THE home computer - is it simply an upscale video game, or is it an Information Age appliance, destined to grace most American households? If the home computer becomes merely another piece of consumer electronics, the industry can look forward to just a few more years of explosive growth, followed by either bust or long, hard years of slow market penetration.
If these machines find real utility in the home, however, the industry can anticipate a long period of impressive growth. And the much-touted Information Revolution will begin to impact at the grass-roots level.
So far, the story of the home computer (generally classed as machines priced under $1,000) has followed the primrose path of stereos and video tape machines.
According to Bert Cowan of Frost & Sullivan, a market research company, entertainment programs have been outselling the second largest home software category, educational programs, by 2.5 to 1.
But the situation has been clouded by a very confused home market. Following a cut-throat price war, Texas Instruments bowed out entirely last year. Timex recently threw in the towel, after watching sales of its under-$100 computer evaporate.
Altogether, more money was lost than made in home computers last year. Commodore did make money - but was recently shaken by the resignation of its aggressive and dominant president.
According to one of the first national surveys of home computer use - a study conducted by Software Access International (SAI) - about 3 million home computers are in use in the United States.
But another 1 million to 1.5 million are consigned to the closet.
The fundamental problems sidelining so many of these machines have been lack of power and a dearth of high-quality software.
Most early models simply couldn't do much beyond video-gaming.
For serious use, a full-featured computer with a scratch-pad memory (also known as random access memory, or RAM - memory the computer uses only when it's turned on) of 64,000 characters and a floppy disk drive for permanent storage are needed, say computer specialists.
BUT this picture may have begun to change. ''The home computer market hit bottom last year. Now we have some real machines and some very good software available,'' argues Dr. William Coggshall, president of SAI.
Growing sales of disk drives and software for such functions as word processing imply that ''there has been a definite philosophical shift in the home market from recreational to serious applications,'' the analyst concludes.
At Softcon, a recent software trade show in New Orleans, a good deal of excellent new ''serious'' software for home consumption was on display.
Although it still takes 20 to 40 hours to learn how to use most home computers, the latest programs show significant progress in ease of use.
Following Apple's lead, many are sporting pop-up ''menus'' - lists of selectable functions - which are easier to learn than the multiple key commands common in the past.
''Help keys'' that provide brief, on-screen tutorials have become de rigueur.
But, even with greater ease of use, it remains unclear just how much people are willing to pay for computer capabilities.
One problem is that little is known about the type and intensity of information processing that goes on in the home.
Much of the so-called home market appears actually to be a home business market.
''We see evidence of a burgeoning cottage industry in the home,'' observes Ted Morgan, president of Human Engineered Software.