PC Makers Join Forces to Challenge IBM’s PS/2

From Reuters

Several leading personal computer companies will make a combined effort to challenge International Business Machines Corp.'s PS/2 computers, industry sources said Tuesday.

The sources said the group will announce next week a joint development program aimed at providing an alternative to IBM’s Micro Channel Architecture, a new design that is at the heart of the PS/2 line.

Analysts said the group’s efforts, if successful, could put a big dent in IBM’s desktop computer sales. The PS/2 was introduced in April, 1987, the key element in IBM’s attempt to reassert itself in the personal computer market.

News of the group’s plan sent IBM’s shares lower in heavy trading Tuesday, analysts said. IBM’s stock closed down $1.125 at $112.825 on the New York Stock Exchange.


Analysts said IBM’s rivals plan to capitalize on the slow acceptance of Micro Channel--the circuits, known as a data bus, that connect the PS/2’s microprocessor with the other parts of the machine.

Industry analysts said Micro Channel has hurt PS/2 sales because it is not compatible with the bus used in IBM’s older PC/AT, forcing PS/2 buyers to scrap their often large investment in peripherals designed for the AT. They said IBM’s rivals would seek to sustain sales of AT clones by designing a bus that is compatible with the AT bus while providing the technological advantages of Micro Channel.

Sources said the new group is headed by Compaq Computer Corp., the biggest maker of AT clones and a vocal critic of Micro Channel. The company has scheduled a news conference for Sept. 13 in New York, but it declined to comment on the topic.

Slated to join Compaq at the briefing are big clone makers, including Tandy Corp., Wyse Technology Inc., Zenith Data Systems, AST Research Inc., Hewlett-Packard Co., NEC Corp., Epson America Inc. and Ing. C. Olivetti Co.


IBM said it does not discuss the plans of its rivals. But spokesman James Monahan said Micro Channel-based models had accounted for more than half of the more than 2 million PS/2s shipped since April, 1987.

“We think that’s ample evidence of the success of Micro Channel,” he said.

Analysts, pointing to the continued success of AT clones, said a new bus that mimics Micro Channel but can work with AT peripherals would likely be a big money-maker.

“Users would obviously jump all over that and love it,” said Ed Spelman of Oppenheimer & Co. “They don’t want to give up the investment in equipment they have already bought.”


The main advantage of Micro Channel is that it can support several microprocessors within one PC. Although few users need this capability now, analysts expect it to become important as PCs are used increasingly to handle several jobs at the same time.

Analysts cautioned, however, that such a bus probably would not be available until mid-1989, and the group could also run into legal hassles with IBM, which has said it will aggressively protect its PS/2 copyrights.

Also, by acknowledging that Micro Channel holds certain advantages over the AT bus, the clone makers could give the PS/2s the legitimacy IBM has been working so hard to win, analysts said.

And because clone makers spend more time competing than cooperating, analysts said the group could be hampered by infighting.


But such cooperative ventures are becoming more common in the computer industry.