Cut-rate desktop electrifies market


October 20, 1992|By John E. Woodruff | John E. Woodruff,Tokyo Bureau

TOKYO -- In northeast Tokyo's bustling cut-rate electronics district, the fourth floor of a seven-story discounter called Computer Hall is where the traffic is.

Thousands of people visit every day to check out magazine and TV reports that many are not sure they believe -- bilingual Japanese-English desktop computers from America at prices as much as 45 percent less than any Japanese brand.

Compaq Computer Corp. has brought America's desktop price wars to Japan. Even without any stock available for retail customers, the Houston-based maker's new cut-rate ProLinea line is already electrifying a market long accustomed to fat prices and easy, steady sales.

IBM Japan has already announced it would slash PC prices by up to half on several models within weeks to meet the new competition.

And yesterday, the Japanese subsidiary of Digital Equipment Corp., which began selling PCs here in May, said it was cutting prices on its personal computers by an average of 46.5 percent.

Apple Computer Japan Ltd., the Japanese subsidiary of Apple Computer Inc. of Cupertino, Calif., then announced an average 20 percent price cut for its personal computers.

NEC, Japan's biggest maker, with a 60 percent market share, responded by saying it would continue to rely on quality and reputation rather than price to protect its market.

But Japanese news reports said NEC's management is in a power struggle -- a rarity in any industry here -- over whether and how to respond to the Compaq challenge.

NEC's initial public responses speak of counting on the conservatism of Japanese buyers; consumers here are famous for hesitating to take risks.

But Toys 'R' Us, the big American discounter, was an instant success when its warehouse-style stores opened here last winter. And Apple Computer has already enjoyed two years of spectacular growth in the Japanese market with a price strategy -- up to now -- far less aggressive than Compaq's.

"Compaq has a reputation for quality with people who know computers, so at these prices,these models are sure to sell," Kenji Haraguchi said after playing with the keyboard on one of the new American-made models.

He was one of tens of thousands of people who have come to Computer Hall since Oct. 1, when Compaq's new series became the first full-power, bilingual desktop line ever introduced in Japan witha bottom price under $1,000.

Like most who have come for a look, Mr. Haraguchi was at Computer Hall out of more than a shopper's interest. He is a 19-year-old salesman at a Tokyo computer shop, assigned to find out whether his manager should consider stocking the new line.

"More than 13,000 people came to see these models in the first five days, and more than half of them are in the computer business," said Masaaki Inagaki, Computer Hall's manager on the floor where the display is set up.

Compaq's new cut-rate line still is only on display in a few stores in Japan.

Adapting the line to Japanese language and preferences has involved more than a few start-up delays, including difficulties in putting out a bilingual keyboard to work with MicroSoft's new bilingual DOS/V software. Stock for delivery to retail customers won't arrive until late this month or early next.

And the jury is still out on how many sales Compaq will get out of all the interest its new lines are attracting.

Computer Hall's Mr. Inagaki said that, despite the traffic, retail orders for Compaq desktops at his shop were "still in two digits" midway through the second week. At this point, he said, NEC is substantially outselling Compaq at Computer Hall.

Dealers across Japan, mainly in the Tokyo area, have ordered a start-up stock of about 3,000 of the line's various models, Tatsuhiko Tsubuki, Compaq's Japan sales manager, said. It is that stock that is due about the end of the month.

The company has signed up about 40 dealers who either own or serve an estimated 500 or 600 shops, but it has not yet been able to supply even a set of display models to each outlet.

So with costly two-page, full-color ads already running on the inside covers of some Japanese computer magazines, the worry is that interest might peak before the stock arrives.

Until DOS/V, most bilingual desktops here used hardware rather than software to handle the Japanese-language part of their work. The standard way was to add a Japanese-language chip to work together with the main drive.

U.S. makers, daunted by both this language problem and Japan's arcane distribution system, were at a disadvantage that many found as powerful as any tariff or trade restriction.

MicroSoft, and now Compaq, are promoting DOS/V -- developed by IBM Japan to help popularize its PCs here -- as a fully bilingual software.

What this has meant is that anyone who makes IBM-compatible hardware can go into the English-Japanese bilingual PC business. And that, in turn, meant that, for the first time, Japan was open to an IBM-compatible American challenge like the one Compaq has mounted.

Compaq, the No. 3 U.S. maker, put a total of 39 products on the market Oct. 1, centered around the ProLinea line and the DeskPro/i line. The company said it was aiming for a market share of between 7 percent and 10 percent. The company opened operations here in April with a conventionally priced line that is yet to achieve a 1-percent market share.

The lowest-priced ProLinea model lists at about 128,000 yen, or about $1,000, which is just over half the price of the comparable NEC model.

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