Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, February 13, 1994 TAG: 9402080257
SECTION: BUSINESS PAGE: F-2 EDITION: METRO
SOURCE: ELISA WILLIAMS ORANGE COUNTY REGISTER
DATELINE: COSTA MESA, CALIF. LENGTH: Medium
What bugs him is being limited to electronic mail that can't send voices or pictures.
"What I want is possible," he said. "We just haven't gotten there yet."
To Tsubota, Canon's long-term success depends on his putting the proper organization in place, not on day-to-day competition.
Tokyo-based Canon Inc., which has been wildly successful in the printer business, resolves to be a force in the PC business by the end of the decade. It spent $20 million to set up Canon Computer Systems in 1992, a Costa Mesa division that focuses on marketing PCs and printers to small businesses and home offices.
A year after introducing its first product lines, questions remain about whether Canon - known for cameras, printers and optical products - has what it takes to compete as a computer company.
Tsubota maintains it's too soon to judge.
"We look at our first years as experimental. We're now applying what we've learned as we enter our second phase," Tsubota said. "It's important to understand that, in the beginning, it's not so much the product that was important, but determining how do we handle it and sell it. When you look at computer companies today, like IBM, they got into trouble because they had the wrong organization."
In the past few months, Tsubota's ideal PC company has begun to take shape.
Canon Computer Systems more than doubled its work force to 170 people and moved into a headquarters building in Costa Mesa.
It opened a 187,000-square-foot warehouse and distribution center in Memphis, Tenn. The facility, based on manufacturing models first conceived by mail-order companies, is designed to assemble 10,000 to 15,000 personal computers a month with a skeleton crew of 20 people.
And it expanded its network of retail dealers from about 500 to more than 3,800, including national chains such as Circuit City, Comp USA and Wal-Mart.
Canon's theory is that the PC market will undergo massive change within the next three to five years as more computers are sold through retail stores to students, entrepreneurs and telecommuters.
With a U.S. distribution network in place, U.S. managers keeping a pulse on trends, and high name recognition, Canon considers itself among the top candidates to be an emerging leader in this new market.
One of Canon's advantages is the diversity of its product line, a combination of PCs and laser printers and its Bubble Jet printers.
Last fall, Canon introduced nine 486-level Innova desktop computers, ranging in price from $1,400 to $3,000, all of which can be upgraded to Intel Corp.'s Pentium processor.
For mobile workers, Canon has three Innova notebook PCs and NoteJet, a combination printer and portable PC that starts at about $2,500 and has won design awards from Byte, Popular Mechanics and PC Laptop magazines.
Canon hopes to sell PCs with its printers in discounted combination packages.
Analysts admit the strategy has potential.
"It's true that right now the only real thing Canon has got going for it is a high brand awareness. But that may be enough," said Philippe de Marcillac, a PC analyst with San Jose-based Dataquest. "There's a lot of evidence that the PC market is rapidly entering an era where brand name is more important. It's similar to what happened with TVs - consumers looked to brand as an indication of quality."
What remains to be seen is whether there's room for another leader or even another niche player. The shakeout is ridding the computer business of small PC-makers. The survivors are companies such as IBM Corp., Apple Computer, Compaq Computer Corp. and AST Research, which have name recognition and a critical mass of more than $1 billion in sales.
Canon Computer Systems is still minute compared with the PC industry's powerhouses. Personal computers accounted for about $70 million of Canon Computer Systems' more than $300 million in sales last year.
Canon Computer Systems concedes that it does not expect the PC portion of its business to become profitable before 1995. results.
Its goal is to capture 1 percent of the small-business and home-office market by 1995, and 5 percent by the end of the decade - a market share that would rank it among companies such as AST, Dell Computer Corp. and Gateway 2000, according to International Data Corp.'s market share reports.
Though Canon Computer Systems has the support of a massive, multinational electronics company, its distance from Canon's U.S. headquarters in New York has enabled it to foster the personality of a start-up.
Employees at its sleek glass office building dress casually. And Tsubota, who after 16 years at Epson America spent six months as an assistant to Steve Jobs at Next Computer, acts more like an irreverent entrepreneur than a seasoned corporate executive.
by CNB