A Time of Uncertainty for PC Industry Titans : Technology: Taking stock as the Comdex trade show opens, some observers doubt that there will be enough bright spots to compensate for a gloomy trend.
As the personal computer industry gathers in Las Vegas for its huge Comdex trade show starting Monday, companies of all stripes are anxiously scanning the heavens, wondering if the gathering clouds of recession will gently rain on the PC parade or unleash a devastating storm.
For months, there have been indications that the industry is in for some rough weather. Market research shows domestic personal computer sales growth dropping below 5% for 1990--far below the double-digit growth of recent years--and booming overseas markets have begun to sag. Price wars have broken out. Many computer stores are struggling to stay afloat.
Yet a few glimmers pierce the gloom. Optimists cite the popularity of notebook-size computers that can do anything a good desktop machine can do, and about a dozen companies are expected to show high-powered new notebooks at Comdex.
Corporate customers are still buying the powerful--and expensive--PCs that link networks of traditional PCs, while consumers have responded well to economical new products from Apple Computer and International Business Machines. Comdex, the largest trade show in the country, will be brimming with imaginative new uses for Microsoft’s hugely successful Windows software.
But many believe that these bright spots will not be enough to counter the downward trend--at least in the short term.
“There are two conflicting tensions,” says Ed Anderson, president of Computerland, a chain of computer stores catering to businesses. “There’s the attitude that computer networks are too strategic (for corporate buyers) to cut back on. And then there’s the opposite, the board of directors saying that the banks are going to clamp down on credit, so it’s time to postpone (computer) projects.”
Anderson believes that growth in the $27-billion U.S. PC industry has all but ground to a halt in recent months. Slow sales have led most manufacturers to cut prices by 20% or more for mainstream desktop PCs, and dealer incentive programs are getting more aggressive. “Last year, the trend was to offer neat bundles of software” with PC purchases, said Michael Rusert, executive vice president of Computer City Supercenter, a large retailer in Garden Grove. “This year, it’s cash rebates. The prices have really dropped out. It’s astounding.”
He said color machines that used the popular Intel 286 microprocessor as their brain were selling for as little as $1,300, and machines equipped with the higher performance Intel 386 microprocessor could be had for $1,700.
The discounting has helped keep volume growing at Rusert’s store, which caters primarily to home computer users and small businesses. But Joeann Stahel, president of the market research firm Storeboard, says the price cuts could lead to a “blood bath” for the manufacturers, and she cautions that the full impact of recession-related corporate buying cutbacks has not yet been felt.
Pricing pressures have also sent manufacturers “scrambling to find where the margins still exist,” noted Andrew Seybold, an analyst at Dataquest. One place they exist--at least for the moment--are in high-performance notebook computers.
In recent weeks, Compaq Computer, Texas Instruments, Epson and AST Research have all introduced notebook computers that use Intel’s fast 386SX microprocessor, and dozens of new varieties of notebook and laptop machines are expected at Comdex.
Many of those products will be from Japanese, Taiwanese and Korean manufacturers, ranging from well-entrenched players such as Toshiba and NEC to big-name newcomers such as Nippon Steel to complete unknowns. Many Asian vendors, strong in critical flat-screen technologies and component miniaturization, view the portable arena as the ideal entry point into the U.S. PC business.
The high end of the market will also be attracting attention at Comdex with the debut of new “servers”--machines designed to control large networks of computers--that use Intel’s most advanced microprocessor, the 486. IBM will show new high-end servers that were announced two weeks ago, and Advanced Logic Research will be showing its new clone of Compaq’s successful Systempro network server.
Computer buyers looking for power and speed will also be able to peruse a host of new desktop machines that are based on a design licensed from Sun Microsystems. Sun’s workstations, as well as the emerging group of Sun clones, use the efficient but complicated Unix operating system to control basic functions. They’ve traditionally been sold to engineers and scientists.
But Sun has been pushing hard to sell its workstations as an alternative to personal computers for many mainstream business applications, and the company will have a “drastically larger” presence at Comdex this year than in the past, a spokesman said.
Another highlight of the show will be new equipment to bring pictures and moving images onto personal computer screens.
The tens of thousands of Comdex attendees will be hoping that these and the hundreds of other new gadgets on display will be enough to keep the industry moving forward. And in a go-go business accustomed to rapid growth, there are still plenty of people who consider the outlook sunny.
“We think the business grew 20% in the third quarter, and we see 20% in the fourth quarter,” said Linwood A. (Chip) Lacy Jr., chairman of Santa Ana-based Ingram Micro D, the nation’s largest computer products distributor.
Even Anderson of Computerland, a short-term pessimist, is “unabashedly optimistic” about the industry’s long-term prospects. But he, like many others in the business, is waiting anxiously for the country to “get past the Middle East crisis.”
