Home computer market is shaky at the low end but vigorous higher up

Reports of the demise of the home computer are highly exaggerated, analysts say. If there seems to be less happening at the low end of the market, it may be that the low end just isn't so low anymore. The exodus of manufacturers from the low-end home computer market -- most recently Coleco, which has decided to drop its Adam computer and return to the profitable Cabbage Patch -- has left Atari and Commodore International to fight it out.

But the focus of the action has shifted upmarket, with both Atari and Commodore introducing more sophisticated machines to compete with IBM's and Apple's.

As Jeanne Dietsch, president of Talmis, a market research firm in the home computer field, puts it, ``A certain segment of the population dropped out of the computer market -- those going for the lower-end machines. That hurt Commodore.''

Indeed, Commodore's difficulties were highlighted by this week's announcement that profits for the quarter ending Dec. 31 were down 94 percent from the year before. The news was especially bad for a company as dependent on Christmas sales as Commodore.

But if the low end of the market is falling off, the upper end is increasing. Commodore's Amiga, to be introduced in June, and Atari's new ST, expected in the stores by April, are both modeled after Apple's Macintosh -- ``slick, fun, easy to use,'' says Ms. Dietsch. All three machines have a 16-bit processor and are based on the Motorola 68000 chip.

But there are questions about these Apple knockoffs. Says Ms. Dietsch, ``With the Atari, there's the question of design.'' Jack Tramiel, who bought Atari from Warner Communications, is famous for bringing out machines with bugs in them. Then there are questions about production quality -- how good can it be at such a low price? Commodore's Amiga has ``top-quality design,'' she says. ``But there's still the question of production quality.''

How much software is produced for the new machines will of course be a factor in their success. ``There will be lots of software for the Amiga, the [software] developers love it, so there will be lots of software for that. But the ST -- it will depend on its initial reception,'' she says.

If the machine is a hit right away, software writers will swing into action; otherwise, it could be problematic.

Dietsch is enthusiastic about home computer software: ``Till last year, educational and entertainment software was mostly arcade games.'' But now the trend is toward ``more broad-appeal software -- interactive novels, for example, and simulations, travel through history, for example. A sort of crossover between education and entertainment -- PBS style,'' she jokes.

``I don't think the market is rejecting the low-end machines,'' says Hilda Uribe, an analyst at Future Computing in Dallas; ``they're buying more-complete systems. Now the consumers know they have to buy disk drives, and so on.''

Ms. Uribe says the market for home computer hardware fell from 5 million in 1983 to 4.8 million last year. But dollar volume rose from $1.705 billion in 1983 to $2.819 billion last year. The software market has been steadily up in terms of dollars and units.

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