IBM to Target Competition With New Line of Workstations

International Business Machines Corp.’s decision to take aim at the growing workstation market could catch the three dominant workstation makers off balance, but gaining ground may be a tough battle, according to industry analysts.

On Friday, IBM said it is planning to introduce a family of workstations later this year or in the first quarter of 1990 to compete in the $4-billion- to $5-billion-a-year market.

“It’s going to have an impact on everybody’s business for a few months,” said J. H. Friend & Co. analyst James Wolpert. “It could be Armageddon.”

Three companies--Hewlett-Packard Co., Sun Microsystems Inc. and Digital Equipment Corp.--now supply nearly 90% of the market for workstations, which are specialized high-performance microcomputers used for graphics and computer-aided design and engineering or scientific applications.

More powerful than personal computers, workstations approach the capacity of lower-end minicomputers in computation capacity but generally cost less than their $100,000 to $300,000 price tag.

Analysts estimate that the market for these machines will grow by at least 30% a year and could reach $25 billion by 1995.

The machines achieve cost-effective performance that rivals larger, more expensive minicomputers and have sophisticated communications capabilities.

Industry Reshuffling

Although largely restricted to use by engineers and scientists, workstations are increasingly being used in commercial applications, such as providing central processing for stores, financial services and industry research.

IBM’s 1985 debut in the workstation market--the RT--has not sold well. Most industry surveys list its market share in the low single digits. IBM spokesman Doug DeLay said the new products would begin at about four times the power of the original RT and use a new generation of leading technology.

The products come as the industry is reshuffling.

Hewlett-Packard, a late-rising but robust player, bought its way from third place to No. 1 last April by buying out fourth-place Apollo Computer Inc. for $476 million. It is still absorbing and consolidating Apollo’s operations.

Sun Microsystems now trails narrowly in second place. Both have about a third of the market, but last week Sun reported a sharp fourth fiscal-quarter loss and said it has not been able to produce enough new workstations to meet record demand.

“If it was only a question of whether people think the products are excellent, Sun would be fine. It’s a matter of execution,” said Steve Ossad of Montgomery Securities.

Digital Equipment, which analysts say has about a 20% share of the market, recently introduced several new models, along with a shift from its own proprietary operating systems.

Analysts said DEC is benefiting from its move to its own form of Unix--the emerging computer language for workstations.

But they said it will take time for the company to attract more than the several dozen applications now available.

There are about 3,000 applications for Sun machines, including 750 for its newly introduced Sparcstation and hundreds of applications for Hewlett-Packard machines.

Improved Technology

IBM’s introduction may come as early as October, while its competitors are still preoccupied with product adjustments.

Many analyst are expecting the new IBM family to be a dramatic improvement over its original RTs.

“I expect them this time to be really competitive,” Ossad said. “They’ve had a long time to analyze what their competition is.”

IBM said the entry-level machine is being designed to run at about 20 mips, or million instruction operations per second; or five gigaflops, or million floating point operations per second. Both are measures of performance in scientific and engineering functions--but standards for their measurement may vary between manufacturers.

The IBM machines would be targeted at under $20,000, well within the current range of about $8,000 to $100,000.

But a major issue will be whether IBM can attract enough of the specialized applications which have been driving sales of workstations among the scientific community.

“Frankly IBM just doesn’t have anything to sell in this market that the other players don’t have,” said Peter Rogers, an analyst at Robertson, Colman & Stephens. “It doesn’t mean that much unless you have software.”