Hall of Fame/HallofFameCDROM.cdr/pcjr/news.lzh/NEWS.DOC

Text File | 1986-03-03 | 17KB | 302 lines

PC Week - May 14th.
                            THE TROUBLE WITH JUNIOR
                            --- ------- ---- ------

Like a high-tech Father Flanagan,  IBM  has  spent  much  of  the  past  year
proclaiming  that  there's no such thing as a bad IBM computer--at least when
his name is Junior.

IBM's refusal to give up on its PCjr,  supporting it with a new keyboard  and
last  year's holiday sales promotion,  was beginning to make believers out of
some PC buyers when Father Flanagan suddenly announced in March that  he  was
giving up on his 14-month-old child.

Stopping production of the jr has left thousands of users wondering what this
action  will  mean to them and what convinced IBM that jr was an erd
after all.

IBM's support for its product--launched in February 1984 with a  $40  million
million  ad  campaign--included  price cuts,  discounts and a redesign of the
original chiclet keyboard after it was criticized for appearing too toy-like.
During the Christmas holidays,  the company launched an extensive advertising
campaign,  cutting the price of the PCjr with a color monitor to below  $800.
Sales  soared for the holidays,  but fell to below pre-promotior
the campaign ended on February 1, 1985.

In March,  IBM announced  that  PCjr  production  would  end  in  April.  The
company's brief explanation of the jr's failure was simple:  "The home market
didn't expand to the  extent  we  thought  it  would,"  said  Rob  Wilson,  a
spokesperson at IBM's Boca Raton offices.

Almost two months after the IBM announced the jr's demise,  the microcomputer
industry is still far from agreement about the  meaning  behind  the  action.
With  an  esti 300,000 in inventory,  some retailers believed
that perhaps the halt was only temporary.

Confusion Continues
--------- ---------
"There's a general misperception  about  what  IBM  did  here,"  say's  Maury
O'Connell,  vice president of network development for On-Line Computers Plus,
a retail chain based Boston.  "They really intened to continue to market  the
jr  and  to  fully support it,  but they didn't renew their [annual] contract
with Teledyne [to manufacture the CPU] because they happly  in
inventory."

"People  are  reporting  that  the product is being killed by IBM," O'Connell
said.  "That's certainly not the case.  We have them  in  inventory,  in  the
stores,  and  in  our advertising.  We present the product in a very positive
fashion and explain that it's not dead."

Ron Cheney of the MicroAge retail store in Lincoln, Neb., agreed.  "There's a
lost  of misinformation in the marketplace," he said.  "They're not,  per se,
discontinuing the PCjr.  They're simplction  temporarily.  I
think  we  may see some changes to the PCjr,  but I don't think IBM will drop
the jr and just toss it out the window."

IBM's Wilson,  however,  sees nothing temporary about  the  production  halt.
"We'll  be  stopping  production of it in April for good," he said in a March
interview.  "We're stopping production because we have  enough  inventory  to
meet foreseeable demand.  We've tried to underscore that we're not abandoning
this product.  We're going to continue to nd sell it."

Meanwhile,  jr users see the product's discontinuation as final, and they are
not happy about the situation.

"I think IBM made a mistake and hurt their credibility," said  Ernest  Karhu,
an  economic  development  specialist with the Bay State Skills Corp.  in the
Massachusetts Office of Economic Affairs.  Karhu uses his jr at home to  work
on  models and prototypes of job-related projects.  "Folks bought jrs because
they felt if any company would back up a product, IBM wouldd.

"They thought it  was  a  safe  investment.  Giving  the  impression  they're
abandoning  the  home-computer market is going to hurt them." Along with most
users interviewed by PC Week,  Karhu believes that IBM gave up on the jr  too
soon, and that if it had waited longer, the market might have grown.

Membership  has  mushroomed  in  the  Boston  Computer  Society's  jr Special
Interest Group, Karhu said.  The group had six users last November,  compared
to 60 to 70 today.

