Toshiba’s PC Division Struggles

But analysts say Toshiba’s priority should be on shifting resources to areas where it has a clear advantage, such as hard disk drives (HDDs), as a fierce price battle involving Hewlett-Packard and Dell has made profits in the PC market elusive.

Hit by aggressive pricing by the two industry leaders, the Japanese electronics conglomerate cut the earnings outlook for its PC and PC peripherals division twice in as many months this year, raising investor concerns about its competitiveness.

Toshiba, which held top spot in the notebook PC market for seven consecutive years to 2000, expects the division to post an operating loss of 21 billion yen ($196 million) for the year to March, a stark contrast with its initial forecast of a 22 billion yen profit.

As part of its effort to revive the once vibrant division, it plans to turn its PC business into a separate in-house company on January 1 — a step industry watchers see as a catalyst for far-reaching restructuring.

“When profits from hard disk drives are stripped away and the real earnings picture emerges, losses at its PC business will be more like 30 to 40 billion yen (rather than 21 billion yen),” said Yoshiharu Izumi, an analyst at J.P. Morgan.

“That would leave Toshiba with no choice but to embark on fresh restructuring steps.”

To fend off price competition from HP and Dell, Toshiba said in September it aimed to cut its PC-related work force by 500, increase the ratio of outsourcing to 30 percent from 20 percent, standardize parts and lower the number of production platforms.

But the moves were seen as insufficient to turn around the PC business and Toshiba President Tadashi Okamura acknowledged it might need to do more.

“Those measures are intended to stop the bleeding, to keep the PC business from declining further. There could be an occasion to announce more radical measures,” Okamura told reporters at a reception on December 16.

Source: Reuters