Apricot buy turns sour on Mitsubishi

Analysis Parent quits UK PC sector as vendor struggles to expand.

Apricot Computers was once the darling of the UK IT industry, but its decision to sell out to Mitsubishi Electric in 1990 triggered a slide in fortunes that has led the parent company to abandon the local PC hardware market altogether.

Instead, Mitsubishi is focusing on the systems integration business it launched in January under the Metaphorix brand and has pulled out of the UK PC market (PC Dealer, 17 March).

The move was the latest in a series of strategic realignments for Apricot.

When first acquired by the Japanese conglomerate, the company received a $200 million cash injection to help propel it into the top 10 PC vendors worldwide.

A subsequent investment of $200 million was made in 1996, but that also failed to take Apricot beyond the realm of a second-tier hardware manufacturer.

In the autumn of 1997, the company re-entered the notebook market after an unsuccessful attempt at rebranding Samsung machines three years earlier. Then, later in the year, Apricot increased its list of directly-supplied resellers and set up an accreditation programme in an effort to boost its presence in the local SME market.

That strategy was further consolidated by the vendor's withdrawal from the consumer business in February last year (PC Dealer, 4 March 1998). Since then, Apricot has focused its PC hardware business on the SME market, as well as the internet sector.

Peter Horne, managing director of Apricot, blamed Mitsubishi Electric's recent financial troubles and sales model for Apricot's inability to improve its status.

'We've never been a tier-one player,' he stated. 'So as margins became smaller and competitors such as Compaq and Dell increased market share, it was not viable for us to operate profitably.'

But one reseller claimed the mismanagement of local representatives was equally to blame.

Dennis Eyre, managing director of Voyager Systems, said: 'Apricot squandered the money invested by Mitsubishi. It was never a top-tier vendor but with that financial base it could have taken the business a lot further than it did.'

He added: 'Apricot's management has wasted a lot of people's efforts, including its own staff and resellers. The buck ultimately stops with Horne because he's the one who's been in charge all along.'

Eyre cited a programme offering free servers to local councils as an example of poor management by the subsidiary.

He also claimed a multimillion pound advertising campaign in early-1998 targeted at the SME market was 'a total disaster' and resulted in the sale of 'about 12 boxes'. Eyre also suggested Apricot invested in buildings and personnel it did not really need.

But Phil Williams, head of corporate marketing at Computacenter, disagreed: 'Because it's a more consolidated market and the big players are just getting bigger, it's becoming increasingly difficult for vendors to move up the food chain.

Apricot could never really move from its position as a second-tier vendor.'

According to Terry Ernest-Jones, research manager of European personal systems at analyst company IDC, that status made it hard for Apricot to compete in the local market.

'Second-tier vendors can't achieve the economies of scale that the larger brands can and because they're not pared down like the third-tier vendors, they can't respond to small niches, so they get caught in the middle.'

Eyre also claimed that Apricot's demise was inevitable. 'Everybody in the industry has known something was happening for a while because there have been a lot of problems with supply. Also, Apricot staff have been on a downer, not knowing what was going on.

'When we heard on the grapevine that Horne was in Japan, everybody put two and two together and guessed it was probably the end,' he added.

MITSUBISHI ELECTRIC GROUP COMPANIES

Mitsubishi Electric's PC business covered systems, motherboard and software systems.

Other Mitsubishi Electric products in the UK are:

Disk drives

Monitors

Industrial automation equipment

Storage products

Mobile phones

Television and video

Mitsubishi Electric Semiconductors include:

ASSPsMCUs/MPUs

Digital TV Decoder chip set

Microwave/RF

DRams

Opto-electronics

Flash

SRams

Video Ram

TFT-LCD flat-panel displays

Other subsidiaries are: Mitsubishi Electronics Mobile Computing, Mitsubishi Electric, Meteorological Radar and Mitsubishi Electric Escalator.