AST Takes On Japan Market With Computer

TIMES STAFF WRITER

AST Research, the Irvine personal computer maker, launched a David-and-Goliath battle with NEC Corp. in its own back yard 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 Corp. has established the traditional standards in the United States.

U.S. 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 AST'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 Inc. 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 industry 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.

An 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 worldwide 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, noting that the company will not rely on a single product for its revenue and the machine's success will not be overly dependent on the success of U.S.-Japan trade talks.

"The product has to meet the need in Japan," Qureshey said. "We have done that. The Japanese will have to take a more open look at U.S. products and the trade talks can help us there."

Qureshey said the machine's introduction will not likely show any impact on company earnings 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.

In a bid to become a global computer company that stands toe-to-toe with larger rivals such as IBM, Compaq Computer and Apple, AST has been aggressively pursuing business overseas, particularly in the Soviet Union, Western Europe and the Far East.

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.

The Japanese PC market--about one-sixth the size of the $35-billion U.S. market--is the second-largest in the world. Dataquest estimates that the Japanese market will grow nearly 20% to $6.7 billion in 1990, far surpassing growth in the U.S. market.

Qureshey said AST's name is virtually unknown in Japan and the company will not attempt to navigate through Japan's archaic distribution system on its own. Instead, the Irvine firm will distribute the computer through other Japanese computer manufacturers, who will sell it under their own labels.

One potential vendor is Sharp Corp., the consumer electronics giant, Qureshey said. AST also hopes to attract other Japanese companies interested in selling the machine.

Qureshey said the new product will add credibility to AST's bid to become a worldwide computer company. He said the company put more than two years of research into the multimillion-dollar project.

AST will try to compete with NEC's established machines by offering lower-priced hardware with more features, such as compatibility with software that runs on MS-DOS operating system, Qureshey said.

AST DUAL SX/16

PRODUCT: A personal computer for the Japanese market based on Intel's 80386SX microprocessor.

FEATURES: Compatible with Industry Standard Architecture software, including MS-DOS applications, and NEC's 9801 personal computer architecture, the de facto standard in Japan.

HARDWARE: AST Research, Irvine.

SYSTEM SOFTWARE: Tomcat Computer Corp., Japan.

SUPPORT CHIPS: Kawasaki Steel Corp., Japan.

ESTIMATED PRICE: $2,216 to $2,650.

Source: AST Research Inc.

JAPAN'S PERSONAL COMPUTER MARKET

The major players in Japan's $5.6-billion personal computer market.

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.

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