Trying to Key Into the Future for Computers : Technology: O.C. companies attending Comdex are poised between sticking to PCs, aligning with network partners.
With all the noise about “information superhighways” and a convergence of high-tech media, you might expect the basic business of making personal computers to be in confused panic. However, they’re not.
Outside the industry, alliances are taking shape. Cable TV giant Tele-Communications Inc. aligned with Bell Atlantic Corp. AT&T; joined McCaw Cellular Communications Inc. Time Warner Inc. linked with US West Inc. Last week, Pacific Bell said it would build a $16-billion fiber-optic information highway in California by 2000, 15 years ahead of earlier plans.
What’s a computer company to do? Invest money in designing products for technology that doesn’t yet exist? Or do you look for partners to join you in a future that promises a global computer network where people can access one another and a host of interactive services?
Executives will wrestle with such questions this week at Comdex, the computer industry’s biggest trade show, which begins Monday in Las Vegas.
Safi Qureshey, chairman and chief executive of AST Research Inc. in Irvine, said his computer company will stick to making PCs--the business it knows best and the “heart of all technology” to come. His Irvine-based company is too preoccupied with merging newly acquired assets of Tandy Corp., the former maker of Radio Shack’s computers, to seek alliances across industry lines.
“If you notice, these other alliances are centered on the transport of information or on the information itself,” said Howard Elias, AST vice president of marketing. “We make the core information tool. AST does not have to be a part of those other alliances.”
On the other hand, Taizo Nishimuro, vice chairman of Toshiba America Inc. in Irvine, says his parent company’s alliances with Time Warner Inc. and US West will lead to experiments in interactive television, where customers in Orlando, Fla., and Omaha, Neb., will be able to select services from home shopping to games.
“This test will gives us vast experience on what will be needed in the interactive future,” he said. “We believe in alliances with large and small companies, because we have no intention to do everything ourselves.”
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Most of the 119 Orange County companies scheduled to attend Comdex are poised between those extreme positions. And greater attention will be focused on the computer industry’s own bruising technological battles.
Manufacturers of microprocessors, the brains of PCs, will introduce new chips to challenge Intel Corp.’s domination of the PC chip market. Designers of software operating systems, which provide the basic link between computer and user, will also slug it out.
Floating above the fray are the themes of information superhighways, which would permit transmission of telephone, video and computer services over a single wire, and digital convergence--the proposed merging of consumer electronics, media, computers and telecommunications.
The industry’s bigger players--especially those Japanese companies with their U.S. operations based in Orange County--hope to sort through the hyperbole to determine whether it’s time to join the rush toward the interactive future.
As manufacturers maintain their traditional strategies for success in the computer business, some are insuring against being blindsided by technological change.
“No doubt the superhighway and digital convergence will come to pass, but the question is whether it’s 10 years away or two years away,” said Peter Bergman, vice president of marketing at Canon Computer Systems in Costa Mesa.
Examples of some steps Orange County companies are taking on the road to convergence:
* AST acquired several emerging technologies from Tandy Corp., such as Zoomer, a hand-held computer that recognizes handwriting and can send electronic mail. Such products are why AST now says it makes information tools, not just personal computers.
The computer hardware industry is under siege: Prices are falling 40% a year, forcing companies to cut costs or face bankruptcy. AST, which spent $105 million this summer to buy Tandy’s computer business, last week announced a major shift in manufacturing. It will eliminate 1,050 jobs, including 650 in Orange County, and add 850 jobs in lower-cost Texas and Ireland.
AST is not investing money in convergence, but the company says it believes its machines can be made compatible with any future information network.
* Mitsubishi Electronics America in Cypress, a maker of TVs, stereos, VCRs and computer components, is “watching the whole situation with great interest,” said Howard Mirowitz, vice president of advanced product planning.
Unlike Japan’s other techno-giants, Mitsubishi has not invested heavily in acquisitions or alliances. It does have them, though, including one with IBM and Bell South that it declines to discuss. Mitsubishi also expects to make use of its technologies for computer and TV displays, custom computer chips and wireless communications, such as cellular telephones.
Mirowitz said the company, which isn’t launching any interactive products yet, believes it will take some time for all the combined industries to establish standards to ensure technological compatibility.
“We think there will be plenty of cross-pollination between technologies, but that doesn’t mean that everything is going to converge,” he said. “It will take a long time for that.”
At Comdex, Mirowitz said he only expects to see technology that could be parts of interactive systems, not completed systems with true convergence, which is expected to blur the distinctions between the media.
* Western Digital Corp. in Irvine makes computer chips and disk drives for PCs, but it is delving into various ways to store data and plans to make components for whatever high-tech tools prevail in the coming years.
“I think in about two years, you’ll begin to see real products that go beyond the hype,” said Charles Haggerty, chief executive of Western Digital Corp. in Irvine. “I don’t see a lot of the so-called ‘grand convergence.’ ”
Like Qureshey at AST, Haggerty believes computer technology will be key. His company’s components can be the core of any interactive device, even if it looks more like a “Star Trek” communicator than a PC.
* Yamaha Corp. of America in Buena Park is using its expertise as a manufacturer of musical equipment and sound chips to pry its way into the fast-growing business of making sound cards, which bring stereo sound to PCs.
With such cards, multimedia features--the combination of audio, video and animation capabilities on the personal computer--should finally become inexpensive and available after several years of false starts, said Ron Raup, senior vice president.
From its line of computer speakers to a compact disc recording device, Yamaha will be at Comdex to stake its claim in the industry.