Karhu   jr  could  also  be used by small businesses or small
private non-profit organizations.  "There's a cottage-industry movement  that
could  also  use  the  PCjr,"  he  said.  "[but it's] a market that's slow in
blooming.  It'll probably develop in the next few years." Users reactions  to
the jr's demise depend on how much they rely on IBM support.

Mixed Reactions
----- ---------
Jack  Spitznagel  uses  five  PCjrs  in  his  work as a dental researcher and
immunologist in Reading,  Mass.  A e hacker,  his only worry
about  the  future  of  his jrs is the possibility that new technology in the
computer industry could render his machines obsolete.

"Until they come out with an operating system that absolutely won't run on it
[the jr], I'm in good shape", he said.

Despite his organization's recent purchase of 100 juniors,  Bob Bethel of the
Baord of Realtors in Lincoln,  Neb., is equally unconcerned.  "The board uses
the jrs primarily as intelligent terminals off its Multiple ce
mainframe,"  he said.  "If,  down the road,  the jr software dries up,  we're
still not in a bind because we'll still have it for our primary usage,  which
is  as a terminal," Bethel said.  "That's why we're probably resting a little
easier than others."

Easier than David Silowski,  for one.  The director of recruitment at the New
England  College of Optometry in Boston,  Sislowski estimate he does about 30
percent of his work, mainly word processing,  at home on his jr.  "I'm rather
sd  bit  apprehensive" at the discontinuance of the jr,  he said.
"You begin to wonder what kind of support will be there--not only  from  IBM,
but from 3rd party vendors, software and peripheral makers."

Ted Esch of the Knoxville Computer Center in Knoxville, Tenn., is not worried
about  getting  3rd  party  service  for his firm's five jrs.  "We're getting
service directly from Computerland,  so I don't see a  problem  for  us,"  he
said. "We can always beat on Computerland.  If I were Computrry
about  it  [supporting  the  jrs]." Esch said that IBM's action has upset his
business's expansion plans,  which called for the purchase of  15  more  jrs.
"Where we were going to use the jrs before,  we'll use PC's", he said, adding
that the jr was preferable because it takes up less  space  than  a  PC.  The
demise  of  the jr "has left a void for what we were going to do with it," he
said.  Esch had planned to use jrs for data entry in his employees' homes.

Not  to  Worry
--- -- --oncerns about obtaining support, hardware and software in the wake of
the jr's discontinuation might or might not be legitimate,  depending on whom
you consult.  According to IBM, there's absolutely no cause for alarm.  "Have
we  abandoned  this  [low-end]  marketplace?"  asked  IBM  spokesman   Wilson
rheotorically. "I'd say the answer is `no'.  Asked whether the jr's toll-free
help  telephone number will continue in operation indefinitely,  Wilson said,
"I can't speak for multiple years down tt we do plan to  continue
to support it."

Knoxville's  Esch  thinks IBM's service will be as good as its word,  because
after the chicklet keyboard fiasco  and  the  AT  disk  problem,  IBM  has  a
credibility  gap  to overcome.  "IBM says they'll continue to support the jr,
and they might," he said.  "If they were to  drop  the  spares  [spare  parts
inventory  for  the jr],  that would be as bad as the chicklet keyboard.  IBM
doesn't like to look bad.  I think it's likely that it will be
Lisa Wilmoth,  public relations associate  at  Computerland  headquarters  in
Hayward,  Calif., agreed.  "We don't see any real change within the next year
or so," she said.  "IBM has assured us that they'll continue to  support  the
product."

Although IBM is guaranteeing the continuation of its own service and support,
it  can't  do the same for 3rd party vendors,  whose add-ons have transformed
the jr from a home computer ot one  suitable  for  many  business  uses.  On-
Line's  O'Connell  ty add-on support development may slow down.
3rd party manufacturers "will look very, very carefully at what's happening,"
he predicted. "I think you're going ot see people who are not well structured
financially--people with very thin capitalization who can't afford to make  a
mistake--pull out of that market, because their pockets aren't deep enough to
ride out a storm.  But others will stick to it."

