USA TODAY US Edition
Toshiba’s travails underscore lack of speed in innovation
Nuclear bet, failure to keep up with tech rivals may be downfall
Toshiba introduced millions of Americans to high-end TVs and portable computers. Now, it could be saying goodbye.
The 142-year-old Japanese conglomerate, commissioned by that country’s Ministry of Engineering to develop telegraphic equipment when Ulysses S. Grant was U.S. president, warned in a financial report Tuesday there is “substantial doubt” about its ability to continue as a “going concern.”
The potential fall of the Toshiba brand comes with more than a dash of bittersweet memories for Americans. Many were weaned on the company’s dependable TVs and got their first taste of portable computing with the T1100, “the world’s first massmarket laptop computer” in 1985 — but have since moved on to Apple iPhones, Samsung TVs and Amazon Echoes.
Toshiba doesn’t sell home ap- pliances in the U.S., and two years ago it said it would stop making and selling its TVs in North America. It still sells laptops, accessories, hard-drives and phone systems here, available through retailers such as Best Buy and Amazon.
To patch up its bleeding balance sheet, Toshiba is selling a majority stake in its vaunted computer-chip business. Foxconn, the Taiwan-based components supplier, has offered as much as $27 billion, according to the Wall Street Journal. Toshiba spokeswoman Kaori Hiraki declined to comment.
“Think of the (intellectual property) that could end up in the hands of a company that competes with U.S. companies,” says J.P. Gownder, an analyst at market researcher Forrester. “That is sure to get the attention of the Trump administration.”
Toshiba faces a bleak future after losing a jaw-dropping $4.8 billion over the first nine months of its fiscal year and warning it could balloon to $9.2 billion for the full year. The biggest culprit: last month’s bankruptcy filing of its U.S. nuclear unit, Westinghouse Electric, after delays and billions of dollars in cost overruns in building U.S. reactors.
Financial troubles have reduced its credit rating and put in jeopardy a key construction license from the Japanese government. Toshiba also faces the possibility of being delisted on the Tokyo Stock Exchange.
The nuclear division, which Toshiba won in a heated bidding war in 2006 for $5.4 billion, has been roiled by soaring cost overruns since the March 2011 nuclear disaster in Fukushima, which tempered nuclear demand.
“This illustrates the dangers of operating in a conglomerate fashion,” says Columbia Business School Professor Rita McGrath. The fall, she says, is a cautionary tale of what happens to companies that depend on high-quality knock-offs that are priced competitively and distributed aggressively around the world.
The strategy worked through the 1980s for the so-called Big Six of Japanese electronics — Toshi- ba, Sony, Fujitsu, NEC, Sharp and Mitsubishi — until competitive cycles grew faster and U.S., Chinese and Korean companies won on innovation, she says.
“The Japanese approach was to take existing product like cars and TVs, perfect their quality and then leverage a formidable global reach to distribute them,” McGrath says. “It’s hard to compete, however, when next-generation products come along.”
For years, Toshiba was on the forefront of the computing revolution. In the 1980s, it introduced flash memory, technology that would transform how we store digital photos, video games and reams of documents on those once ubiquitous flash drives. Its products still regularly grace electronics shows. But in the past decide, it hasn’t had a winning product that could offset its troubled bet on nuclear.
“A lack of diversity in culture, ideas and technology hurt the Big Six,” says Gerard Corbett, who spent a dozen years at Hitachi, including a stint as vice president of branding and corporate communications and is now a branding instructor at UC Berkeley Extension.