IBM Unveils New Computer Line; Analysts Applaud
In a bravura performance designed to signal that the sluggish giant is roaring back to life, IBM on Tuesday unveiled its new family of mid-range computers amid wide acclaim from analysts and other industry observers.
The Application System/400 “is really the product of a new IBM,” said Terry Lautenbach, company senior vice president and U.S. general manager, in an announcement that was televised to 170,000 customers and others around the world. To an unprecedented degree, he said, the once go-it-alone company had solicited and incorporated suggestions from its customers and from independent software developers.
Analysts said the new machines are designed to check or even turn back advances by Digital Equipment Corp. DEC’s share of the mid-range computer market has climbed to 19% from 12.5% since 1984 while IBM’s has fallen to 24% from 27%, according to International Data Corp.
“It is a heck of a product--better than anyone expected,” said David Miller, president of Joiner Associates, a Madison, Wis., software concern. Miller, who watched the product announcement in Madison with members of IBM’s field sales force, said “the mood in the audience went from excited anticipation to downright elation” as the six new models were described.
“It probably will take some sales away from (DEC’s) VAX,” Miller added.
‘Definitely Listening’
IBM officials insisted that they weren’t targeting any particular competitor. To focus on DEC is to have “a narrow perspective,” said Ron C. Rettus, IBM’s manager of Advanced Systems Planning. He noted that 60% of IBM’s mid-range business is overseas, where the company must vie with such rivals as Fujitsu, Hitachi and Siemens.
The new IBM models, which are in the minicomputer class, are two to five times more powerful than the IBM machines they replace and feature an easily expandable design.
“This will provide a real psychological lift to IBM,” predicted John Jones, a computer industry analyst with Montgomery Securities in San Francisco. Added Jeff Beeler, an analyst with Dataquest: “They very likely have a winner.”
The AS/400 announcement, which IBM has touted as its most important new product introduction since it brought out its first personal computer in 1981, is part of a broad-based IBM campaign to regain ground lost to competitors.
Earlier this month, for example, the company took a swipe at Compaq Computer when it filled in several gaps in its Personal System/2 line of personal computers. IBM recently announced a trade-in program under which old PCs could be exchanged for new PS/2s. Also this month, IBM held an unusual customer briefing to promote its initially slow-selling 9370 mainframe computer.
The new machines IBM unveiled Tuesday are aimed at small and medium-sized businesses, as well as departments of large corporations. They succeed IBM’s System 36 and System 38 mid-range computers, which were well regarded individually but suffered in the marketplace because they lacked a common operating system.
Operating systems control a computer’s basic functions, and the new models feature a common operating system that also incorporates such standard features as graphics capability, a database and other office automation functions.
“IBM is definitely listening to its customers and its software suppliers,” said Roy Smith, head of Key Software in Castro Valley, Calif. “We were really surprised.”
Bruce Baum of Balanced Point Systems noted that IBM will now do many more joint sales calls with companies such as his, which provides software for the hospitality industry. “They’re going outside for help.”
Edward E. Lucente, IBM vice president and group executive for U.S. marketing, said the AS/400 “begins a new era of easy-to-use processing power for commercial customers.” Parts are designed to snap in and out, and expanding the system is a relatively simple task. The machines also feature built-in tutorials for users and can automatically diagnose problems and even order spare parts if needed.
Plenty of Software
IBM named the product the Application System to emphasize the large library of applications software the machines can run. Already, some 1,000 packages are available and by the time the machines are shipped in late August, another 2,500 will be unveiled.
The machines sell for anywhere from $30,000 to more than $1 million.
IBM’s stock closed Tuesday at $120.25 a share, up $3.125, and was the second-biggest gainer on the New York Stock Exchange. DEC’s stock was unchanged, closing at $110.50.