User  Bethel is not concerned that 3rd party products for the jr will dry up.
There aren the market so that  his  business  will  continue  to
receive support, "because there's money to be made," he said.

Greg  Brehm,  vice  president  of  marketing  for  Legacy Technologies Ltd of
Lincoln, Neb., said Legacy is one 3rd party add-on maker of memory boards and
disk drives that will stick with the jr. "We are actively supporting the PCjr
as well as PCjr expansion products," he said.  "We're not going to  drop  the
ball."  Legacy was founded on a PCjr base and makes only products fo  Brehm said.  He acknowledged,  however,  that his firm would  probably
alter its jr-only orientation sometime in the future.

Another  3rd party vendor,  Alpha Software of Burlington,  Mass.,  is equally
bullish on it's jr product. "We expect to be selling the cartridge version of
Electric Desk for quite some time,"  said  Alpha  President  Richard  Rabins.
Since  the discontinuation announcement,  Rabins notes an upswing of interest
in his product,  which he atributes to users' concern about gftware.
"It's  simply good business to continue to support the jr," Rabins explained.
"From our conversations  with  IBM,  it  appears  that  they  have  quite  an
inventory,  and  the  installed base is about 250,000 to 300,000 already," he
said.  "At least for the next 12 months we will continue  to  market  the  jr
version."

Tim Mahoney,  vice president of marketing and sales at Tecmar in Solon, Ohio,
a maker of add-on boards, was philosophical about IBM's announcement. "As the
la PCjr peripherals,  we had the most to gain [from the  jr]
and the most to lose [from its discontinuation]" he said. "It's certainly not
exciting  news  as far as we're concerned,  but ....  it's not as terrible as
everybody's saying.  "Retailers were negative at first, but now they see that
there's an opportunity here," he continued.  "The reaction by consumers is to
protect their investment.  The perception in the marketplace is  they  better
buy their peripherals because they may disappear in e're seeing
a stronger demand than in the past.  We're  an  aftermarket,"  he  explained.
"The  need for peripherals is still there.  We're going to stay in the market
until it goes away." Mahoney also thinks users can take IBM at its word. "IBM
is going to be darned sure to support that home users," he said.  "IBM  is  a
very conscientious company.  They're very sensitive to publicity."

Silver Lining
------ ------
O'Connell sees some good news in all this for anyone contemplating purchasiHe  predicted  the  price  will drop to $600 or $700 to make up for
recent slow sales, and expected inventory overstock due to buyer panic in the
wake of the discontinuation.b "People who don't understand will be  spooked,"
he said. "People who know what's going on will snap them up as never before."
Users  are  hoping  the discontinuation leads to `fire sales' of software and
peripherals as well.  "I'm hoping [vendors]  try  to  dump  them,"  Sislowski
admitted.

Legacy's  Brehm  agreed  tductions are a distinct possibility to
help move excess stock. "We had a cross-the-board price reductions on March 1
[before the IBM announcement], but I don't anticipate any more.  Those having
fire sales are those that are going out of business," he said.

Cheney,  howver,  does not anticipate price reductions.  "IBM is not lowering
their price to retailers," he observed, adding that MicroAge will continue to
sell the jr at the pre- and post-promotion price of $999 without a monitor.

Tecplans for price reductions, acMahoney.

What Went Wrong?
---- ---- ------
"There  may  be  some values,  and that will be a short-term gain," Sislowski
observed, "but you still have to worry about the long term."

