Fujitsu unit to make only 2.5-inch hard drives

SAN JOSE: A Fujitsu Ltd. subsidiary that makes hard drives for desktop

personal computers said on Wednesday that it will no longer do so, and will

focus solely on making hard drives for mobile PCs, which it sees as a growing

market as laptops gain in popularity.

The announcement comes in the wake of flagging worldwide PC sales - the

second-quarter marked the first time since 1986 that PC shipments fell

year-over-year - and a focus at PC makers on managing costs, including through

deep job cuts.

San Jose, Calif.-based Fujitsu Computer Products of America told Reuters that

it is exiting the market for 3.5-inch hard drives for desktop PCs as soon as

possible, and will put all its resources committed to that market toward

building 2.5-inch hard drives for both desktop and mobile PCs.

"We think the 2.5-inch drive, now in the mobile desktop, will penetrate

the desktop market in 2002," Mike Chenery, vice-president of advanced

engineering for Fujitsu Computer Products of America, said. "We can see the

convergence coming and we want to take advantage of that."

"There is a movement to replace the desktop systems with newer

systems," Chenery said. "They're smaller, quieter, use less power and

just generally look better." The Fujitsu subsidiary said it expects the

2.5-inch mobile hard drive market to match the 3.5-inch desktop hard drive

market at $7 billion by 2005.

Chenery, noting the Fujitsu subsidiary will face competition from

International Business Machines Corp., Toshiba Corp. and Hitachi Ltd., said it

is the process of researching new 2.5-inch hard drive products to bring to

market in mid-2002.

The Fujitsu subsidiary said it expects to stop making its current desktop

hard drives later this year.

(C) Reuters Limited 2001.