New small computer has Commodore saluting its future

OK, so pop artist Andy Warhol goes gaga over it. So it'll trade licks with jazz musician Tom Scott. But can ``Amiga,'' the latest personal computer from Commodore International, hit the right note with consumers?

The $1,800 Amiga debuted at Lincoln Center here this week in a lavish coming-out party. And Commodore plans a freewheeling, $50 million dollar ad campaign. But the party and campaign fly blatantly in the face of declining sales, crumbling earnings, and layoffs hitting the personal computer industry.

Last week, IBM announced it had no plans to unveil the ``PC2'' -- a lower-priced version of the PC AT. It has already canceled the much-ballyhooed PC Jr. And sales of the Macintosh, Apple Computer's flagship, have dropped from 80,000 in April to 55,000 in June, says Kidder, Peabody analyst Joan McKay.

But Amiga, analysts agree, is a radically superior machine, and that may be enough to bring back buyers.

At Lincoln Center Tuesday night, analysts cooed over the Amiga, which is due out in September. ``Dazzling'' color graphics, they say. ``Stunning'' stereophonic synthesized sound.

``Never before has so much power been offered in the less-than-$10,000 price range, not to mention the less-than-$2,000 price range,'' states Peter Teige of Dataquest, a computer research firm that is based in San Jose, Calif. But he adds that Amiga's success will depend on how ``Commodore meets the challenge of positioning and supporting a revolutionary product in a jaded, lethargic market.''

The Amiga is priced and designed to go toe to toe with Apple's Macintosh. But the Amiga has one-upped the Mac in several significant ways.

Chiefly, Commodore claims IBM compatibility. The principal obstacle to selling the Macintosh -- especially to businesses -- has been lack of such compatibility. Commodore's ace here is an ``Emulator'' card. For less than $100, the company claims, this software breakthrough enables Amiga to run such IBM software as Lotus 1-2-3, Wordstar, and D Base III.

Second, Amiga has a color and sound edge. It has a 4,096-color palette, vs. the Mac's black-and-white screen. And although the Macintosh has sound capabilities, the Amiga's are more sophisticated, analysts say.

Finally, the Amiga offers a little more speed and memory. It comes with 256,000 bytes, or characters of internal random-access memory, vs. 128,000 bytes as standard on the Mac. And the Amiga's 3.5-inch disk drive comes with twice as much storage capacity as the Mac.

Still, Commodore has some major obstacles to hurdle.

Until now, the company has been known for its low-priced Commodore 64 and 128 machines, sold through mass merchandisers. It now must project an upscale image to draw consumers to the Amiga (base price $1,295, plus $495 for color monitor).

In this vein, Commodore will distribute the Amiga through retail stores specializing in computers -- the traditional sales ground for IBM, Apple, Compaq, and Hewlett-Packard. But none of the top three computer specialty chains are planning to carry the Amiga.

Why not? ``First, in the minds of most businessmen, Commodore tends to be associated with toy computers,'' says Bert Helfinstein, vice-president of operations at Entr'e Computer Centers, the second-largest domestic retail computer chain. ``Second, they have a very bad reputation with dealers -- who have received poor treatment from the company in the past. And finally, it's not clear to me that their product offers anything more that isn't being offered by the lines we carry.''

Commodore officials brush off this setback as typical of the risk-averse large chains. Commodore will focus on retail rather than corporate-oriented computer stores. It expects to sign 400 to 500 independent stores to carry the Amiga by September and 1,200 by Christmas.

A few fence-mending steps may indeed win back jilted dealers.

Commodore is offering a 40 percent margin on the Amiga, which is a comparatively hefty profit. The company has new managment, so retailers will no longer be dealing with former Commodore head Jack Tramiel (now chairman of Atari), who often abruptly switched marketing strategies.

And Kidder analyst McKay says the limited initial distribution will work to the dealers' advantage. ``You probably won't see price-cutting competition between dealers, and Commodore has said there will be no volume discounts.''

Ms. McKay predicts sales of 200,000 to 250,000 units the first year. She thinks the Amiga will be bought at first by ``upscale home-users and computer jocks.'' Some analysts question whether this market hasn't already been tapped out by Macintosh. Atari is just unveiling the $800 520ST, which may siphon off more home buyers.

Still, Commodore expects 60 percent of initial Amiga sales to go the home, says Mr. Teige at Dataquest. The basic software package will include Amiga DOS (the operating system that comes with speech capability), ABasic (a BASIC language program), and Amiga Tutor (how-to instructions). Some 20 extra programs including musicmaking, painting, word processing, and accounting, are supposed to be available at the start.

Another channel, says McKay, is the ``niche markets where this machine could sell.'' Potentially, graphic artists at ad agencies, engineers, architects, interior designers, and musicians could be attracted by its capabilities and price. But the more sophisticated business programs will take longer to develop, and until they arrive, sales to small businesses will be hampered.

Essentially, Commodore is straddling the home and business markets. Teige expects Commodore to push in whichever direction the market responds. But the danger is that the ``Amiga could fall into a nebulous market void that could confuse consumers who do not see it clearly as a home machine or a business machine.''

The Amiga was not a home-grown product, but was developed by a company Commodore acquired in 1984 for $25 million. It was a crucial purchase for both. Amiga was running short of development money. Sales of Commodore's low-priced computers were flagging, and its chairman had jumped ship.

Now, officials feel the company is back on track. ``Commodore's going to light a fire under the tail of the entire industry,'' exclaimed its North American president, Thomas Rattigan, a trouble-shooter hired from PepsiCo.

If the Amiga does succeed, it is likely to be at the expense of Macintosh. And that, analysts say, could prompt struggling Apple to slash prices on the Macintosh.

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