious choice to buy the plant.
McNally says the contract will end in April/May and Compaq will supply all servers to Tandem. According to McNally, Compaq is porting Tandem technologies to its servers. He agreed that the Unisys/Hitachi deal will not be consummated by then so there is no chance that a Hitachi-owned plant could continue the Tandem supply contract.
Unisys is now positioned for continuing sales in the commodity PC/server business without a manufacturing headache. Hitachi is going to be able to grow its PC/server business in the US and the rest of the world. With its track record in the notebook market, second and third-tier PC vendors may have reason to watch out.
Struggling security titan makes three board appointments after investor took 5.8 per cent stake last month
Commvault ousted its CEO in May and has since undergone a radical refocus
As employees demand more flexible working environments, CRN asks how the channel is adapting to the changing working landscape
Wall Street less than impressed with Oracle's growth as cloud numbers remain hidden