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Opportunity Lost: The Sad Story Of Toshiba

There are hundreds of stories of missed opportunities in the computer industry. And then there is the story of Toshiba America, which, perhaps, is the greatest story never told. It is a sad and curious tale that winds its way from 1985,

the early days of personal computing when U.S. manufacturers lived in fear of the "Japanese invasion",to today, where we have a $5 billion company that, at best, can put out a good press release. All in all, Toshiba America has little to show for nearly two decades of effort,both in the channel and as a division of one of the world's largest diversified electronics conglomerates. Yes, this tale would make a great novel. Let's sit back for a moment and ponder what might have been if only Toshiba had gotten it right. It's a lesson for us all.

I'll start this story with a simple fact: Toshiba once held the computing industry in the palm of its hand because it possessed a lock on the notebook-computer market. Retailers, VARs, integrators, customers, developers and distributors once clamored so wildly for the company's notebooks that it seemed the hardware was in a perpetual state of allocation. Can you fathom such allocation today for any product? And that didn't just last a few weeks or months,it persisted for years based on Toshiba's ties to the component supply chain. Toshiba's executives would sit in their Irvine, Calif., headquarters and actually decide who would and would not be worthy of receiving their computers based on some tenebrous methodology that no one to this day can decipher.

Nonetheless, most of the lot would go directly to "enterprise customers with the greatest demand" and to whomever else the highest-ranking U.S. official deemed fitting. It was an absolutely insane situation devoid of any real strategy beyond "we have some great products and will ride that wave." Through it all, Toshiba really never cultivated long-lasting partnerships, as evidenced by its showing in our Annual Report Card during the years.

In fact, Toshiba could never leverage its lead in notebooks as an advantage for its channel partners. To put it bluntly, the group grew so arrogant over time that it believed it could solicit help from the very businesspeople it was forsaking. And that is probably the reason Toshiba is not a major factor in the market today despite its broad product line. Then, when Toshiba officials woke up one morning, smelled the coffee and realized they needed to expand beyond their core notebook product and break into the market for desktop systems and servers, it was too late. HP, Compaq (at the time), IBM, Dell and several other players were already successfully selling full lines, but time had passed Toshiba by, and it had no central, trusted channel figure. As a result, the company could not muster up much enthusiasm or support for an incursion into new markets.

It's hard to figure out who is responsible. Were U.S. managers held hostage by dictates and directions from Japan? Perhaps the managers who ran the North American computing unit share should bear the brunt of the blame. Well-intentioned, some did more harm than good. What is surprising is many of those managers were accomplished businesspeople with proven track records. One was even a prominent analyst who was used to critiquing businesses, not running one. Indeed, he dismissed the notion of working with the channel,despite our objections,and headed down a failed strategy to sell direct.

Today, you'll find former marketing, sales and channel managers from Toshiba all over the computing landscape. Now Toshiba has Rod Keller running the show,the fifth manager to do so in the past several years,and while he initially unfurled some promising rhetoric to re-engage with partners and tap into the SMB market, I have seen little real progress in the mainstream business channel since he joined 14 months ago. While the company is making some market-share gains under his reign, it still has not been able to articulate a channel strategy that can compare to that of HP or IBM. IBM may only have 5 percent of the overall U.S. PC market, but it owns twice that in the notebook space,and dominates Toshiba in the business sector because of its relentless focus on the channel.

Toshiba claims its market share shot up 43 percent in the first nine months of 2002. Sure, that may make for some great press releases and provocative statements by its management team, but when you add up the numbers, Toshiba still lags far behind the competition in the business space,where even Sony is making inroads.

Toshiba can make all the noise it wants about market share, but its current management seems destined to repeat the mistakes of its predecessors. What do you think? Share your thoughts on Toshiba with me at rdemarzo@cmp.com.

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