August 13, 1981 by Andrew Pollack (The New York Times)
The International Business Machines Corporation, once slow to recognize that computers were getting smaller, is apparently determined not to make the same mistake in the emerging personal computer market.
In the 1960’s, I.B.M. was slow to enter the minicomputer field, allowing upstarts, particularly the Digital Equipment Corporation, to acquire a dominant share of the market and to grow into companies with billions in annual revenue.
Yesterday I.B.M. announced that it would sell a desk-top computer for use in homes, schools and businesses, thereby staging a relatively early entry, some analysts contend, into a market now dominated by Apple Computer Inc. and Tandy Corporation’s Radio Shack division.
“I don’t think they want to allow another Digital Equipment to rise through the ranks in personal computers,” said Thomas J. Crotty, an analyst with the Gartner Group, an investment adviser specializing in the computer field.
Although I.B.M.’s entry into the personal computer business had been expected for months, it still sent reverberations through the industry.
Besides marking the company’s entry into consumer electronics, the endorsement of personal machines by a company whose name is synonymous with computers is expected to stimulate the growth of an already fast-growing business.
But in helping the business in general, I.B.M. is expected to pose the stiffest challenge yet to Apple and to Tandy, which together have a 39 percent share of the personal computer market, with sales of $2.4 billion in 1980. “It’s one of the most important announcements we’ve seen in the industry,” said Christopher Morgan, editor in chief of Byte, a personal computer magazine.
“People will now know that personal computers are not a fad or a flash in the pan,” said Michael McConnell, executive vice president of Computerland, a chain of retail stores that will market the new I.B.M. products.
The price of the machines will range from $1,565, for a simple system that will require users to provide their own television-like display screens and cassette tapes, to more than $6,000, for the most elaborate versions.
A typical home version with a memory of 64,000 characters (about 10,000 words), a single storage disk and a display screen would be priced at $3,000, while a business system with color graphics, two disks and a printer would cost $4,500, the company said.
In addition to Computerland, the line will be sold through several new business-machine stores being started by Sears, Roebuck & Company, by I.B.M.’s own three retail stores and directly by I.B.M. to large corporations.
American companies are increasingly buying desk-top computers to increase the efficiency of executives and other personnel. Until yesterday’s announcement, I.B.M.’s least expensive computer was a $10,000 desk-top model for small businesses, the sort of computer useful to a doctor or small company for billing, record keeping and similar tasks. That model was announced only two weeks ago.
According to analysts and others connected with the personal computer business, I.B.M.’s machine is impressive technologically, not because of any single breakthrough, but because of a combination of good features.
16 Bits of Information
The new model uses a microprocessor capable of handling 16 bits of information at a time. That will permit the machine to make faster calculations and perform more complex tasks than most other personal computers, which have 8-bit microprocessors. Depending on the model, the machine can store from 16,000 to more than 260,000 characters in its memory.
But analysts disagreed on whether the price would be low enough to knock Apple, the market leader, or Tandy out of the ring. “It’s not as aggressively priced as I expected,” said Mr. Crotty, the analyst at Gartner. “It doesn’t blow them out of the water, that’s for sure.”
In Fort Worth, Garland P. Asher, chief of financial planning for the Tandy Corporation, said he was relieved in two ways. “I’m relieved that whatever they were going to do, they finally did it,” he said. “I’m certainly relieved at the pricing. They haven’t introduced anything that’s going to rewrite the ground rules.”
Variety of Models
Comparing prices is difficult, however, because the machines of Apple, Tandy, I.B.M., Commodore and other personal computer makers come in different configurations and are not directly comparable. Mr. McConnell, of Computerland, which sells both Apple machines and the I.B.M. home computer, said that in some typical configurations, the I.B.M. machine was several hundred dollars more expensive than the Apple II, Apple’s popular model.
Yet the I.B.M. device is slightly less expensive, at $4,500, than a comparable configuration of the newer, more powerful Apple III, which might sell for $4,740, Mr. McConnell said. An I.B.M. computer with 48,000 characters of memory with one disk storage device and no display would cost $2,600 while the comparable Apple II would cost $2,175, Mr. McConnell said.
Other factors such as the availability of programs for the computer and marketing are equally important, analysts said. I.B.M. will have fewer retail outlets and fewer programs initially than Apple and Radio Shack.
Yet, Aaron Goldberg, an analyst with the International Data Corporation, a Framingham, Mass., consulting firm, said I.B.M.’s direct sales staff could be a potent force in selling to leading industrial companies, which might buy dozens of desk-top computers at a time.
Room for All
Chances are, there will be room for all the companies, many analysts believe. The personal computer market is growing explosively, although accurate figures are hard to get because there is no clear distinction between home computers, personal computers for other users and desk-top computers designed for business use.
International Data estimates that 327,000 desk-top computers, ranging in price from several hundred dollars to $20,000, were sold in the United States in 1980. It projects that this total will increase to 1.3 million by 1985. In dollar volume, the market is expected to grow from $2.4 billion last year to $9 billion in 1985.
According to estimates by International Data and others, there are approximately a million personal computers in use. Most are actually used in business and professional applications. The home and education markets are still small, but are expected to grow rapidly, though perhaps not for another few years.
Image Is Changing
For I.B.M., the entrance into personal computers is further evidence of a change that has been taking place over the past few years in the company’s image and the way it does business. To some users of personal computers, who have been known to say, “Never trust a computer you can’t lift,” the International Business Machines Corporation has sometimes been viewed as the enemy, according to a recent editorial in Byte.
After all, the magazine said, I.B.M. rode to its dominance of the computer industry on the strength of mainframe computers – large, forbidding machines with banks of blinking lights that stood in special rooms by themselves, attended to by technicians whom no one else could understand.
I.B.M. was so wedded to the big machines that in the 1960’s it paid little attention to the emerging minicomputers. Although I.B.M. eventually became a major player in that market, that did not occur until after upstarts, particularly Digital, had captured a large part of the market and had grown into major companies. Nevertheless, Digital, which still has a larger share of the minicomputer market than I.B.M., grossed only had $2.4 billion in revenues last year, compared with I.B.M.’s $26.2 billion.
Adapting to Market
In the past few years, as the prices of its computers and office products have declined and their potential market have widened, I.B.M. has been willing to alter the way it had done business when computers were high-priced items affordable only by large companies.
It has begun to rely more on mass-marketing techniques, has opened a few retail stores and has been willing to buy more parts, or even complete products, from other vendors, like the low-priced copier it now sells made by Minolta. I.B.M.’s entry into the personal computer market, and the way in which it has done it, attest to that trend.
In particular, I.B.M. will allow non-I.B.M. vendors to sell its personal computers, something it has done only sparingly in the past. And, while I.B.M. has traditionally made its products and software incompatible with those of other vendors, this will not be the case with the personal computer.
The programs offered initially to run on the I.B.M. machines will be versions of programs that have been popular on other computers. They include VisiCalc, a popular business forecasting program; three business and accounting packages by Peachtree Software; Easywriter, a word-processing package, and even Microsoft Adventure, a fantasy game. The software, however, will sell in some cases for about twice the price of the equivalent programs sold for use on other competing machines.
Others May Write Programs
I.B.M. is also allowing anyone else who wants to do so to write programs for the I.B.M. machine, which the company would evaluate. If the programs were accepted for marketing, the writer would be paid a royalty on sales of the program.
A cottage industry of computer buffs has sprung up to write programs for personal computers, and the abundance of such home-grown programs is partly responsible for the market strength of the Apple and Tandy computers.