Fujitsu's $850 million bid to acquire Amdahl has already run into controversy, with shareholders suing over the "grossly inadequate" offer, and insiders hinting at a wholesale refocus that could have far reaching impact for Fujitsu subsidiary ICL.
Speculation particularly surrounds the future role of the ICL services arm, Sorbus, should the Amdahl takeover go ahead. Amdahl has spent the past few years reinventing itself as a corporate services company and this business could be amalgamated with Sorbus, at least in Europe, said one insider.
First the bid will have to pass the shareholders. Amdahl shareholders filed suit almost immediately the takeover offer was announced. The suit claims the $850 million that Fujitsu proposes paying to acquire the 48 per cent of Amdahl that it does not already own is "unfair and grossly inadequate" and fails to take into account Amdahl's "growth and anticipated operating results, net asset value and profitability." The offer of $12 a share is only marginally above Amdahl's closing price the day before the bid, which stood at $11.8125. The suit argues that Fujitsu is not paying a takeover premium, taking advantage of its position as Amdahl's largest shareholder.
Fujitsu said the claims are "without merit" but Amdahl, whose directors are also subjects of the suit, would not comment. Fujitsu sources claimed the price was fair because Amdahl's shares had been as low as $10 during July but several analysts believe the offer is too low and particularly ignores the growth potential of the software and services business - now accounting for 65 per cent of sales at the company best known as an IBM compatible mainframe maker.
Strategically, the Amdahl buy would give Fujitsu a stronger services presence in the US, Amdahl's strongest market, to balance the ICL portfolio in Europe. "I'm sure the two would be amalgamated somehow in Europe, to really give Fujitsu some serious clout in services. Sorbus could lose some of its autonomy," speculated a Fujitsu insider, although the company did not comment officially.
The takeover would also give Fujitsu greater control in its core mainframe market, in which Amdahl fights for number two spot after IBM with fellow Japanese joint venture, Hitachi Data Systems. Amdahl and Hitachi control about one-quarter of the $8 billion IBM-compatible market, but compatibles' share of the overall sector is declining as IBM itself narrows the price gap and trades on its strong brand.
Fujitsu claims Amdahl will retain its brand and current management team, and that no major layoffs are planned. But several analysts pointed out that this is often the line before a takeover, and expect more significant reorganisation once the deal is signed, especially in Europe where Amdahl is a less strong brand than ICL. "If ICL is now jointly branded with Fujitsu, will they really keep Amdahl's identity long term?" asked one.
Amdahl chairman John Lewis said the deal would end "lingering doubts" about the company's financial viability, which damage its credibility with large corporate customers. The company has posted six consecutive loss making quarters.
Fujitsu has been a major investor in Amdahl since it was founded by the inventor of the IBM mainframe architecture, Gene Amdahl, in 1970, when the Japanese giant owned a 33 per cent stake. Amdahl himself was forced out of the company after disputes with investors in 1979 and has founded several hi-tech start-ups since. His son Carl co-founded the disastrous Trilogy with him in the early 1980s but then went on to set up Netframe.
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