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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 -- File Transmission Completed...