Debut of New PC Line by IBM Brings Sigh of Relief From Some
After the suspense ended and all the hoopla about IBM’s new line of personal computers died down Thursday, Roger Johnson decided that he could breathe a sigh of relief on behalf of his Irvine computer products company.
There was, he declared, no cause for alarm at Western Digital, which he heads. More important, he said, the horrible game of waiting for the IBM news had ended.
“The world slows in anticipation. Rumors start. Buying slows. Stock prices drop. And finally the world is nearly paralyzed,” Johnson said. “Now the world finally knows.”
Throughout Orange County, where the thrust of operations at several large- and medium-size companies is dictated by what IBM does with its personal computers, reaction to the new systems unveiled Thursday was generally mild. Company officials said they were largely unthreatened by IBM’s latest moves.
At Western Digital, where IBM sales accounts for about 20% of its projected $450-million sales, company officials already knew that the newly introduced machines--unlike their predecessors--would not contain any of their products.
So, the real fear, Johnson said, was that the announcement would wipe out the company’s market with IBM’s copycat competitors by setting a radically different standard that would leave no room for Western Digital’s current line of controller chips and boards for data storage, data communication and data display.
“But IBM’s new machines won’t kill the clones, so we’ll continue to supply them,” Johnson said.
Western Digital’s stock, which had dropped from a high of $31.25 in February to the $23 range in the last several weeks, closed Thursday at $25.75, up $2.75 for the day. It was the second most actively traded issue on the American Stock Exchange.
At AST Research Inc., the Irvine company that built a business of nearly $200 million a year supplying add-on products for IBM personal computers--and which recently began building PC clones--the new systems represent both good news and bad.
On the plus side, President Safi Qureshey said, IBM’s new machines carry suggested prices that are so high that competitors, such as AST, won’t feel price pressure.
“That was a pleasant surprise,” Qureshey said. “There’s room under the umbrella.”
However, Qureshey acknowledged that because the new IBM machines now include several features, such as enhanced graphics and data storage, that AST had once supplied with its add-on boards, there is little market left for those products. And other add-on boards, he said, will have to be re-engineered to fit the new machines.
The likelihood that IBM would move to usurp some of the add-on market led Emulex officials last year to reduce emphasis on the company’s Persyst product line, a retail family that included enhanced graphics and memory boards for the IBM PC.
Stephen Frankel, Emulex’s president, said Thursday that he felt relieved and vindicated: “We feel we predicted properly when we made the decision last November to de-emphasize Persyst in favor of more advanced, proprietary products. The easy part of the add-on business is gone now, and it’s a threat to companies that served it.”
For some companies, the new IBM machines represent potential new business.
Archive Corp. Chairman Howard Lewis said his Costa Mesa company stands the chance of selling more of its tape drives. According to Lewis’ reasoning, the new IBM machines will hold more data, so users might feel a greater need to install tape drives to copy the data onto magnetic tape to prevent loss or damage.
Even tiny American Micro Technology, an 18-month-old PC clone-maker in Tustin, said it felt unthreatened by the news. “Our prices are half, or less, of what IBM charges,” marketing director Joseph Meshi said. “IBM is not a threat to no-name clone-makers like us.”
