Can At&T Get Through To Japan?Larry Holyoke
Within hours of the earthquake that struck Kobe last Jan. 17, technicians at the network control center of Japan's national phone company, Nippon Telegraph & Telephone Corp., had to cope with a torrent of Kobe-bound phone calls--more than 50 times normal levels. Fortunately, NTT's damage-control experts had a new tool: AT&T had installed a $110 million system with four giant video screens displaying color-coded network maps that allowed frantic managers to quickly find solutions. "I shudder to think how much worse it would have been without the new system," says Minoru Matsuoka, a director of international procurement. "It functioned extremely well."
Those words must be sweet for AT&T, which, since entering Japan in the early 1980s, has gotten almost nowhere. It tried selling plain-vanilla telecom gear, let infighting break out among its business units, and launched a hodgepodge of joint ventures. Worse, AT&T did little to fight market barriers. The result: It's third in phone switches behind Northern Telecom Ltd. and L.M. Ericsson, and, say analysts, it could be outgunned by British Telecommunications PLC in data networks.
Clearly AT&T has immense potential. No single competitor can offer Japanese customers the U.S. giant's state-of-the- art technology and globe-spanning network services. Just ask a Japanese engineer. Michiyuki Uenohara, an executive adviser at NEC Corp. who spent 10 years learning the high-tech ropes at Bell Laboratories, can't quite hide his pleasure at AT&T's newfound sense of mission about Japan, despite the added competition. "I think they are getting themselves back on track," he says.
The phone giant decided to get serious about Japan last October. That's when CEO Robert E. Allen dispatched a 31-year company veteran, Louis C. Golm, to Tokyo to clean house. Golm, 53, had previously been in charge of marketing AT&T network services to U.S. businesses, and he is the highest-ranking corporate officer ever to lead Japan operations. His orders: Knit a cohesive team from disparate divisions--including the former NCR Japan, which dwarfs AT&T's other subsidiaries--and customize offerings for Japanese needs.
"BODY LANGUAGE." If anyone can accomplish such a transformation, AT&T watchers think it's Golm. For starters, he has clout at AT&T's Basking Ridge (N.J.) headquarters. Colleagues also say his manner--that of a kindly high school principal--goes over well with Japanese customers. Granted, he cannot speak Japanese and has no previous international experience. But Golm seems attuned to local cultural quirks. "It always impresses me the way he picks up on Japanese body language," says a key Japanese executive at AT&T Japan.
Whatever his strengths, they seem to be working. AT&T sold 104 of its powerful model 3600 parallel computers last year, at $1 million to $10 million a pop, to customers such as Japan's top credit-card company, JCB International, and Nomura Securities' research arm. Another sales highlight: AT&T chips that process voice signals and record messages. They are in 2 million cordless phones made by Tottori Sanyo Electric Co. AT&T recently proposed a chip to Tottori Sanyo for voice-activated dialing.
If there's a question mark over Golm, it's whether he'll take on Japanese bureaucrats. AT&T has always been the nice guy among foreign companies in Japan. "They have no sense of going for the jugular," says one AT&T insider. But getting tough can pay off. Motorola Inc. lobbied loudly against barriers in the 1980s and offended Japanese officials and executives--but won nearly a quarter of the mobile-phone market.
Golm says AT&T doesn't plan to take such an aggressive stand: "I don't expect to succeed here by walking across the street and asking Ambassador [Walter] Mondale to sell my products for me," he says. But behind the scenes, AT&T is applying pressure. Motorola officials say AT&T has joined in consultations with Washington trade wonks, and Glen S. Fukushima, AT&T Japan's director of public policy and market development and a former deputy U.S. Trade Representative, is known as a trade hawk.
Right now, AT&T is asking the U.S. Trade Representative to come down hard on Japan in talks scheduled for July. AT&T says NTT has refused to open the bidding for a new mobile-phone system called PHS--which is similar to the Personal Communications Service setup being planned for the U.S.--after Japan agreed to procurement procedures with the U.S. last October. AT&T is designing switches for PHS with Nagoya-based Nippondenso Co. and wants into a market that analysts say will be worth over $600 million by 1997.
Golm's toughest challenge may be integrating the operations of the former NCR, purchased by AT&T in 1991 for $7.5 billion and renamed the Global Information Solutions Div. (GIS). NCR Japan, with a 75-year history in the country and its own Tokyo Stock Exchange listing, is about as Japanese as an American company can get. It has 5,000 employees, vs. the 600 or so who work for the rest of AT&T in Japan.
There's little coordination right now. GIS's Japanese executives are still listed in a separate AT&T directory and work in a different building. Worse, their pay ranks in the bottom third of foreign executives in Japan. Other AT&T employees rank in the top quarter. It does not help that GIS is coming off tough times. NCR's biggest business had been automated teller machines, and when Japan's economic bubble burst in 1990, sales plunged. With taxable income of $54 million in 1993, GIS sank to No.42 among foreign corporations in Japan, from No.19 in 1992. Hideaki Takahashi, head of GIS, is reversing the decline with sales of client-server computer networks. Revenues edged up 7% last year, to $1.16 billion.
Next, Golm wants to forge links between GIS and other AT&T businesses in Japan. Those units might snag some significant orders if they gain access to the old NCR accounts, which include top banks and retailers. Granted such synergies have not occurred in the U.S., but Golm says he'll make them happen. "Part of my coming here was a clear statement by Bob Allen that this is our fundamental strategy," he says. "I don't think anybody at AT&T misses that point."
MAJOR PRESENCE. Just in case, Golm installed himself in the GIS building. The troops are starting to get the message. GIS recently joined two other units in a business to furnish phone centers for distribution and service units of corporations. The business supplies equipment--GIS workstations and private branch exchange switches--and plans to add operators trained and employed by AT&T's phone services division. Bell Labs, too, is in on the synergy: It just melded its wireless computer technology with a system developed by GIS.
But competition for Japanese customers is heating up, particularly in the data-transmission services that AT&T is pushing. British Telecom has made Japan one of its top three priorities for its "Concert" phone service for multinationals and is on the prowl for Japanese partners. In March, AT&T landed NTT as a trial partner of its "WorldPartners" alliance, Concert's chief rival.
Golm says AT&T is committed to building a major presence in Japan, whatever the cost. The market may be hard to crack, but it's too big to ignore--and the competition is here. "If you're out of this market, if you don't know what they are doing, you are at risk," he says. It's a risk that AT&T can no longer afford to take.