Interesting article on Toshiba. SNDK mentioned.
Gadget colossus
Benjamin Fulford , Forbes Global, 01.08.01
forbes.com
Toshiba is supposed to be a dog of a company. The $56 billion (sales) electronics giant lost close to $400 million in two years on plunging memory prices, a $1.1 billion legal settlement over faulty drives and a declining share as the world's top laptop maker.
In Japan, its home base, Toshiba's image has been battered after one customer's rude treatment by a company service representative triggered an online deluge from other outraged customers. Toshiba's market capitalization, down to less than half of its peak of a decade ago, is now $24 billion—half annual revenue. By contrast, General Electric is worth $511 billion, four times sales. His company's reputation in tatters, Chairman Taizo Nishimuro six months ago ceded control to a new chairman and CEO, Tadashi Okamura.
Now results are in for the first half of its fiscal year.Toshiba earned $1 billion in profits, ahead of Sony and Matsushita and behind only Hitachi in the Japanese electronics sector. Toshiba now forecasts a record profit of $2.7 billion for the fiscal year ending in March.
Much of that profit swing is owed to the 1999 restructuring of the hidebound, 120-year-old company. Widespread use of the Six Sigma quality approach is expected to save $1.3 billion in costs this fiscal year. Nishimuro had divided the company into nine nimbler units and focused its 190,000 employees on making what people want. Lab researchers were forced to talk to consumers.
Says Okamura: "It is like driving a big limousine. [Nishimuro] had the slow job of turning it around; all I had to do was put my foot on the accelerator." He says Toshiba can speed ahead, thanks to big early bets on multimedia technologies.
"We are moving from e-mail, word processing and databases to an era centered on games, mobile devices and digital television," says Yoshihide Fujii, the strategic planner of Toshiba's $15 billion semiconductor group, the world's third-largest after Intel and NEC.
Toshiba has some enviable positions in the building blocks of this era of mobile, media-rich devices. Its flash-memory business—providing storage for the wildly proliferating array of cell phones, digital cameras and PDAs—is entering a vertical takeoff from sales now in the hundreds of millions of dollars. Its laptop labs continue to churn out ever thinner and crisper liquid-crystal screens and hard drives the size of a credit card that hold up to 2 gigabytes.
The chip group has a wide array of digital-to-analog converters crucial to video and audio playback and core patents on the coming MP4 video-compression standard. And Toshiba's $350 million battery division now focuses solely on lighter, thinner lithium ion batteries after selling its old nickel-hydride line to Sanyo.
At Toshiba's labs in Kawasaki, rows of laptops chained to their desks contain hints of wonders to come. Don't bother stealing one, says Yukio Kamatani, the lab's chief—it works only if it recognizes the face of its rightful user.
Neither Kamatani nor Tetsuya Mizoguchi, the head of the $16 billion laptop division, were willing to display a top-secret mobile phone they have under development, but they demonstrated enough upcoming features to enable an educated guess. The new toy is likely to allow mobile video without any of the jerky, grainy pictures people now see in tiny boxes on their PCs. This will let people watch games on the road or peek at what their kids are up to at the day care center. A global-positioning satellite receiver the size of a postage stamp is likely to meld with Toshiba's mobile map service (200,000 subscribers in Japan so far).
Kamatani also demonstrated a new Bluetooth-enabled wireless laptop card you can use to turn off your air conditioner by calling your laptop at home. Toshiba eventually plans to sell a Bluetooth wireless terminal for controlling all of a home's appliances from the road.
Even if Toshiba's new mobiles don't become bestsellers, the company could make good money selling vital parts to others. Toshiba, along with Sandisk, holds most of the basic patents for the flash memory that is to mobile gadgets what the floppy disk was to PCs. Even Sony's sleek-looking Memory Sticks depend on Toshiba guts.
The brain inside the Sony PlayStation 2, the so-called Emotion Engine, is mostly Toshiba-designed and -built. In its first year, Sony has already shipped 2 million of the consoles. Back orders are piling up. Toshiba is working on a successor graphics chip that will function as a video-on-demand, general home-entertainment terminal that will melt the boundary between movies and games. The chip could power home entertainment centers due in five years.
Toshiba also may become a big player in "dramerce" (for drama and commerce), which excites lots of broadcasters. Dramerce is made possible by Japan's new digital-TV standard. Remotes equipped with "buy" buttons let viewers of The X-Files respond to impromptu viewer surveys on screen or acquire Agent Dana Scully's sunglasses.
Five of Japan's six private broadcasters have installed Toshiba equipment that lets viewers order and pay for products seen on TV. It will take several years for that capability to grace U.S. digital broadcasting standards.
Okamura also has set up a new division to create alliances with other companies to reduce technology-development risk in much the same way syndicated loans do for banks. For example, in the volatile DRAM memory chip business it now pools resources with Fujitsu, its former archenemy, and Winbond, a Taiwanese maker.
Toshiba still has some trouble spots. Its $3 billion North American laptop business is losing market share, having ceded the top slot to Compaq for the first time in four years. Because of high prices, its U.S. share slipped from 24% in 1996 to 11.3% by the third quarter of 2000.
High pricing will remain a problem because Toshiba relies on expensive Japanese factories. Okamura plans a counterattack next year, based not on lower prices but on products loaded with interesting new features. In response to price wars, Toshiba has also opened a laptop fab in Shanghai and has subcontracted the manufacture of two low-end laptops to a Taiwanese maker.
But a slowing worldwide PC market bodes ill for Toshiba's laptops and its marginally profitable DRAM business. Fujii, its chip strategist, says that it can come up with a small profit because no new factories are expected to go online next year. As a hedge, Toshiba has begun doling out some of its DRAM work to Taiwanese makers.
But Fujii admits that Toshiba is holding on to the DRAM division mainly to keep workers employed—and that misses a crucial point. If Toshiba wants to boost its 4% profit margins closer to GE's 10%, it will have to remember how Jack Welch got the nickname Neutron Jack—by ruthlessly shedding unneeded workers. Alas, this is something Toshiba refuses even to contemplate. |
