Byting Japan

By EDWARD W. DESMOND TOKYO

EXECUTIVES AT APPLE COMputer's Japanese subsidiary are still laughing about the time a shipping-company employee drove up in a refrigeration truck to pick up crates filled with Macintosh computers. He had seen the company's rainbow- hued apple logo on the boxes and assumed they contained fresh produce. The irony was fitting: in the first few years after the 1983 entry of Apple into Japan's $7 billion personal-computer market, its Macintoshes, unsold, were gathering dust on the shelves of computer shops in Japan.

If Apple staff members in Japan can laugh today, it is because the company has succeeded in dramatically reversing its fortunes there during the past four years. Since 1989 Apple has increased its market share in Japan nearly fivefold, to 5.4%, selling 120,000 machines in 1991. That is still small compared with giant NEC, which controls more than 50% of the personal-computer market in the country, but Apple hopes to reach a 7% share and sell 50% more computers this year, for $500 million. Maneuvering its way among behemoths like NEC, Fujitsu, IBM and Toshiba is no mean achievement for Apple, especially since overall personal-computer sales have slumped during the past two years. Says Satjiv Chahil, marketing vice president for Apple Pacific: "I think we have won Japan's respect."

In the process, Apple (worldwide sales: $6.3 billion) has joined a select group of American companies that have debunked the myth of Japan as a fortress impenetrable to outside products. But cracking the Japanese market has had deeper significance for the California-based company: with profit margins steadily shrinking in the personal-computer business, CEO John Sculley has set out to expand Apple's business into advanced consumer electronics like CD-ROM players and personal digital assistants (PDAs), far more powerful versions of the electronic pocket diaries developed by Japan's Casio and Sharp. Sculley believes Apple has a key advantage because it pioneered software that makes computers simple and fun to use.

Sculley's vision enticed electronics giants Toshiba and Sharp to form alliances with his company earlier this year. Apple is contributing software know-how and product design to manufacture a CD-ROM player with Toshiba and a PDA with Sharp; the Japanese firms are providing manufacturing expertise along with key components such as flat-screen displays. Says Sculley: "We cannot afford to fund these projects by ourselves. These alliances give us a chance to be players in an important growth area." Agrees Toshiba's Takehiko Kotoh: "In the 100-m race, Apple is the top runner. They are very quick to move, and they are very open about what they are doing."

No one in Japan would have spoken so flatteringly of the U.S. firm four years ago, when Apple was doing nothing right in that market. The company had priced its best-selling equipment too expensively -- a Macintosh Plus at $2,842 in 1989 had a tag more than 60% higher than the U.S. price. Apple left marketing and distribution exclusively to a subsidiary of Canon, which saw little point in exerting itself on behalf of a lazy American client. Worst of all, Apple had not taught its computers to speak Japanese. In early 1989 only six software programs were available in Japanese, and a computer without software is about as useful as a phonograph without records.

But a change in attitude was beginning to take shape. In 1988 Sculley decided to take the Japanese market seriously. Seeking to address the software problem, Apple sponsored forums of Japanese and American software makers to encourage cooperation. The strategy worked: today about 500 Japanese-language programs exist for Macintosh, and several Japanese-language magazines for Apple enthusiasts are being published by local software companies. Access in Japanese to Apple's highly regarded software in graphics, desktop publishing and music writing established the company as a leader among designers, artists and small publishers, as well as among a surprisingly large number of big companies keen to improve the look of their internal publications. Says Takefumo Kanoya, general manager of the Japan Personal Computer Software Laboratory: "Apple has its own culture, the Mac culture, which is the key to its success. It has finally come to Japan."

In relatively short order, Apple Japan hired a Japanese management team, appointed a local board of directors, listed its shares on the Tokyo stock exchange and dropped its prices to competitive levels -- all meant to demonstrate a long-term commitment to Japan. Most important, Apple took charge of its own marketing and advertising. An award-winning Apple television commercial shows a bemused young businessman's face as he asks himself, "In love with my work? What happened to me?" Apple Computer is the answer, of course.

The whimsical ad campaign contrasted Apple with the dark-suited imagery preferred by the likes of NEC. Apple also went after youthful consumers by backing a 1990 Janet Jackson concert in Tokyo and a Japanese Ladies' Pro Golf Association tournament last month, the first time a major corporation has ever sponsored a Japanese women's tourney. Says Chahil: "We are championing causes. Besides, women are becoming more important in professional life. If ( women vote for Mac, maybe the next generation will too."

What the next generation does will depend largely on Apple's next generation of high-powered "information appliances," which will reach the market in 1993. Sculley is a leading advocate for the view that the high-tech world is on the verge of another revolution spurred by stunning advances in miniaturization, data storage, digitization of information and telecommunications.

The company's premier product for the new age is the Newton, a PDA produced in cooperation with Sharp, unveiled in May for release early next year. The Newton fits in the palm of the hand and employs a touch screen rather than a keyboard; entries like appointments or notes can be handwritten on the screen with a stylus. Newton has a slot for credit-card-size memory and program cards, like guidebooks or maps, and can make wireless data transmissions by fax.

Apple's CD-ROM joint venture with Toshiba is focused through Kaleida, a subsidiary at work creating an operating system that will make the disks playable on a variety of computers. The CD-ROM can hold digitized text, still images and even video as well as audio. Its main appeal is that it can accommodate data equivalent to that carried by 1,000 regular computer disks or about 250,000 pages of text. At this point, fewer than 5% of personal computers are equipped with CD-ROM players because no standard exists: a CD- ROM for Apple, for example, does not run on an IBM machine and vice-versa. As a result, the industry is paralyzed; book publishers have made few titles available on CD-ROM, and computer manufacturers have shied away from pushing CD-ROM players.

Sculley hopes that Kaleida will overcome the problem. In late July, at an industry conference that Apple sponsored at Hakone, a mountain resort near Tokyo, he announced that starting next year his company will build CD-ROM players into most of its computers at cost to stir consumer interest. Says Chuck Goto, general manager of S.G. Warburg Securities in Tokyo: "The new technology is ready, but so far, no one has shown the imagination to figure out a product consumers want. Apple is trying to build the critical mass." If the company succeeds, it will be blazing an impressive trail -- similar to the one it has cut by building a base in Japan.