In 1985 Toshiba launched the world’s first notebook computer, the T11. Weighing in at a hefty four and a half kilos, an Intel 086 CPU and 256Kb RAM and no hard drive, just a 720K floppy.

Priced at around US$4500, the T11 was pretty advanced for its time. The notebook was a good seller – the company shifted 11,000 units in

the first year and it wasn’t even a full year.Twenty years after the launch of the first notebook computer, Toshiba’s Australian Information Systems Division is well past the million mark. Toshiba reached the one million notebook milestone in March last year, just as Ralph Stadus left the company, handing Mark Whittard the reins.
Prior to 1985 Toshiba was a consumer products business in Australia. The 130-year-old company is highly diversified with 161,000 employees worldwide, and consolidated sales of over US$55 billion. The present day Toshiba has a dual history. In 1875 Tanaka Engineering Works became Japan’s first manufacturer of telegraphic equipment and later one of Japan’s largest manufacturers of heavy electrical apparatus. In 1890, Hakunetsu-sha & Co began making light bulbs, diversified into consumer products and was renamed Tokyo Electric in 1899. In 1939, they merged to form an integrated electric equipment manufacturer under the name Tokyo Shibaura Electric before becoming Toshiba in 1978.

In Australia, Toshiba has operations in Consumer Products, Imaging and Medical, but it is the company’s Information Systems Division (ISD) which is responsible for the family of notebooks. Mark Whittard took over as general manager of the ISD last May, as Stadus retired from 12 years as a general manager in the PC business with Digital, Dell and Toshiba.

Mike Sager, PC Analyst at IDC Australia, points out that Tosh hasn’t been out of the number one spot in the notebook market much recently. Seven out of the last nine calendar quarters is a good record during a time of leadership change. “Once in a while someone might tip them into second place,” he says. “It’s difficult to be number one all the time.”
The first time was second quarter 2003. It happened because HP was doing great deals bundling an iPaq with their notebooks. The second time was first quarter this year. Of the factors at play in the latest shove, biggest was probably its standout quarter at the end of 2004 – getting a lot of stock out into the channel one month is hard to do again the next.

Releasing the Q1 figures last month Sager said the Ingram/Tech Pacific merger had affected the market: “With so many vendors at Ingram, companies have to fight to hold their ground, so they are looking at their channel strategy.” Toshiba did and joined Acer at Brisbane’s Cellnet Group, as did HP. Both said it was to access the increasingly important telco market. As well as being a major distributor of mobile phones and accessories, Cellnet includes general computing distributor IT Wholesale. “If you want Queensland, you need ITW,” Sager adds.
Whittard explains why that decision was made: “The customers are looking at buying that equipment together, so they know it works together. Also the traditional telco sellers were asking for product more and more often. We had been holding them off.” Whittard told SmartOffice Reseller he was watching the Smartphone market but made no commitment to enter it, though bundling 3G cards is…on the cards.

MIXED BLESSINGS

The PDA market is “not setting the world on fire”, Whittard says, but the pocket PC has never been a big part of ISDs business. He all but gave up the space to the handset manufacturers, though admits Toshiba does have product in that space.
Mercie Clement, handheld analyst for IDC Australia, points out that one of the key factors in entering the Smartphone market in Australia is a relationship with one of the carriers. “They would have to get on with a carrier before Tosh could make it there,” she said. “The criteria are different for each of the carriers and it is a lengthy process. You have to have internal expertise to get it into the channels and markets.”

Meanwhile, the notebook business has been a bit of a mixed blessing since Whittard took office. Though growing at 19 per cent, Whittard’s main business in commercial notebooks has also come under pressure. Since the introduction of new brands Asus, LG and Samsung into the competitive mix, the local dynamics of the market have been upset.

In response to the invasion of its market share, Acer has cut prices which in turn puts pressure on Toshiba, says Sager. So as these new, well-branded competitors have gobbled up much of the growth from potential whitebook sales, it has also eaten into the growth that could have gone to the traditional players Tosh, HP, IBM, Dell and Acer.
Toshiba’s strategy, according to Whittard, is two-fold. Notebooks are a commodity product at a price point and you have to be at every price segment with good quality features. Tosh can do this with economies of scale. Then, maintain differentiation through technology. At the moment that’s tablets, size, AV. Soon it will be Fuel Cells, that sort of thinking.
Another point Whittard makes is that Toshiba sees its competition as the desktop market, not notebook manufacturers. “We don’t take it to our competitors head to head, we are about converting the desktop. If we can convert desktops across we’ll get 30 percent of that,” he says.
It might not be a hollow promise. In Australia notebooks already constitute 35 to 40 per cent of the total PC market, he points out, and for the first time in the US notebooks now outsell desktops.
Sager warns that Toshiba needs to stay out of the line of fire or it
might get hurt by competitors trying to get marketshare. “Other vendors are doing things that might be considered crazy,” he says.

Tosh needs to maintain its high presence in the channel, maintain its place in the market with low price, low spec, but do that without competing at the low-end and bringing the brand down. Sager says the company’s main strengths are the brand, channel relationships and product. That’s a good mix to have.