IBM Gearing Up With a New Brigade of Computers to Battle Clones
The “clone killers” are coming.
The drum beats foretelling their arrival have nearly reached a crescendo, but International Business Machines isn’t saying when--or even whether--it is bringing out its next generation of personal computers.
Maybe within two weeks but more likely in the next couple of months, say many of the analysts, dealers, buyers and trade publications that have been participating in the eddying speculation for the past half-year.
They expect three versions of the clone killers: machines replacing the aging PC, PC-XT and PC-AT models that will match or exceed the performance of their imitators (called clones or compatibles, depending on the degree to which they mimic IBM’s standards). Machines that will be priced to compete with the rivals that have been gobbling up IBM’s market share.
But the talk of the personal computer industry these days is about more than just numbers--the bytes, chips, pixels and prices. The new machines, so the common current has it, could incorporate features that will be difficult to copy and easy to protect through patent or copyright law. Features, dealing with advanced graphics or communications ability or both, that will lock clones and their users out of future enhancements and capabilities developed by IBM and its chosen collaborators.
What’s at stake here, say some who attach great import to the IBM announcements, is nothing less than the whole direction of office automation and IBM’s role in it.
This is a critical time in the personal computer industry. Even though sales of personal computers have slackened from the 30% growth rates of the first half of the decade, it’s still a $30-billion-plus annual market worldwide and growing.
“We haven’t scratched the surface of the personal computer market yet,” said Rick Martin, a securities analyst who tracks IBM for Sanford Bernstein & Co. in New York.
What’s needed to tap the richer veins of the market, industry analysts have been saying for the past year or so, is a way for companies to get all their personal computers on the same wavelength, so to speak--so that they can “talk” to each other, work together and share information.
Just as IBM stepped amid the Babel of personal computers five years ago and offered its PCs as a standard, now it appears ready to propose its solution for the communications issue. And some predict the results will be as spectacular.
“This will put the PC market in turmoil, if (the new machines) are priced low enough,” Martin said.
Others, including industry consultants who have witnessed firsthand their clients’ defections from IBM, warn that it won’t be easy to persuade customers to abandon their clones and compatibles.
The defections have accelerated this past year. IBM and IBM compatibles are the biggest single category in the personal computer market. Of the 15.9 million personal computers sold worldwide in 1986, according to the market research firm Dataquest, 6.2 million machines were IBM-style. But IBM, the creator and one-time sole owner of that segment, now holds only a 42% share, according to Dataquest.
Instead of crushing the competition, IBM’s moves could wind up splitting the market segment into two, forcing not just customers, but software developers and accessory-product makers as well, in a quandary over which trail to follow.
“I don’t think it will be easy to lock out the clones,” said Aaron Goldberg, personal computer industry analyst at International Data Corp. in Framingham, Mass. “I think it will be impossible . . . and it is not in IBM’s best interest to lock out the clones and third-party developers.”
Goldberg said it was the openness of the IBM PC--its easily imitated internal design and operating system, known as PC-DOS--that acted as the catalyst for the personal computer market’s phenomenal growth. Restricting that, he said, will also restrict future market growth.
Also, the confusion in the world of IBM and compatibles could drive some of the confused smack into the arms of Apple Computer.
Apple may be ready for them. The personal computer maker has made no secret of its project to “open up” its Macintosh computer--that is, to make it more compatible with the IBM world and thus more acceptable in the tough corporate environment. Analysts are predicting that Apple will unveil such a Mac in March. And last week, the company introduced communications products based on its own technology that will help link free-standing machines.
Apple Chairman John Sculley said that IBM may be successful in beating back the clones, but not Macintosh. Apple has gained a toehold in the corporate market by marketing the Mac and its superior graphics abilities as part of a desktop publishing system. IBM can’t hope to match Apple’s graphics for another couple of years, said Sculley.
Other companies have moved faster than IBM to improve the personal computer’s price, performance and graphics capability. Many of the clones pack more punch at a far lower cost. Atari and Commodore, two makers of popular graphics-oriented computers, last year said they would join the IBM-compatibles field with new machines of their own. And higher-end machines--most especially those of Houston-based Compaq--have become the technological leaders in the market.
It’s enough to send shivers down the spine of any company--even one that raked in $51.2 billion in revenue last year. Although personal computers don’t generate the kind of profits that mainframes do, they are, nonetheless, an important market for IBM. About 15% of IBM’s business comes from PCs, and analyst Martin said that the company expects to increase that portion, including software, to 20% by 1990.
Buyers Impatient
That won’t be done without enticing back clone buyers and carving out new customer bases. Many potential buyers seem to have lost patience with waiting on IBM.
The drum beats have failed to elicit the sheer excitement that preceded the PC, the AT and even the disappointing PCjr. Some blame this, in part, to last year’s heady rumors of a new personal computer that failed to materialize.
International Data’s Goldberg said: “I don’t expect there to be a great migration to the new machines. Most people are pretty satisfied and feel no need to upgrade. . . . Sales of PCs and and PC clones in 1986 were very large. Virtually anybody who wanted a PC-DOS machine went out and bought one.”
Even corporations that have long been customers of IBM, both in the mainframe and personal computing ends, have strayed.
“Most of our clients have long had a strong prejudice to do business with IBM. But that has gone away,” said David Ferris, chairman of Ferrin Corp., a San Francisco-based consulting company that helps Fortune 1000 companies size up personal computing options. “I’d say that 60% of our clients are explicitly telling the user community (in their companies) that it is fine to get clones.”
Among those, said Ferris, are Bank of America and Oakland-based American President Lines, a Ferrin client that Ferris still describes as “especially wedded to IBM.”
But even APL “has not been waiting to see what IBM will do,” said Dick Tonnemacher, manager of APL’s Information Center, the department that supports the company’s computer users and makes recommendations on personal computer purchases. “We have to have the technology in place--yesterday.”
What the managers want from personal computers for their staffs “is functionality to meet their business needs and save money. IBM hasn’t set itself apart enough. . . . IBM equipment is relatively expensive; the functionality hasn’t changed, and other companies have improved functionality and dropped the price way down,” Tonnemacher said.
APL has added other names--one Asian, one U.S.--to the recommended list of computer brands that will be supported, in software and peripherals, by its Information Center.
Still, it’s not just a question of buying machines anymore. Many companies now view the hardware as nearly disposable--equipment that can be “tossed out” after a few years of use. The machine--costing $2,000 to $3,000 for a fully equipped personal computer at the low end--is only a small part of a company’s investment.
Source of Confusion
Actual costs can be four or five times that, said Ferris, figuring in program-building efforts and staff training time.
Therein lies the threat of the clone killers--and the challenge they will face in winning over buyers--if, as speculated, IBM builds into the new machines proprietary features that will determine future software development.
If the new machines are priced competitively and offer substantial long-term advantages, then large corporate buyers will face a dilemma: They can stick with clones and take a chance that that market segment will keep up, or switch back into IBM’s camp.
Or they may shrug their shoulders and look elsewhere. Andy Seybold, editor of the Seybold Outlook on Professional Computing, a Torrance-based newsletter, said the clone killers will cause more confusion in the PC market and wind up helping Apple.
The drums may be beating for IBM, but, said Seybold, “this will be a year of opportunity for the Macintosh.”
