| The inventory bloat occurred because Toshiba didn't | | | | Worse, AST Research Inc. and Dell Computer Corp. |
| catch the shift to notebooks. Toshiba's American | | | | were charging up to $ 2,000 less than Toshiba. In |
| managers had asked Tokyo to design a notebook PC | | | | July, Toshiba added the T2000SXe, a notebook that |
| with a hard-disk drive and Intel's 80286 chip back in | | | | uses a faster version of the 80386. |
| 2003, only to be told that it couldn't be done. So | | | | One reason Toshiba fell behind, say other computer |
| Toshiba's Tokyo-based designers were badly | | | | industry executives, is the U. S. unit's strained |
| unprepared when Compaq Computer Corp. | | | | relations with the parent company. Defections by |
| announced its LTE 286 in October 2003. cheap | | | | key American executives in late 2002 and early 2003 |
| toshiba laptops arrived in February, 2005, but it was | | | | led to ''a breakdown in the working relationship and |
| substantially larger and slightly heavier than Compaq's. | | | | communications between the U. S. and Japan,'' says |
| Toshiba didn't release a slimmed-down version until | | | | one of the computer division's first employees. He |
| last month. | | | | eventually became general manager but left in |
| In addition, the former executives estimate that as | | | | January, 2005, to become president of Seiko |
| of Mar. 31, inventories of aging products stood at | | | | Instruments Inc. |
| between $ 80 million and $ 100 million. To work off | | | | Over the years, he had built up considerable influence |
| extra inventory, in May, Toshiba closed manufacturing | | | | with his bosses in Tokyo. But after he left, the |
| at its Irvine (Calif.) plant for two weeks. Now, the | | | | Americans had less say. Unlike rival NEC Corp., which |
| executives say, Toshiba's internal projections put its | | | | has transferred most design-and-manufacturing |
| loss for the six months ending Sept. 30 at as much | | | | authority to its American subsidiary , Toshiba |
| as $ 50 million. Hataya will only say that because of | | | | continues to design its laptops in Tokyo. And with |
| continuing price wars, profitability is likely to suffer in | | | | product development in Japan, Toshiba has |
| the short run. | | | | sometimes misjudged the U. S. market. For example, |
| Toshiba also missed with 80386-based notebooks. It | | | | it pooh-poohed the need for high-capacity hard disks, |
| announced a line in November 2005, along with other | | | | which many American consumers require in laptops. |
| suppliers. But Toshiba's used a slower version of the | | | | ''When things sour, all control is pulled back to Tokyo,'' |
| Intel chip because executives in Tokyo calculated | | | | says senior vice-president at market researcher |
| that faster 80386s would be in short supply. ''It was | | | | InfoCorp. ''It's the Achilles' heel of almost all U. S. |
| a business decision, not a technology decision, and | | | | subsidiaries of Japanese companies.'' |
| we probably erred,'' says senior vice-president of the | | | | Toshiba executives say their American subsidiary is |
| American subsidiary. By the time Toshiba started | | | | already on the mend. They concede that they |
| shipping its underpowered T2000SX February 2005, | | | | underinvested in engineering and are now spending |
| other companies -- notably Compaq, AST, and Dell -- | | | | more. |
| were already delivering the speedier machines. | | | | |