Supercomputers’ Numbers Look Bad
A supercomputer capable of performing billions of calculations per second may cost as much as $25 million. Therefore the sale of as few as 15 supercomputers can make the difference between a strong and weak performance for the entire industry.
Two factors may cause another shakeout among manufacturers. First, government institutions are cutting back. They have consistently purchased the largest systems, contributing, for example, 50% of the revenue of Cray Research Inc., the industry leader. With the thaw in the Cold War portending big defense cuts, the growth in the government sector is limited at best.
The second factor is that the commercial sector has the largest growth potential yet historically has purchased smaller and cheaper computer systems.
Last year, at least six supercomputer manufacturers left the business, and Cray split into two companies with founder Seymour Cray leading the competition. These events confused buyers and led to delayed and more cautious buying decisions. Although the company closures depressed sales for the year, they also helped some companies by reducing price competition. Nonetheless, the result was flat growth last year, in contrast to the steady, strong growth for the previous five years.
The shakeout has peaked and the next few years should be relatively stable. But 1992 and 1993 will see another shakeout as the high end of the supercomputer market once again becomes overcrowded.
Cray established the supercomputing market in 1976 when it introduced its Cray-1A. The company has a dominant 40% share of the $1.6-billion market. IBM has been working quietly to become a major player in supercomputing. It has increased its share from 7% in 1985 to nearly 16% in 1989 and now holds the No. 2 position in this industry. Its 3090/vf supercomputer provides owners of IBM mainframes with an easy upgrade to supercomputer capabilities.
Third-ranked Convex Computer Corp. introduced a smaller “departmental-supercomputer” in 1984 and now has almost 8% of the market. Last year, Silicon Graphics pushed the upper end of its workstation line into supercomputing and captured close to 6% of the market. Fujitsu, with 5.3%, introduced its series of systems in the early 1980s and began the competition between the United States and Japan in the supercomputer arena. The remaining market share is made up of about 20 companies.
Regional U.S. Phone Firms Look to Europe for Growth
Frustrated by restrictions placed upon them by the 1984 breakup of AT&T;, the seven Regional Bell Operating Companies (RBOCs) are looking for more business in Europe. Deregulation and the promise of a unified market in 1992 have made Europe particularly attractive to the so-called Baby Bells.
Pacific Telesis, the first to enter the European market, owns parts of six cable-television franchises in the United Kingdom and as well as interests in British cellular and mobile communication consortia. Nynex bought a U.K.-based software house, and BellSouth bought Air Call, a U.K. mobile communications company.
Bell Atlantic has six principal businesses in Europe and 51 locations in 14 countries. U.S. West has interests in seven-cable television franchises in the U.K. and, this year, won a license to build a cable-TV system in England.
Southwestern Bell originally formed a subsidiary in the U.K. in 1986 to market a consumer telephone product. Today, it has an equity stake in a cable communications organization and will produce five telephones. Finally, Ameritech owns a small interest in a U.K. voice messaging company and has signed a cooperation agreement with Telefonics of Spain.
The major European markets are in the United Kingdom, West Germany, France and Italy. The Baby Bells have been successful in the first three of these, but the potential in the Italian market has not yet been realized.
Another increasingly important market, which has also been largely ignored by the Baby Bells, is Spain. Outside of local telephone services, the Baby Bells have made their impact in the United States in mobile communications.
Therefore, it’s not surprising that they have a great interest in this market in Europe, most prominently in West Germany and the U.K., which allow consortium bids for licenses.
