Toshiba's Exit Points to Unforgiving Climate
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12/01/97
Computer Retail Week
Page 52
Copyright 1997 CMP Publications Inc.
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The computer retail market has always been particularly unforgiving, but Toshiba's recent disclosure of a plan to depart the retail desktop market after a year's effort points to a new level of ruthlessness.
There's no question Toshiba parachuted into stores at a particularly volatile time. Its feature-packed high-end desktops were about as appetizing to a market thirsting for cheaper PCs as saltines after a marathon.
But it wasn't just the wrong product line that did Toshiba in. It also was hammered last year by Intel's decision to postpone the launch of MMX technology until this January. That marketing coup left Toshiba and a handful of PC makers holding warehouses full of inventory, and forced them to discount PCs in early 1997 and delay product launches until they could close out the old. The price-protection bill Toshiba was left holding reportedly ran into the tens of millions of dollars.
Amazingly for a company of Toshiba's stature, the Japanese conglomerate seems to have been blindsided by the pace and the harrowing turns of the U.S. computer retail market. Just when it thought it had conquered its mountainous inventory and price-protection woes, it was hit by a wall of sub-$1,000 PCs that slapped it backward so fiercely that only a white flag could stop the barrage.
Toshiba's exit is also a signal that the allure of DVD is beginning to fade. At the launch of its consumer desktops just over a year ago, Toshiba painted an idyllic picture in which every system rolled off the production line with a DVD drive built in. For one of the biggest producers of DVD , and certainly its biggest backer, such a scenario must have seemed quite prosperous for Toshiba.
Unfortunately, DVD drives have only scratched the surface of home penetration. What's more, those drives that are making it into systems are doing so by default. System makers have determined that as CD-ROM speeds begin to top off, and DVD drives plummet in price, there's little reason not to go with DVD . But the premiums associated with the technology a year ago are all but gone.
When Toshiba launched its consumer desktops just over a year ago, a high-level executive said one of the driving factors was the belief that notebook computers would never fully dominate the computer market. It was a critical admission of fear that Toshiba itself could not drive the market to make notebooks the computer system of choice.
Ironically, and perhaps as a result of its consumer-desktop ambitions, Toshiba's market share in notebooks has slid. The internal distraction of a product line under constant assault clearly took Toshiba off the mark in notebooks. And while its admission of leaving the retail desktop arena accompanied no vow of redoubled commitment to notebooks, expect to see some fierce paddling by Toshiba up the notebook creek to regain lost ground.
Finally, Toshiba's decision to leave the market serves as testament to the skills of those who have played in computer retailing and still have working body parts. Compaq in particular has made the current market so unbearable at so many levels that we wouldn't be surprised to see others bailing before too long. The lessons:Agility is the defining trait in today's environment. And not even a giant like Toshiba can foist its interpretation of what consumers want on an unforgiving public. |
