Toshiba Tweaks Ailing PC Division

Executives at Toshiba’s fledgling PC & Network Company are facing a tough sell for the division. The company was spun off internally earlier this week
and is making its public debut Jan. 1 and is looking to recapture its
magic in PC sales around the world.

At one time, Toshiba outpaced Dell in PC shipments. As of third quarter 2003, however, it
ranked fifth behind Dell, HP , IBM and Fujitsu-Siemens, according to IDC’s Worldwide Quarterly PC
Tracker. The new company inherits a 3.3 percent market share and a sales history of just
over one million PC units shipped in the third quarter.

So it could have come as no surprise this week when executives at
Toshiba headquarters announced they would separate PC operations from its
more-successful Digital Media Network Company. If Toshiba decides to
jettison its PC division entirely, separating it from the digital media
holdings will be much easier. (All three entities — the PC & Network, Digital Media and
Mobile Communications Companies — still report to Toshiba’s Digital
Products Group.)

According to the press release, “The establishment of a dedicated
company, solely focused on PC operations, is expected to further
accelerate Toshiba’s renovation of its PC business and secure an early
improvement of profitability.”

It’s the second radical shift in operations since September, when
executives announced sweeping changes to jumpstart the PC division
within the company. On Sept. 16, Toshiba cut 500 jobs at offices in
Japan and throughout the world, ordering decreased production in Japan, U.S. and Germany. At the same time, it increased the production of its plants in the Philippines and China, where labor costs are less.

It’s as good a time as any for the Toshiba PC & Network Company to make
a mark on its own. According to IDC, PC shipments are expected to reach
record levels in 2004, notably in the consumer markets. IDC said
the PC industry hit sales of $175 billion in 2003, and it expects shipment
growth of 11.4 percent in 2004.

“Following a surge in demand during the third quarter, and support by an
improving economic environment, we expect significant growth in the
fourth quarter,” said Loren Loverde, IDC Worldwide Quarterly PC Tracker
director, in a statement. “Consumers remain the primary market driver,
and while business purchases have yet to accelerate substantially,
overall growth shows the market in mid-recovery. We expect greater
business participation and continued double-digit growth during 2004.”

Ramping up for the expected gains — IDC forecasts a jump from 152.6
million units in 2003 to 169 million units in 2004 — Toshiba has been
beefing up its product line since September with low-end notebooks and
PCs tailored to businesses and consumers, mainly around its Satellite
line of notebooks.

Representatives from Toshiba USA were unavailable for comment at press
time.

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