AST to Challenge NEC by Introducing Clone in Japan

AST Research, the Irvine personal computer maker, launched a David-and-Goliath battle with NEC Corp. by unveiling a clone of the Japanese giant’s best-selling personal computer.

The bold move is the first attempt by a U.S. computer maker to challenge NEC’s dominance in the Japanese PC market, where NEC’s machines have become a de facto standard in much the same way as International Business Machines has established standards in the United States.

Commerce Department officials, who accompanied AST officials at the unveiling, praised the venture as a good test of Japan’s willingness to open its market to U.S. products. The announcement follows last week’s approval of a sweeping U.S.-Japan trade agreement aimed at reducing the $49-billion U.S. trade deficit with Japan and opening the Japanese market to more imports.

Safi Qureshey, AST’s president and chief executive, said the firm’s computer “represents a milestone in U.S.-Japanese trade relations.”

AST said it will sell its new computer in Japan at lower prices than comparable offerings from Tokyo-based NEC.

Qureshey said the move “shows the determination of an American computer company to explore overseas markets such as Japan.” U.S. firms have managed to capture only a small fraction of the $5.6-billion Japanese PC market. “It will also test Japanese willingness to look at products from outside its borders.”

IBM and Apple Computer have made forays into the Japanese market with limited success. IBM has carved out a 7% market share, while Apple--which sells a Japanese-language version of its Macintosh machine--has almost nothing. AST, however, will be the first U.S. company to directly challenge NEC with a computer that mimics NEC’s machines and can run the same software programs.

NEC has captured nearly 50% of the Japanese PC market, and its NEC 9801 machine has become the computer design standard in Japan. The Japanese standard is different from the IBM standard because it must handle the thousands of characters in the Japanese alphabet.

“I think this is a very big challenge for AST,” said Steve Lair, an analyst at Dataquest, a San Jose market research firm. “Breaking the domestic Japanese market depends on establishing very key distribution alliances.”

He added: “There is a lot of spirited support for an American company turning the tables on the traditional Japanese practice of the fine art of cloning.”

While Japanese firms have aggressively cloned computers made by U.S. manufacturers, they have been reluctant to copy each others’ products, Lair said. Only one company, Seiko Epson Corp., has marketed a clone of the NEC machine.

A NEC spokesman declined to comment on the new AST machine.

The AST machine, called the AST Dual SX/16, will run thousands of software packages written for NEC 9801 computers and will accept Industry Standard Architecture supported by IBM and much of the global PC industry.

AST began designing a computer for the Japanese market nearly two years ago. The new machine will use a set of microchips supplied by Japan’s Kawasaki Steel Corp. and an operating system--the software that manages the computer itself--developed by Tomcat Computer Corp., a small Japanese firm.

Qureshey described the company’s venture as radical but not overly risky.

Qureshey said the machine’s introduction will not likely show any impact on company profit for the current or next quarter because negotiations with distributors will take time. AST was founded in 1980 by Qureshey and fellow entrepreneurs Tom Yuen and Albert Wong. The company made IBM-compatible add-on products and eventually introduced its own line of personal computers in 1986.

AST lost $7.5 million on revenue of $456.5 million in its fiscal year ended June 30, 1989. For the six months ended Dec. 29, 1989, AST earned $10.2 million on revenue of $244.7 million. AST’s stock, which has risen dramatically in the past quarter, closed Tuesday at $20.125 per share, up $1.125, in over-the-counter trading.

JAPAN’S PERSONAL COMPUTER MARKET

Here are the major players in the $5.6-billion personal computer market in Japan.

Company Market Share NEC Corp. 48.7% Epson 13.7 Fujitsu 7.1 IBM Japan 7.0 Panasonic 6.4 Toshiba 4.6 Sony 4.4 Sharp 2.8 Hitachi 1.6 Mitsubishi 1.6 Sanyo 1.2 All Others 0.9

Source : Dataquest Inc.