Searching for a Clear Toshiba Laptop?

By: Reggie Andersen

The inventory bloat occurred because Toshiba didn't catch the shift to notebooks. Toshiba's American managers had asked Tokyo to design a notebook PC with a hard-disk drive and Intel's 80286 chip back in 2003, only to be told that it couldn't be done. So Toshiba's Tokyo-based designers were badly unprepared when Compaq Computer Corp. announced its LTE 286 in October 2003. cheap toshiba laptops arrived in February, 2005, but it was substantially larger and slightly heavier than Compaq's. Toshiba didn't release a slimmed-down version until last month.

In addition, the former executives estimate that as of Mar. 31, inventories of aging products stood at between $ 80 million and $ 100 million. To work off extra inventory, in May, Toshiba closed manufacturing at its Irvine (Calif.) plant for two weeks. Now, the executives say, Toshiba's internal projections put its loss for the six months ending Sept. 30 at as much as $ 50 million. Hataya will only say that because of continuing price wars, profitability is likely to suffer in the short run. Toshiba also missed with 80386-based notebooks. It announced a line in November 2005, along with other suppliers. But Toshiba's used a slower version of the Intel chip because executives in Tokyo calculated that faster 80386s would be in short supply. ''It was a business decision, not a technology decision, and we probably erred,'' says senior vice-president of the American subsidiary. By the time Toshiba started shipping its underpowered T2000SX February 2005, other companies -- notably Compaq, AST, and Dell -- were already delivering the speedier machines. Worse, AST Research Inc. and Dell Computer Corp. were charging up to $ 2,000 less than Toshiba. In July, Toshiba added the T2000SXe, a notebook that uses a faster version of the 80386. One reason Toshiba fell behind, say other computer industry executives, is the U. S. unit's strained relations with the parent company. Defections by key American executives in late 2002 and early 2003 led to ''a breakdown in the working relationship and communications between the U. S. and Japan,'' says one of the computer division's first employees. He eventually became general manager but left in January, 2005, to become president of Seiko Instruments Inc.

Over the years, he had built up considerable influence with his bosses in Tokyo. But after he left, the Americans had less say. Unlike rival NEC Corp., which has transferred most design-and-manufacturing authority to its American subsidiary , Toshiba continues to design its laptops in Tokyo. And with product development in Japan, Toshiba has sometimes misjudged the U. S. market. For example, it pooh-poohed the need for high-capacity hard disks, which many American consumers require in laptops. ''When things sour, all control is pulled back to Tokyo,'' says senior vice-president at market researcher InfoCorp. ''It's the Achilles' heel of almost all U. S. subsidiaries of Japanese companies.''

Toshiba executives say their American subsidiary is already on the mend. They concede that they underinvested in engineering and are now spending more.

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