Computer trade: less hypey, more upscale
Las Vegas, Nev. — This year there were no mimes in white face or modern dancers on platforms at the nation's largest computer trade show. There was plenty of chrome, plastic, and neon in the record 1,400 exhibits, but the attitude of the personal computer vendors and retailers attending the Comdex meeting here last week was noticeably less exuberant and more sober than the year before.
This sobriety (some call it a dose of realism) in what, just a short time ago , was the glamour industry of the nation and the world is the result of a number of underlying factors. But lack of growth does not figure prominently among them.
There are some indications that growth has been slower than anticipated in some segments of the industry, but the reports are conflicting. Last summer, there was a major drop-off in sales, but that had been generally anticipated as the computer market increasingly took on the character of other mass consumer markets.
InfoCorp, a Cupertino, Calif., market-research company, recently reported that personal computer sales have continued sluggish and unpredictable since May. But Portia Isaacson of a rival analyst firm, Future Computing, reports that store surveys have shown close to predicted sales in September and strong activity in October. Personal computers for the business market should post 60 percent growth this year, she says.
Meanwhile, surveys of the home computer market by Information Access and Dataquest find that buyers are migrating from low-cost machines like those produced by Commodore and Atari to more expensive models like the Apple II and IBM PCjr.
In the software publishing industry, sales are on a 30 percent growth track. Many other industries would love to have this sort of growth, but many software houses were banking on a 60 to 100 percent increase in sales. The situation is grim for many small software companies. A number of publishers and distributors have filed for bankruptcy over the last six months.
''There is no pie so big that you can't cut it up into so many pieces that no one can make a profit - and that's just what has happened,'' comments David Wagman of Softsel Computer Products, a software distributor. While he was referring specifically to the software publishing industry, which now consists of around 3,000 companies, his observation applies to a number of the segments in the personal computer industry. The number of stores selling computers, for example, has increased to 3,727 from 2,479 in the last year, according to Future Computing figures.
During the five years ending in early 1983, the computer industry was the darling of Wall Street. Venture capitalists, their coffers bulging because of changes in the capital-gains tax, were pouring money into high-tech areas such as Silicon Valley in California and Route 128 in Massachusetts. Consequently, more and more companies were started up to produce disk drives, display monitors , software, and other computer-related products until the market finally became glutted.
The period of easy money couldn't last forever. About a year ago things began to change. Some highly regarded companies stumbled. The pendulum swung violently. Suddenly, computer company stock offerings were no longer commanding the inflated prices that had been common before. Investment money dried up.
''It's a real paradox that the investment community has turned away from the most exciting marketplace in the world,'' comments John Sculley, chief executive officer of Apple Computer.
Mr. Sculley sees another thing behind the current computer industry ''malaise'': lack of innovation.
''Right now the personal computer industry is caught in a temporary rut,'' he argues. At a time when the industry needs major new innovations to expand beyond the bounds of the computer-literate, people are prematurely preoccupied with ''standardization,'' he complains. By this, he means the establishment of the IBM Personal Computer as the de facto industry standard. (Apple is the major holdout. Even Tandy's Radio Shack, like Apple one of the pioneers in the microcomputer market, recently introduced two IBM work-alikes.)
IBM now controls about a third of the personal computer market, and IBM compatibles account for 20 percent beyond that. Until recently IBM could not meet the demand for its small computers. Other brands that run the software written for the IBM PC - Columbia, Zenith, Eagle, Corona, Seequa, and a host of others - rushed in to fill the gap.
Last spring, however, Big Blue had ramped up its production to the point where it could meet demand. Then, in June, it slashed the prices of its computers by up to 23 percent. This sparked a round of price cutting at the same time summer sales were sinking deeply.
That was the first of several aggressive steps the giant computer company embarked on after the 1982 decision by the Justice Department to lift an antitrust action against it.
Last summer IBM introduced its AT (advanced technology) personal computer. ''This came as a real shock to many of us,'' admits Barry G. Dearborn of Durango Systems Inc., a California company that builds multi-user microcomputers.
IBM did two things that were unexpected. The new AT is technologically advanced, rather than conservatively designed as its predecessors were. In addition, it has been priced extremely aggressively. As a result, the previously lucrative role of producing IBM clones will get harder and harder in the period ahead, Apple's Sculley points out.
In the past, IBM had also been content to license software developed by independent software publishers for its PCs.
This fall, however, Big Blue startled the software publishing industry by announcing its first, internally developed line of software: a set of integrated business applications.
At the time, Esther Dyson, a prominent industry analyst, commented: ''Everybody thought IBM wouldn't compete in this market. But it has moved in as it always does.''
Peter M. Thomas of Precision Software, which makes a data-base program for the Commodore 64 and Apple II, expects that increasingly manufacturers will take over the marketing of generic software and independent publishers will be forced to turn to more specialized applications to survive.
The entry of another corporate giant, AT&T, into the personal computer market has added yet another element of uncertainty. One of the next major advances in the personal computer's utility is expected to come through telecommunications, and many people are waiting for AT&T to set the standards.