Japan Laps Up U.S. Computers

TOKYO -- Masaru Murai, president of Compaq Computer's Japanese subsidiary, apologetically guides a visitor past piles of computers in the halls and offices of the company's Tokyo headquarters. "We've been growing faster than we expected, and don't have enough space," he explains. So fast that after only two years in Japan, Compaq K.K. has to move to larger quarters. Japanese personal computer companies have watched their sales slump along with the sluggish Japanese economy. But Compaq, Apple and other U.S. computer makers are finding consumers in the world's second-largest computer market eager to buy their products. Last year, American companies' share of the Japanese PC market climbed from 15.1 percent to 24.2 percent, says Dataquest, a market research firm. Each has taken a different route to higher sales, but together they have profoundly changed Japan's PC market. "It's an anxious time for Japan's computer industry," says Takahiko Umeyama, an analyst for market researcher IDC Japan Ltd. "It needs to change because of the foreign vendors, but the changes are very difficult to make." A combination of factors is weakening the once-invincible grasp of the Japanese PC-makers on their home turf. Since cheaper American PCs were introduced here two years ago, computer prices have plunged more than 60 percent. Japanese makers, once able to keep price tags high by splintering the domestic market with non-compatible designs, are shifting to the worldwide IBM standard. Dealers and distributors who were wed to a single maker have begun selling other brands, including imports. Japan's market still has plenty of room for growth. The average Japanese office has only 10 PCs per 100 employees, compared with about 42 per 100 in the United States, IDC says. If "wa-puro" -- the dedicated word processors used widely to handle Japan's complex writing system -- are included, the total still reaches only 16 machines per 100 workers. But with PC prices dropping following the discounting by American makers, Japanese are beginning to buy computers to replace their word processors. The biggest winner so far has been Apple. It first entered the Japanese market in 1983, but languished for years with a series of expatriate managers, high prices and an exclusive distribution network. "We thought it was the same market as the United States, and tried selling the same computers," says John Floisand, president of Apple Pacific and acting president of Apple Japan Inc. "It took us until 1988 to discover what it took in terms of Japanese-language application software." Macintosh sales began taking off in 1989 when a new Japanese management team signed up dozens of new dealers, introduced an improved Japanese-language operating system, and encouraged development of Japanese software. In Tokyo's Akihabara electronics retailing district now, it is a rare shop that does not display the rainbow-colored Apple logo. Nationwide, Apple has 3,000 resellers. That is far short of market leader NEC Corporation's 8,000 outlets. NEC's proprietary models still dominate the market with a 52.8 percent share -- a slip of 0.6 percentage points from a year ago. Still, Apple's market share jumped from 8.3 percent to 13.9 percent last year, displacing Fujitsu as the second-largest PC supplier, Dataquest says. IBM Japan, meanwhile, wrested fourth place from Toshiba with 6.7 percent of the PC market, it says. Yet IBM's Japanese subsidiary faces many of the same problems as its U.S. parent: over-dependence on large computers, high costs and limited distribution channels. Restructuring costs and the high Japanese yen pushed IBM Japan into the red last year with a net loss of 23.5 billion yen ($228 million). Compaq stretched its market share from 0.5 percent to 1.8 percent last year, its first full year in Japan. Compaq says it has decided to focus on selling through dealers who can provide extensive advice and service -- Japanese style. "We began by trying to sell through as many outlets as we could. But we learned that wasn't the right way," Compaq's Murai says. "We've pulled back some this year to eliminating outlets with limited service." Although quality, lower prices and better distribution have been key, American makers also benefited from the release last year of Japanese versions of Microsoft's Windows 3.1 software for IBM-compatibles and for Japan's handful of proprietary computer designs.