Nec In The U.S.: A Detour On The Road To The Big TimeGary Mcwilliams
When the laptop computer took off in the U. S., Toshiba America Information Systems Inc. took off with it. By 1988, it was giving Japanese rival NEC Corp. a run for its money. But NEC could still claim to be the biggest success among Japanese computer makers in the U. S. After all, it was doing well both in laptops and in desktops.
To do even better, NEC 18 months ago merged its U. S. laptop and desktop units into NEC Technologies (NECT) Inc. With the combined company's broad line and a retail network nonpareil among IBM-clone makers, NECT appeared set to be the first Japanese to really challenge the PC market leaders.
But NEC has been having some trouble. Combining the two units has taken longer than expected, partly because the company's withdrawal from the U. S. television and VCR businesses distracted managers. And the expected benefits from combining laptop and desktop marketing haven't materialized. Recent mergers of computer retailers have concentrated NECT sales into just two major chains. Result: NECT expects revenues for the year ending Mar. 30, 1992, to be flat with last year's $992 million.
And that's the good news. Like Toshiba, NEC is finding U. S. competition far tougher in the hot market for notebook-size laptops. NEC's UltraLite, introduced in 1988, was the first notebook on the market. Now, NEC lags rivals such as Compaq Computer Corp. and AST Research Inc. in both pricing and technology. NEC's notebook based on Intel's 80386SX chip, for instance, arrived eight months after others were announced. And it took NEC three months to match Compaq's spring price cuts on laptops.
DESIGNED IN THE U.S.A. Such delays have been costly. NEC's 9% share of the U. S. laptop and notebook market puts it in fourth place, far behind Toshiba, says market researcher InfoCorp. In desktop computers, the company's market share is now expected to decline for the third year in a row, falling to 1.4% in 1991 from 1.9% in 1990, and 2.3% in 1989, says another researcher, WorkGroup Technologies Inc.
NEC Technologies is plotting its comeback--with new products and distribution plans. First up: a line of low-cost PCs, due this summer, designed to be sold in computer superstores. Then, in September, a line of machines to run networks of PCs. Aimed at corporations, they will be sold partly through a beefed-up direct-sales force. "This is what we've been working on the whole year," says James R. Berrett, NECT's chief operating executive.
The products are a big test for NECT. When the two units merged, American managers pushed for permission to design and build products specifically for the U. S. market rather than sell Tokyo's designs. Headquarters agreed, and the U. S. unit now develops and manufactures NEC's PCs for the Americas, Europe, and Australia.
To pull ahead in the U. S. and other markets, NEC has to match not only IBM's and Compaq's technology but also their new pricing. And--hardest of all--it must match their marketing skills. But NEC is making some progress. KinderCare Learning Centers Inc. just bought 1,250 NEC desktops. Low prices helped, but NEC's willingness to customize the PCs clinched the deal, says John McKay, a KinderCare vice-president. NECT needs more such sales. It can't afford to lose another 18 months in its efforts to crack the PC big time.