In Fast-Moving Business Fields, Victory Goes to the Swift
Heralding good times for the personal computer business and many other industries, Compaq Computer recently forecast strong worldwide growth this year.
But Apple Computer saw the future differently, cautioning securities analysts that sales growth would slow this year as the company goes through a period of product transition.
“Several trends shaping the future of the computer industry” lie behind that difference in outlook, says analyst Bruce Lupatkin of San Francisco’s Hambrecht & Quist investment firm. They’re trends, he says, that Compaq, the fast-growing Houston company, is positioned to exploit but which Apple, the renowned pioneer of the personal computer, seems slow to grasp.
It’s a situation that offers insights beyond computers, into the pace and requirements for success in any fast-moving business--which is to say all business today.
The personal computer industry, which remains in constant flux even after 45 million machines have been sold, is changing profoundly again. It is shifting from an emphasis on stand-alone machines that offer word processing and spreadsheet accounting for individuals to the development of networks on which many users can do many things simultaneously. Architects, say, can draft plans, simulate structures and test stresses at the same time.
And the direction of development is toward truly mobile computing in which powerful, multipurpose machines will operate on their own, communicating through digital cellular modems. Indeed, Business Week--citing the example of a European chairman who runs a $20-billion global company with two laptop computers and one secretary--reports the future is already here.
One reason the business keeps growing--defying predictions that the market is maturing--is that accelerating technology and product development make even 4-year-old computers obsolete, says Richard A. Shaffer, publisher of Technologics Computer Letter.
And the reason technology keeps advancing, adds Shaffer, “is that business customers are making real gains”--in cost reductions, profitability, productivity. As computing spreads through every stage of manufacturing, for example, productivity keeps growing--up 4.1% in the latest figures.
So customers are eager for the latest computer models, which deliver more power for the same or less money. The innovations promise to bring to personal computers the power now seen in the large networks that run banks, car rental agencies and hospitals.
Yet the innovation leader today is not Apple, the legendary Silicon Valley company, but Compaq, a firm that began in 1981 with a business plan written on a place mat in a Houston diner by three engineers from Texas Instruments.
Compaq started life making close copies of IBM personal computers and selling them at a lower price. It succeeded because it gave dealers a bigger margin and accepted less profit for itself. Still, for years, Compaq was seen as a mouse endangered by an elephant--if IBM turned on it, Compaq would be crushed.
No more. Compaq--now $2.8 billion in sales--has outdone IBM in portable computers and is a close competitor of the giant company in the whole PC field; last year 29% of the personal computers sold in the U.S. market were Compaq, 31% were IBM. Compaq’s laptop computer weighs about 6 pounds with battery and has taken 65% of the U.S. market for such tiny but powerful machines.
At the other end of the scale, Compaq has a powerful new computer that possesses the network characteristics of the minicomputers made by such as Digital Equipment and Hewlett-Packard. Compaq may not take customers from those big companies any time soon, but with a lower-priced machine it has a shot at new customers in an expanding market.
What’s Compaq’s secret? It understands that in the computer business today, technology consists of putting together the latest chips and software and getting the product out the door. It does little good to have geniuses figuring out something new and brilliant back in the laboratory, says a top executive of a Compaq competitor. “If another company packages the state of the art technology and ships it to market, it will get the customer.”
That may be the point about Apple these days, say analysts. It spends too much time reflecting on past achievements--the original Apple computers and the bright, easy-to-use Macintosh--and so is not getting new Macintosh programs out fast enough. It now faces a challenge as competitors bring out computers with a program that imitates the Mac’s features.
To be sure, Apple--a $5.3 billion (sales) company--may surprise its critics. (On Tuesday, in fact, Apple and Digital Equipment announced joint development of products that will link the Macintosh in minicomputer networks.) In a young industry, as Bob Dylan put it in a different context, “the wheel’s still in spin and the loser today may be later to win, for the times they are a changin’.”
Which brings up a final thought on the changing computer business--that its very chaos constitutes vitality. The model to look at is the automobile industry from 1908 to 1912, when it had more than 500 companies--new entrants replacing dropouts all the time. It was then a vibrant technology and business and didn’t settle down until the 1920s.
The new shifts in personal computers--a business continually described as mature--may mean the best is yet to come.
