O.C. Computer Industry Expects Windfall From Windows 95 : Computers: Microsoft’s release of upgraded operating system brings hopes of resurgence by local companies.
From tiny software firms to giant suppliers of personal computers, virtually everybody in Orange County’s sprawling computer industry is expecting a much-needed windfall from Windows 95.
How big, no one knows for sure. But some see the Aug. 24 launch of Windows 95, Microsoft Corp.’s next generation of software that runs most personal computers, as the biggest thing to hit the industry since the PC itself.
“It’s huge,” said C. Shannon Jenkins, president of Touchstone Software Corp. in Huntington Beach, which has already profited handsomely from Windows 95.
Last month Touchstone introduced a program to help computer users prepare their machines for Windows 95. In the first week alone, the 48-employee shop shipped more than 100,000 copies of its Win ’95 Advisor software with a total retail value of about $3 million--more than the firm’s revenue for all of last year. Touchstone’s stock has more than doubled since June, closing at $12.875 per share Friday.
David Dukes, co-chairman of Ingram Micro Corp., the world’s largest wholesaler of personal computer products, says he’s added 200 warehouse, marketing and other jobs to get ready for Windows 95.
“This is the biggest single product launch in the personal computer industry,” said Dukes, adding that it could add hundreds of millions of dollars in sales for his multibillion-dollar company in Santa Ana.
Like Ingram, though, most computer businesses won’t reap benefits until the fourth quarter or next year. Although home computer users are expected to snap up Windows 95, many companies and other organizations say they plan to wait a few months before adopting it because of the costs of upgrading computers, training and concerns about bugs in the new program.
Rob Enderle, a senior industry analyst at Dataquest, a market research firm in San Jose, says it will cost on average $500 to prepare a system for Windows 95. That includes $89 for the software itself, plus the faster microprocessor and the bigger memory and hard disk that many systems will need to accommodate Windows 95.
“Everybody in the PC industry is going to be affected by it,” said Enderle, noting that half of all personal computers now in use will have to be upgraded for Windows 95.
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The long-awaited Windows 95 is the successor to an earlier version of Microsoft’s Windows operating system. Windows 95 creates a more visual on-screen look and enables users to maneuver more easily and quickly with the click of a mouse.
Enderle estimates that 80% of the 100 million personal computers worldwide are outfitted with earlier generations of Windows or other Microsoft operating systems.
Kingston Technology Corp., a leading supplier of computer memory in Fountain Valley, has been gearing up for Windows 95 since late last year, when it added a fifth vendor to ensure that it will have enough computer chips to meet the increased demand.
Experts say that people will need at least 8 megabytes of memory on their machines to run Windows 95. The typical home computer has 4 megabytes, says Gary MacDonald, Kingston’s vice president of marketing.
“Never before has so much attention in the industry been focused on memory requirements,” said MacDonald. Windows 95, he says, could help lift Kingston’s sales this year to $1.3 billion, up from $800 million in 1994.
Each megabyte of memory now costs consumers about $50. But experts say the price could go up soon because the heavy demand created by Windows 95 has exacerbated a worldwide shortage of memory chips.
Indeed, smaller suppliers such as Paragon Memory Corp. are scrounging in the secondary markets for memory chips. Jeff Jones, general manager of the Aliso Viejo firm, says brokers have already started to jack up prices for chips.
“I think people are hoarding products in anticipation of Windows 95,” Jones said. Still, he said Paragon, which did about $50 million in sales last year, expects a 40% to 50% boost in its fourth-quarter sales thanks to Windows 95.
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If expectations translate into sales and increased employment--which many believe will follow--they will provide a lift to an industry that has been struggling in recent years.
Employment in Orange County’s high-tech sector, for example, has been declining since the late 1980s, falling from 92,000 in 1988 to 58,300 in June of this year. Esmael Adibi, an economist at Chapman University, estimates that the high-tech industry pumps $4 billion into Orange County’s economy.
Though layoffs in aerospace have accounted for much of the high-tech sector’s woes, Orange County also has seen more and more job cuts by firms such as AST Research, one of the world’s largest PC makers, as well as a host of computer suppliers such as Diceon Electronics.
Hollie Cronin, a spokeswoman for AST Research, says she expects Windows 95 will propel sales at her Irvine-based company, partly because some consumers will want to buy new machines rather than make upgrades on old ones.
Cronin declined to talk about the volume of its fall shipment of computers, which will be pre-loaded with Windows 95. But, she said, “because of all the hype, we will benefit as well as our competitors.”
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The hype is partly coming from Microsoft, which is touting Windows 95 as far superior to the Windows 3.1 program that was released in 1992.
Seattle-based Microsoft, which is reportedly spending around $150 million to promote Windows 95, has been orchestrating its marketing in Southern California out of its offices in Irvine and Santa Monica.
Every major company in the region has had a test copy of Windows 95 for the last year, said Gini Nochera, Microsoft’s general manager in Southern California. And presentations at hotels and fairs on Windows 95 are continuing, she said.
Experts agree that Windows 95 is superior to its earlier version. The new Windows is more visual, makes it easier to switch between programs already running, and enhances capabilities for graphics and other tasks, according to analysts.
“It doesn’t break as much as Windows 3.1,” said Dataquest’s Enderle, who has been using Windows 95 since February.
Nonetheless, many companies are holding back, saying they are likely to wait at least several months before making the conversion to Windows 95.
“It’s not a slam dunk,” said Jim Williams, chief information officer at PacifiCare Health Systems, the health maintenance organization in Cypress.
Costs are a major consideration, he said. Currently, PacifiCare has about 2,500 personal computer users, from the chief executive to the data entry clerk. Every one of those machines, Williams said, is standardized on Windows 3.1.
Eventually, PacifiCare is almost certain to switch to Windows 95, he said. Williams, however, noted that he hasn’t completed an assessment of the software program. “The real question on the table is: Is the value really there?” he said of Windows 95.
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At Fidelity National Financial, an Irvine title insurer, systems manager Raul Castelo says it’ll probably be at least a year before his company makes the switch.
“As a title insurer, we’re very conservative,” he said, adding that he’s also concerned about unknown flaws in the program. Plus not everyone at Fidelity will need the enhanced capabilities of Windows 95. “A lot of the advantages that Windows 95 brings are almost overkill for us,” he said.
Darrell Tate, sales director at Wareforce Inc. in El Segundo, Microsoft’s largest reseller to companies in Southern California, agrees that corporate America’s move to Windows 95 will be uneven, with smaller firms converting more quickly.
Still, Tate says he’s received orders for about 200,000 copies of Windows 95. And he says volume is picking up as the launch date nears.
“It is the most significant upgrade in the industry’s history,” he said. “You will see the entire industry, every segment of it, benefit from it.”
