O.C. Computer Firms Are Split on Prospects for 1990 : Sales: Expectations range from so-so to great, but the high-tech firms are uniformly excited about foreign markets.
With expectations ranging from the unexceptional to the strongly upbeat, Orange County computer companies’ sales forecasts for 1990 are as diverse as the industry itself.
Local computer firms are involved in many aspects of the computer business, from supplying software to manufacturing personal computers and distributing them to retailers. And their fortunes often are closely tied to the growth in their slice of the market.
Companies that manufacture PCs and PC components are particularly enthusiastic about prospects for 1990. On the other hand, makers of minicomputers--the size of computers between PCs and the largest mainframes--report that they see little reason for cheer.
The county’s computer industry is expected to continue to grow in fits as it enters the new decade. In 1990, Western Digital of Irvine and Ingram Micro D of Santa Ana are likely to become the first county computer firms to hit the $1 billion annual sales mark.
One common thread among local companies is their enthusiasm about the prospects for doing more business overseas. With the promise of new markets opening in Eastern Europe and the development of other markets in Asia and elsewhere, many computer firms say foreign sales may providen their fastest sales growth in 1990.
The majority of local computer firms are involved in the personal computer field. PC sales were dampened in 1989 because of widespread confusion over competing designs, industry officials say. A lot of that confusion has cleared, they say, and the outlook for 1990 is for generally strong, though not spectacular, growth.
“I think it’s going to be a very good year for the industry,” said Gene Lu, president of Advanced Logic Research Inc., an Irvine personal computer maker. “We’ve had a lot of confusion with these different industry standards. In 1990, I think all those issues will be clarified and it will be a matter of selection for buyers.”
But not everyone shares Lu’s optimism.
Dataquest Inc., a Silicon Valley market research firm, predicts that 23.3 million PCs will be sold worldwide in 1990, an unexceptional 10% increase over 1989. For an industry accustomed to 20% to 30% growth rates throughout most of the 1980s, a 10% growth could be considered relatively flat. However, some segments of the industry--for example, companies that supply networks that link PCs within an office--are expected to grow much faster than the overall industry.
Earlier this month, Apple Computer Inc. surprised investment analysts when it said its sales would grow more slowly in 1990 than previously predicted. The Cupertino, Calif., computer maker said it expects U.S. sales to rise by 15% to 18% next year.
“Some people are skeptical about 1990,” said AST Research President Safi U. Qureshey, “but we do not share that skepticism.” Qureshey declined to provide a specific sales forecast for his company.
Qureshey and other computer executives said one unknown factor that could affect sales is the health of the U.S. economy. “There is talk about a possible recession,” he said. “If the economy really goes into the tank, our industry will be affected. But a minor economic slowdown will not have that much effect.”
Ingram Micro D, the nation’s largest wholesaler of PC hardware and software, expects sales growth of more than 20% next year, said Chairman Linwood A. (Chip) Lacy. “There are a lot of exciting products coming in both hardware and software products.”
Traditionally, new products and technology have been the keys to growth in the PC industry as computer users swap their older machines for faster, more powerful models.
Industry analysts say one key reason that PC sales stalled in 1989 was uncertainty over which of two competing PC design standards was technologically superior and likely to gain greater acceptance in the market. One standard was developed by International Business Machines and the other was proposed by nine PC manufacturers that compete with IBM.
Now, it appears that the industry is making room for both PC standards. Some computer makers, such as Advanced Logic Research, are building PCs incorporating both designs: IBM’s Micro Channel and the Extended Industry Standard Architecture (EISA) developed by Compaq Computer Corp. and other PC makers.
Rainbow Technologies Inc. of Irvine, a supplier of software designed to protect the data in PCs, also sees a very strong year ahead, said Peter M. Craig, vice president of business development. Sales of the company’s products are closely tied to overall sales of computer hardware.
“We’re coming off one of the best months we’ve ever had in December and are looking for continued growth in 1990,” Craig said. “We haven’t seen anything yet that would be of concern to us.”
Western Digital Chairman Roger W. Johnson said 1990 will be a “pretty good year” for the county’s largest computer manufacturer. The company’s sales have been flat throughout most of 1989.
“I wouldn’t be surprised to see our sales growing at about 15% this year,” he said. “Our order rates right now are the best they have been in 18 months.”
But companies that supply products for the minicomputer market are less cheery about 1990. They forecast conditions similar to those they had in 1989: sluggish growth.
Minicomputer sales have been hurt by competition from sophisticated PCs and workstations that can perform the same tasks as many minicomputers but cost far less.
Emulex Corp. Chairman Fred Cox is anticipating an increase in sales in early 1990 after a sluggish 1989. The Costa Mesa company supplies storage products for minicomputers made by Digital Equipment Corp. and components for computers made by other manufacturers.
“It’s tougher this year than it has been, but I think we have the potential for some growth,” Cox said.
Robert Kleist, president of Printronix Inc., an Irvine maker of printers for minicomputers, says industry sales will be flat and “our sales will reflect that.” He said Printronix is hoping that a new line of printer products will help invigorate sales.
Printronix and other local companies are forecasting a more rapid growth in international sales than domestic sales in 1990.
“Europe looks very strong for us,” Western Digital’s Johnson said. “And if Eastern Europe continues the way it is going politically, that could be a net incremental boom to the whole industry.”
“We expect our international growth will be very strong in 1990,” said Jim Farooquee, chairman of CMS Enhancements, a Tustin supplier of computer storage devices for PCs. Farooquee says CMS’s 1990 sales will reflect the overall growth in the computer storage market, which is expected to grow 15% to 20%.
CMS plans to open a sales office in Western Europe next year and is eyeing the Soviet Union and Eastern Europe as ripe markets.
“We anticipate a lot of new markets opening up in Eastern Europe,” Farooquee said.
And local firms hoping to tap into the Eastern European market may get some help from the Bush Administration. Commerce Secretary Robert Mosbacher said earlier this month that the administration is actively reviewing proposals to relax the ban on sale of high-technology exports to Warsaw Pact countries, the result of sweeping political changes occurring in the Communist bloc.
