Compaq Computer Corp will drastically undercut Japanese personal computer prices in Japan, the business daily Nippon Keizai Shimbun said, although domestic firms do not expect a fierce price war to follow. Compaq KK, the Japanese subsidiary, plans formally to anounce a new, cheaper range for Japan’s market on October 1, Reuters writer Sebastian Moffett reports from Tokyo. Nippon Keizai said that Compaq will offer models based on Intel Corp’s 80386SX microprocessor at the equivalent of less than $1,050 and also offer an 80486DX2-based model at $3,600 as part of a range of 30 personal computers to be offered at half the price or less of Japanese equivalents. A Compaq spokesman declined to comment on the newspaper report pending the October announcement but analysts said the move would likely bring about a round of price cuts in Japanese personal computers, though this would not reach the levels of the recent cut-throat pricing seen in the US market. But then Japanese analysts always talk like that: the Nikkei Average was not going to plummet, Japan was not going to go into recession.
Others must lower
The biggest effect will be on prices. Other manufacturers are going to have to lower theirs too, said Etsuro Ogisu, an analyst at UBS Phillips & Drew. But the Japanese personal computer market is not so price sensitive as the US, he added. Japan’s personal computer market is overwhelmingly dominated by NEC Corp, which claims a share of around 50%. But NEC said it was unlikely to slash its prices dramatically in response. Echoing the IBM Corp of a year or two back as it tried to hold the line with PS/2 pricing, The Japanese consumer is not someone who goes for price slashing, said Mark Pearce, an NEC spokesman. Ideas of quality service and history are more entrenched here. Echoes of IBM again. NEC’s personal computers also use a different version of MS-DOS from the DOS-V standard that derives from the MS-DOS that dominates abroad, so that NEC software will not run on foreign manufacturers’ machines, putting consumers off non-NEC brands for the moment – but the same argument applied to 8-bit CP/M in 1981. And the distinction will disappear with new versions of Microsoft Corp’s Windows system, which runs best on 80486-based machines, a generation that has not yet taken off in Japan. There aren’t so many Japanese applications for DOS-V now, said Shigeru Yoshinaka, an analyst at Barclays de Zoete Wedd. There’s more room for growth with higher-end models. But Compaq, which established a Japanese subsidiary and started marketing personal computers in Japan only last year, must first convince Japanese consumers that it can provide the after-service and quality Japanese consumers are accustomed to. In these fields NEC is seen still to have a huge advantage, analysts said. Even if they charge very low prices, we can beat them because of our range of applications and retail network, said NEC’s Pearce. (The retailing system in Japan is seen by the US as a hidden trade barrier). It will be hard for Compaq to repeat what it did in the US and Europe, said Phillips & Drew’s Ogisu. They are unlikely to grab a big share here.
