Batteries For Your Toshiba

For all the recent doom and gloom confronting personal computer companies, there's one niche that has seemed invulnerable. Shipments of battery Toshiba laptop jumped 35% last year and are projected to nearly double in 2007. So when the U. S. subsidiary of the world's No. 1 laptop maker lies off about 250 employees, as Toshiba America Information Systems Inc. did in the first quarter of 2007, something must really be wrong.

Since then, Toshiba's woes have multiplied. In February, the top-ranked manager at its Computer Systems Div., which last year accounted for roughly 45% of the unit's $ 940 million in revenues, abruptly resigned. The profit picture dimmed in March, when the company slashed prices by as much as 33% to catch up with an industry price war. In April, it fired its exclusive distributor, substituting Tech Data Corp., a wholesaler that it had fired a year earlier. But Toshiba America has a more serious problem: For nearly two years, it has trailed the competition in bringing new laptop technology to market.

No one is writing Toshiba off, of course. In 2006, it passed Zenith Data Systems Corp. to grab the No. 1 spot in the market for battery-powered laptops, with a 21% share of the $ 3.2 billion business. And its research and development resources rank among the best in the world. Toshiba was the first supplier to sell color portables, and through a joint venture with IBM Corp., it plans to make color screens for battery Toshiba laptop. It's also a leader in use of longer-lasting nickel-hydride batteries. And it's pushing ahead with wireless communications for laptops.

But for now, the company that popularized IBM-compatible laptops five years ago is stuck with an outdated product line. Instead of competing with a handful of companies for a tiny slice of the PC market, Toshiba is now competing with more than 130 laptop makers whose wares account for more than 15% of all PCs sold.

Toshiba's biggest weakness is in notebook computers, compact laptops that slip easily into briefcases. The newest models come with up to 60 megabytes of disk storage and use versions of Intel Corp.'s speedy 80386 chip. But most of Toshiba's product line is still made up of heavy, bulky laptops or notebooks that use slower chips. Many of its products, in fact, still rely on AC power, not batteries. ''Toshiba is held prisoner by a horribly out-of-date product line,'' says, senior vice-president at researcher International Data Corp.

That's hurting sales. The company won't disclose results for its computer operation but says that overall sales for its U. S. subsidiary -- which also makes copiers and fax machines -- grew only 3% last year, down from 30% annually in the previous four years. Recently departed Toshiba America Information Systems executives say its computer sales for the six months ended Mar. 31 were 70,000 units -- down more than 35% from the previous six months and more than 20% below the year-earlier half. That, they say, led to a $ 20 million to $ 30 million loss for the period. President of the Toshiba subsidiary, says that the company was profitable for the full year ended Mar. 31.