IBM Starts Late but ‘Vengeful’ Push Into Workstation Sales
Years after faster-charging rivals paved the way, International Business Machines Corp. moved with a self-proclaimed “vengeance” Thursday to stake its share of the fast-growing technical workstation computer market.
IBM introduced nine new systems claiming to offer the most desktop power for the lowest price. The new systems--arguably IBM’s most important product rollout since the 1981 launch of its personal computer--represent the latest attempt from the world’s largest computer maker to win a large piece of one of the most promising segments of the lackluster electronics industry.
Now growing at an estimated 30% annually, the $6-billion-a-year workstation market had eluded IBM since 1986, when engineers and scientists, the primary customers for workstations, shunned its first offering as under-powered and over-priced.
IBM said its follow-up system, a family of computers called RISC System 6000, is designed to reverse its workstation fortunes--and quickly. “We’re entering this market with a vengeance,” proclaimed Terry Lautenbach, president of IBM’s domestic operations. “We are very, very serious about this market.”
Workstations, relatively new and highly sophisticated desktop machines, have been glaringly absent from IBM’s product lineup, prompting criticism from Wall Street analysts who questioned how serious the company was about tapping emerging technology markets before its competition.
Analysts said Thursday that while the new systems would have little immediate impact on IBM profits, which sagged 35% in 1989, the aggressive introduction did signal the company’s strong intent to improve its fortunes.
Although the new systems won several rave reviews for their price, speed and power, analysts and competitors still questioned whether IBM would achieve its objectives of stealing market share from such established workstation manufacturers as Sun Microsystems, Hewlett-Packard and Digital Equipment. Those rivals all have promised to introduce yet more powerful and competitively priced systems over the coming months.
Early skepticism centered on how quickly software programs could be introduced to operate on the new systems, how qualified IBM’s sales force is at working with scientists and engineers, and whether IBM would soon have a system costing less than the current base price of about $13,000.
Still, International Data Corp., a Boston-area market research firm, estimated that the company would ship about 15,000 RISC systems this year, and three times that number in 1991. “With such success, IBM could rank in the top four among workstation vendors in the 1992-93 time frame,” the research firm predicted. RISC systems (RISC stands for reduced instruction set computing) can process information more quickly than conventional computer systems because they have fewer commands to handle.
Shipments of the workstations, which will range in price from about $13,000 to $74,000, are scheduled to begin within 90 days. And IBM executives promised that at least 175 software programs would be ready for use by that time. The number of available programs is expected to increase by hundreds by the end of the year.
According to industry insiders, IBM spent millions of dollars to entice software programmers to write packages that would operate on the new RISC systems. In one case, said an executive who requested anonymity, IBM paid $5 million to the creators of a noted program. IBM executives acknowledged that independent software companies had been working for as long as the last year to have programs immediately available when the machines hit the market in a few months.
Some analysts and competitors said they are still puzzled about how IBM intends to position and sell the new systems. Noting that IBM traditionally has enjoyed its success among general business customers, one competitor wondered how the company would train its sales force to make the sale to more technically oriented engineers and scientists.
“These boxes do not sell themselves,” said John Hime, vice president of systems products at MIPS Computer Systems, a Silicon Valley workstation maker.
Others wondered whether IBM’s traditional commercial customers needed the high level of power the RISC machines offered, or would they rather have lower-priced systems. Some further questioned if the new workstations would cannibalize sales of IBM’s more expensive IBM AS/400 mid-range computers.
“Welcome to the intra-IBM product wars!” Bob Djurdjevic, president of Annex Research, said in a commentary.
BACKGROUND
Workstations are desktop or side-of-desk machines that are much more powerful than personal computers. Some even match the power of mainframes. They are used widely by scientists and engineers for such processing-intensive tasks as three-dimensional computer modeling of new products. The workstation market is small but is among the fastest-growing segments of the computer industry. And uses for the machines are expanding.