“We’re in the business of the creation and re-creation of sound,” Raup said, “not just the manufacture of musical instruments.”
* Toshiba America’s Nishimuro--on behalf of his $39-billion parent company, Toshiba Corp. in Tokyo--negotiated a half-dozen alliances with American companies. With a $1-billion investment in Time Warner’s interactive venture, Toshiba will participate in a test of interactive TV systems in 5,000 homes in Orlando, Fla., in April.
Before investing additional billions to link up with Time Warner’s 8 million cable TV customers, the companies will attempt to determine which services consumers will actually pay for. Test viewers will be able to sample videophones, electronic newspapers, photo-quality printouts of images on the TV screen and interactive games played against someone across town.
“Our dream is to have most consumers connected to an interactive network by the end of the decade,” Nishimuro said. “Toshiba, with firsthand information as a partner, could possibly make the sets on top of the TV sets that control the services.”
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Nishimuro said that when information superhighways are built, many will be incompatible largely because competing telephone and cable companies will develop different technologies in the quest for dominance.
“Fortunately, as a company with many basic technologies, we are better positioned than computer-only companies,” he said.
Besides PCs, Toshiba owns compact disc technology, semiconductor chips, thin computer displays, longer-life batteries, wireless communication technology and data compression, which uses codes to squeeze more data into a transmission by reducing its size.
But Toshiba isn’t jumping head-first into every new technology. Rather than develop a “personal digital assistant,” or hand-held computer like Apple’s Newton MessagePad or the Zoomer from AST-Tandy, Toshiba is concentrating on a line of “subnotebook” computers--laptops that weigh less than five pounds.
Atsutoshi Nishida, president of Toshiba America Information Systems in Irvine, said subnotebooks are a natural evolutionary extension of the company’s current product line. Such machines are also likely to generate more sales than personal assistants, which Toshiba won’t launch until next year.
* Canon Computer Systems Inc. in Costa Mesa has its own map to the future.
Its Japanese parent company launched a computer division last year during a fierce PC price war, because it saw the computer as a base for its office product technologies that range from printers to copiers.
Executives say their goal is to combine all of an office’s electronic products into a single portable PC. In a first step last April, the company introduced a portable computer with a built-in, high-quality printer that can also send faxes.
Bergman, Canon’s marketing executive, said the company has sold thousands of the machines and wants to eventually manufacture portable PCs that include color printing and scanning, where paper images can be stored in a computer file.
Competitors are skeptical that the computer market will evolve toward a universal machine. Simplicity in an office does not translate to simplicity for general consumers, said Mitsubishi’s Mirowitz. One of his company’s most celebrated products is a TV remote-control with only three buttons.
“If you make a multipurpose machine, it will be difficult to use,” said Nishimuro at Toshiba.
* Advanced Logic Research Inc. in Irvine has more practical concerns than convergence, which David Kirkey, vice president of worldwide marketing, describes as a “zero-billion dollar industry.”
ALR, which recorded its first annual loss--$10.6 million--for its fiscal year ended Sept. 30, has invested its limited resources in making arguably one the best lines of corporate computers based on Intel’s line of Pentium microprocessors, new computer chips that can make PCs as fast as engineering workstations. Pentium chips can improve a computer’s performance up to seven times over today’s popular 486 machines. In fact, ALR is scheduled to announce a new PC model based on the Pentium at Comdex on Monday.
“Multimedia technologies are growing fast, especially for things like games, but they have to take that step to the corporate office before it really becomes a market,” Kirkey said. “Once these futuristic technologies mature, we can acquire them or develop them fast.
“These big companies that try to develop everything are exposed. We still have a very strong business. For us to go foolishly off in a new direction wouldn’t make sense.”
A smaller hardware vendor, ALR plans to observe the larger companies as they attempt to create an industry standard. For now, Kirkey said he is concentrating on the competition between the makers of microprocessors.
The Pentium is vying for status as an industry standard against the PowerPC chip, which is backed by IBM, Motorola and Apple, as well as Digital Equipment Corp.’s Alpha computers and MIPS Technologies, which rely on RISC, or reduced instruction set computing, a traditional computing design for workstations, or machines usually designed for engineers or scientists.
With such varying choices among computer chips, some wonder how alliances across industries are going to work to ensure compatibility. Mirowitz at Mitsubishi said he is not optimistic.
AT&T; and the telephone companies are in a good position to supply the pipeline to any future interactive system, subject to some regulation, he said, but whether there will be a return on the investment is another issue.
“People are betting the farm on products that don’t exist yet,” Mirowitz said. “But the real issue is, having invested money to make this all possible, will there be content on the pipeline that will lead to revenues. The theory is, if you build it, they will come.”
Pacific Bell officials, who have weighed the risks of investing $16 billion to lay fiber-optic lines throughout California, say the company’s copper-wire network is too expensive to maintain and requires an upgrade.
“If we’re wrong, we’ll all be out of jobs,” said Ken Poland, a regional manager in Orange County, where fiber-optic cable will be installed near tens of thousands of homes by 1996. “Our belief from our customer surveys is that our customers are very anxious to have a choice of interactive services.”
Some individual companies are destined to lose their shirts even as the digital superhighway is built, just like the rise of the personal computer led to the ascendance of Microsoft Corp. at the expense of IBM, he said.
“I think it’s very premature yet to identify the winners and losers in this,” said David Dukes, co-chairman of computer distribution giant Ingram Micro Inc. in Santa Ana. “You’ll see people creating multiple alliances fairly soon in the hardware world, but you can’t pick sides until then.”
