How Toshiba's Laptops Retook The HeightsLarry Holyoke
It didn't take much for Toshiba Corp. to lose its title as the world's leading maker of laptop computers. By taking its eye off the ball for a single personal-computer product cycle--about a year in human terms--the Japanese giant squandered the lead in a market where it once boasted a 40% market share. It was a lot harder to retake the lead. But with surprising speed, Toshiba reversed its slide and is now on top again. This time, can it stay?
Maybe--if the company's executives don't forget the lessons of the past few years. After launching the T1000 line, the first successful IBM-compatible laptops, in 1985, Toshiba consolidated its lead by continually cutting prices and adding features. But in the early 1990s--just as the competition was heating up--it began to skimp on research, misgauged the market with bulkier machines when rivals were shrinking their models, and, worst of all, failed to incorporate the latest microprocessors as quickly as the competition. A host of new entrants charged ahead, and by 1993, Toshiba had fallen to No.2, behind Compaq Computer Corp.
CUT LOOSE. Now, Toshiba has regained its balance with fleet-footed marketing by a more independent U.S. operation and a big investment in engineering. In 1994, according to International Data Corp., Toshiba grabbed 15.6% of the worldwide portable computer market, compared with Compaq's 14% (table). In the critical U.S. market, Toshiba did even better, capturing 17.8% vs. Compaq's 14.7%.
How did Toshiba pull it off? By beating Compaq--and others--to market with cutting-edge and aggressively priced models. In the last few months, Toshiba slashed prices on some models by up to $1,200. "It used to take six months to a year for a new [generation of computers] to go from desktop to laptop," says Atsutoshi Nishida, president of Toshiba America Information Systems Inc. in Irvine, Calif. "But from 1993 on, we've introduced a notebook product on the same day that Intel introduces a new chip." Toshiba's Performance T4900CT notebook, introduced last October, was the first laptop using the P54C, a low-power version of Intel's Pentium. By devising "heat pipes" to cool the hot-running chip, Toshiba's engineers built the machine without an internal fan--saving precious battery power. The less exotic T4800CT, meanwhile, has gotten rave reviews for its vibrant color display and five-plus hours of battery life.
The management change that made all this possible was Tokyo's decision to give the U.S. subsidiary more say. "There was a time when Tokyo took the initiative on product development," says Tetsuya Mizoguchi, head of PCs for Toshiba in Japan. "We have grown up since then."
And Toshiba's U.S. marketers have made some astute calls on what the market wanted, and when. "They are using leading-edge technology but not way out there on the bleeding edge," says Mark MacGuire, an analyst with market researcher Dataquest Inc. For example, when IBM and Compaq added inexpensive subnotebook PCs, Toshiba introduced the fully featured color Portege--and avoided a market gaffe. Customers felt the cheaper subnotebooks were underpowered, and both IBM and Compaq had to drastically cut prices.
Toshiba also got lucky. Its fiercest rival, Compaq, has become the No.1 PC maker in the world. But it has let its notebook line slip. Its Conturas, for example, lacks some of the power management and multimedia features of rival products. "Recently, Compaq has been making a lot of mistakes," says Nishida. There have been problems, concedes Lorie L. Strong, Compaq's vice-president for portables and software. "We concentrated on other things," she says. "Certainly, Toshiba is our No.1 competitor, but I'd put us neck and neck." She says Compaq is patching any holes in its lineup.
Still, Toshiba has some advantages Compaq can't easily match, including the fruits of its huge investment in screen technology. Realizing Windows would make color screens de rigeur, Toshiba and IBM plowed $250 million into a joint venture, Display Technologies, to build thin-film transistor, or TFT, color displays. In August, they afnounced plans to spend $400 million to double capacity.
RED CAPE. The screen edge may soon end. The No.1 maker, Sharp Corp., plans to hike production in 1995, and Mitsubishi Electric Corp. said on Dec. 27 that it will break ground in March on a $400 million TFT plant. So Toshiba is focusing on other technology: lithium-ion batteries and multimedia gadgetry such as built-in CD-ROM drives.
By retaking the lead, Toshiba is again the competition's prime target. Gateway 2000, a perennial wannabe in notebooks, has high hopes. The mail-order PC maker says its Liberty laptop, with a 10.4-inch display and high-capacity (up to 720 megabytes) disk drive, will undercut Toshiba's pricier Portege. Says Albert G. Giazzone, director of marketing: "The portable market is very product-oriented. It allows you to jump up in market share quickly, but it means you have to defend it constantly." Just ask Toshiba.