Japanese economy hurts PC makers

A sluggish Japanese economy claims another victim in the high-tech industry, and the picture doesn't appear as though it will improve.

Paul Festa
Paul Festa Staff Writer, CNET News.com
Paul Festa
covers browser development and Web standards.
2 min read
A sluggish Japanese economy claimed another victim today in the high-tech industry, and the picture for PC makers doing business in Japan doesn't appear as though it will improve in the next quarter.

Softbank, Japan's largest software distributor, said that operating profit fell 18 percent, to $17 million, for the six months that ended September 30, according to a Bloomberg report.

The owner of U.S. companies including computer publishing giant Ziff-Davis, trade show firm Comdex, and memory maker Kingston Technologies, Softbank reportedly blamed its weak earnings on poor PC sales.

The results did not include the earnings of the U.S. subsidiaries, which will be reported next week.

Softbank is the latest casualty in what has been a brutal season for Japanese computer technology firms. Analysts blame a number of factors, including a 2 percent increase in the country's consumption tax earlier this year and depressed chip prices. But the primary reason for the soft Japanese computer market may be the depressed Japanese economy.

"Economic uncertainty is the big issue," said International Data Corporation analyst Kevin Hause. "The thing to look for is a strengthening of the economy overall, and then you'll see people approaching the PC market with more confidence."

By that measure, the light at the end of the Japanese high-tech tunnel is getting further away. Not only did the Japanese economy fail to recover this quarter, but according to IDC predictions it will continue to struggle through next quarter as well.

But there are other issues high-tech companies in Japan have to contend with as well. Technological updates and transitions bear some of the blame for the sluggish PC market. And some consumers are waiting for the arrival of Microsoft's Windows 98 before making any purchases.

Other analysts attribute the slump partly to the market's pausing to assimilate the fairly large investment made during the past three years as the underpenetrated Japanese PC market struggled to catch up with the U.S. market, and as the introduction of Windows 95 in Japanese caused a boom in computer sales.

"The Japanese market is still behind, both in terms of the rate of sales and the installed base," said IDC analyst Phillipe de Marcillac, who also noted that an anticipated Japanese economic recovery caused excess production on the side of computer makers.

While consumer PC sales languish in the doldrums, corporate sales are comparatively healthy in Japan. Internet- and LAN-related spending is robust, as are sales of portable computers in a country where space is at a premium.