After standing by its low-end machine so steadfastly,  why did IBM decide  to
pack it in?  According Spitznagel,  "All the fanfare and rumors that preceded
the jr doomed it not to meet exectations." "If you look at  the  #  of  units
sold," said Tecmar's Mahoney, "you can claim it was a successful roduct.  But ook at the price cuts and promotions..." Although he believes IBM
profited from the jr--even at the discounted price--he questions whether  the
profites  were sufficiently high to satisfy IBM.  Mahoney thinks there's more
here than meets the eye.  "I think it's more of an internal IBM thing than  a
market  thing.  It's  unclear what IBM will do next,  but there are two basic
theories.  One is that IBM will take the JX out of Japan.  It's  basically  a
jr with two 3.25 inch dicond theory is that they'll just take the
basic PC and reduce the price."

Sislowski  agreed.  "With  the  PC-2  and downgrading of the PC,  the jr just
doesn't fit [in the IBM line]."

Legacy's Brehm said by the time IBM introduced the jr,  "the home market  had
had  bad  experiences  with  TI  [Texas  Instruments]  and Commodore.  Buyers
couldn't find uses for them.  A lot of them are sitting in closets.  When the
jr came on the market,  the mas numbers just weren't there.  The
saturated  and frustrated," he said.  "Another problem was bad press when the
PCjr was first introduced.  It never had a chance.  It didn't get  off  to  a
good start.  Then,  six months later,  it was rumored that IBM was developing
add-ons,  and that put a lag in the 3rd party development market as  everyone
waited to see what IBM would do.  Retailers didn't do as aggressive a sell as
they  should  have.  Now,  talk  of  the  PC-2  is just pushing [the jr] back
further on retailers' shelves.  It'fittest."

Chris Steit,  a senior analyst  with  InfoCorp,  a  market-research  firm  in
Cupertino,  Calif.,  cited a combination of price and market as the culprits.
"Basically,  it cost too much," he said,  noting that the product  sold  well
when it was priced at $800.

Could  IBM  have  maintained  the  promotional  discount  price  for  the  jr
indefinitely?  IBM won't answer that question directly, but Wilson commented:
"The holiday promotion was a holiday promotion.  Promotions g
and  an  end.  We  thought  the  jr  was  priced  appropriately  [before  the
promotion]."

The  Chicklet `Albatross'
---  -------- -----------
The marketing of the jr might prove to be  a  learning  experience  for  IBM.
"They weren't listening to the marketplace," said Spitznagel. "When you enter
the  consumer  market,  you  must provide a clear-cut package that people can
understand...and watch your pricing very carefully.  A matter  of  $400  made
the difference between sales and no salesitz,  IBM's pricing error was evidence that the company was unfamiliar
with the home market.  "The PCjr did a lot of market research for them,"  she
said.

Esch  noted  that  IBM  expected  the jr "to be a home machine because of the
[chicklet keyboard],  but the cost,  which was almost $2000 (with a  monitor,
second drive, and 256k of memory), wouldn't sell on the home market."

Most  users  and retailers agreed that the chicklet keyboard was an albatross
IBM foundf hard to shake. "Pet [the keyboard] as a toy," said
MicroAge's Cheney.  "If they'd offered the second keyboard first,  they would
have done much better.  People make judgments based on first impressions."

Esch  agreed  that  the keyboard was fatal.  "I don't think it ever recovered
from the Mickey Mouse keyboard," he said. "The initially high cost was also a
mistake.  The keyboard, the original price and the cost of the expansion were
killers." Esch summed up IBM's misreading of thehome market  this  way:  "Why
payIBM when for $1200 you can get an Apple.  When it's corporate
money it's easier to rationalize [buying IBM], but when it's your money, it's
different."

"This may be a learning experience for IBM," said Spitznagel.  "They're bound
not to let the message go by."

Esch  agreed  that  IBM will learn from the jr.  "You get the impression they
might have found some kind of successor to the jr coming  on,"  hesaid.  "I'd
say  they're coming out with something in direct competition with Apple, have a better image.  It will look completely different  because  any
connection with the jr will kill it."

"IBM doesn't make the same mistake twice."


                         -- End of News --






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