Market for Personal Computers Keeps Expanding Away From Home
Never renowned for tranquility, the personal computer industry has embarked on a new round of product one-upmanship as rival companies try to gain the high ground in a market that seems certain to keep up its hectic growth in coming years.
It has left many computer users more confused than ever about what to buy. But analysts say it could be the key in determining whether International Business Machines calls the tune in the decade-old industry.
Once known as pricey playthings for computer lovers, the PC has gone upscale in the 1980s, with sales that are expected to reach $23 billion this year.
Major manufacturers’ sales and development strategies are now targeted not on tinkerers but on businesses. Increasingly, the machines are gaining power and memory and being tied together into networks that may link desks in a single room or on separate continents.
For sales, the horizons remain almost limitless.
“We’re looking (now) at probably only in the high 20%” range in terms of saturation of the U.S. market, said Rod Canion, president of Compaq Computer of Houston. He defined the market as white-collar workers who could use a PC. Estimates of sales growth in the industry this year range anywhere from 12% to 50%.
This rapid expansion has been especially good news for computer companies in view of a worldwide shortage of the high-density memory chips, which PCs use in great quantity. “The worst fears of a slowdown . . . were unfounded,” said Greg Cline, a senior analyst at the Yankee Group. He noted, however, that many machines are being sold with less memory than before.
The markets’ contestants are divided into three camps, each shut off from the other by various technical barriers. First, there is IBM, pushing ahead with the Personal System/2 (PS/2) line it introduced last year. Analysts generally saw PS/2 as an attempt to regain leadership in a field IBM legitimized in 1981 with its first PC offering.
Then there are the “clone” makers, a group which includes Compaq, Tandy, Zenith Data Systems, Hewlett-Packard and a bevy of East Asian makers. This group has stuck with the technical standard that IBM pioneered before the PS/2 and by most accounts has taken a share from it.
The third camp has but one member--Apple Computer, the industry’s pioneer in the 1970s and in many eyes still its most innovative force. Indeed, its fans say that troubles that have come into the open between IBM and the clone-makers this month are driven by their desperation to match Apple’s line.
Earlier his month, representatives from nine major clone companies gathered in New York to announce a formal alliance that further complicated the buyers’ choice. The group announced yet another would-be standard, this one specifically aimed at undermining PS/2. So far it exists primarily as a set of numbers. Products are a year or more away.
Their announcement came the same day that IBM, in an auditorium across town, introduced new products in the PS/2 family, including some that analysts felt were meant to grab back some of the clone makers’ sales.
Paul D. Gillin, executive editor of the industry journal Computerworld, calls the alliance a case of “playing out market positioning games at the expense of customers” and says most buyers want neither PS/2 nor the new rival standard--they want to stay with their clones. Other analysts, however, say it has at least made clear the direction that the nine companies intend to take.
IBM reports that PS/2 is its biggest seller ever and that shipments will exceed 3 million units by the end of this month. However, those sales are taking place in an expanding market, which means big sales may not translate into market share gains. Most analysts believe that some old IBM customers are resisting the often costly changeover to PS/2 and that IBM’s share has been falling as a result.
“IBM is flat and companies like Compaq, Zenith and Hewlett-Packard have been making market share gains,” said Bruce Stephen, PC analyst at International Data. “IBM has been just maintaining itself and therefore losing share while the rest of the market balloons.”
Meanwhile, in sales by computer specialty stores (excluding channels such as direct sales and mail order), lesser-known brands have whittled away at IBM, said Bob Greiner of StoreBoard, a Dallas market research firm. Japan’s NEC, for instance, had a 2.7% share in stores the firm surveyed in January and 5.4% in July. AST Research, meanwhile, went from 0.8% to 1.7%.
Some forecasters, meanwhile, see PS/2 as destined to hold a sizable niche of the market but never to become a standard in the way the old IBM system did.
In the industry’s early days, companies talked hopefully of a PC in every home, to be used for such things as games, letter writing and balancing the family checkbook. An Electronics Industry Assn. study earlier this year found that about 18% of all U.S. homes had a PC, but the use patterns predicted earlier have proven off-base. Many PCs in American homes, in fact, are not used at all, due to owner anxiety over things electronic or loss of interest.
