Martin Banks, Personal Computer World 11/82 - checked

November 1982

A few years ago I was, in the course of my labours, asked to attend a conference in the fair city of New Orleans, USA. Not unnaturally, I would have much preferred to have stayed in the UK watching what was happening to the microcomputer industry here - the cut and thrust of business, who was telling the best fibs about sales figures, which companies had just gone bankrupt. But no, the editor for whom I worked banned me from such fun and sent me to the salt mines of Louisiana.

The reason for all that unwarranted cruelty (ask any journalist just how cruel such working trips abroad can be) was that New Orleans was to be the site of a conference on personal computers. Yeah, well, a conference is a conference is a conference I hear you say - and most of the time I would agree with you. This one, however, was different. For a start it was not just a vehicle for flight-testing hot-air balloons like many of the events normally are; and for a finish it was being run by one of that fair nation's most widely respected analysts of the electronics and computer industries, one Benjamin Rosen.

That fact alone made it interesting. It was a conference run by finance men, for finance men, and about the personal computer industry. Not surprisingly, the personal computer industry took note, and attended in small but very select numbers (some say that's why I was there, but I would deny it).

During the course of this conference a new game came into being. To be fair, I suppose it wasn't a new game as such. The rules were as follows: someone asks the speaker (senior people from the industry) who's going to be top dog in five year's time. What was new about the game was that the speakers felt obliged to answer. They did not try to duck the issue as they normally would have done. This time, perhaps because of the heavyweight audience, they were giving straight answers - or as straight as possible, anyway.

What was interesting was the nature of the answers, and what they indicated about the perceived future of the industry. This year was, in fact, 1980. All the speakers at the conference which included the likes of Steve Jobs (Apple), Chuck Peddle (then Commodore), John Roach (Tandy), Alan Alcorn (Atari) Dan Fylstra (Personal Software) and Portia Isaacson, were putting money on Apple and Tandy to be in the first three. That third place, the consensus said, would go to a Japanese company.

There are still three years to run on that prognosis, but even now the odds seem to be lengthening, especially on Apple.

The pace at which this particular industry develops makes playing the predictions game a fool's errand at the best of times. It is surprising however, that the likes of IBM were ignored by all but one speaker - Portia Isaacson. She said that the number one company would be Tandy and IBM, which would be a joint venture. Apple ranked only third in her prediction, and that only after it had been acquired by a Japanese company.

Most of the assembled delegates thought these predictions to be a wizard wheeze, and therefore no doubt promptly forgot them. With the benefit of two years' hindsight, they are predictions that do not look quite so silly. They certainly bear some examination.

The first point to consider is the pace of development that has continued in the business. At the time of that conference, Sinclair had yet to launch the ZX80 in the US. Clive was a man with a reputation, to the US financial men, for flair in design and danger in manufacturing. Since then he has created a whole new personal computer marketplace around the world, and has almost certainly stopped being poor.

Nobody could really have predicted that particular event, or the scale of it, two years ago, yet the speakers at the conference knew that some events were likely. In particular they knew about IBM and the chance of it coming into the market. Despite the pace at which: the market was developing, IBM was a predictable entrant. Yet only one person, Portia Isaacson, ventured to suggest that it might be amongst the leaders in five years time. Could it have been that the leaders of the industry had such a poor view of IBM, or perhaps a grand view of themselves?

With that benefit of two years' hindsight, it is perhaps possible to reappraise those predictions, especially those of Portia Isaacson, and see where the strengths and weaknesses lie.

What the last two years have taught us is that: 1) there will always be room for something new, and that something new can happen very quickly in this business, eg, Clive Sinclair; and 2) not all the old analogies always work - only some of them.

That second, probably obscure statement refers to the Japanese, who were punted by just about everyone at that conference as the source of one of the top three companies for the future. A Japanese company was punted for the then-obvious reason that, as a nation, it had done well in just about every other industry it had looked at. Analogies abounded. Shipbuilding, motorbikes, cars, televisions, hi-fi, semiconductors. Everywhere there was an analogy of how the Japanese can take an industrial sector by the throat and make it theirs.

Yet, for some reason, no Japanese company has managed the trick in the personal computer business - well, not yet, anyway. There could be two reasons for this. One, that they are just biding their time until an appropriate moment, and two, that another analogy is in play. That analogy is of the popular music business - that while the Japanese have the world hardware market in hi-fi, they are nowhere in the software - the music that gets played on hi-fi systems. In personal computers, it is usually the case that without the right software the hardware means little.

It could be that a combination of these reasons prevails, and that leads back to Portia Isaacson's prediction - that third place in the world market would be taken by Apple, which would be owned by a Japanese company.

The chances are that an acquisition of this type is the best way the Japanese can make the big transition from the unfamiliar position of also-ran to market leadership. (There is also, of course, the chance that they are about to do a Sinclair and come up with something entirely new). If acquisition it be, then whom should be purchased? Ms Isaacson's suggestion is maybe not that outlandish. Apple and its contemporary Commodore are both showing the hints of vulnerability, while having a presence in the market of considerable value.

A star of the US stock market, Apple's financial performance has recently started to plateau. Its early growth rates have diminished to levels that, while still good for industry in general, are no longer at the dramatic and significant levels of two years ago. One New York stock analyst has said that the company might be slowing down.

On top of this, the company's product range has hit a hiatus. The Apple II has been one of the outstanding successes of the industry; in many ways it helped to create the viability of the whole business.

It still sells well, but it now long in the tooth. The follow-up, the Apple III, limped into existence with a million problems, not least of which was the fact that the company was going public at the same time. The machine has since been revamped, which took around a year, but it has been in many ways superceded by events (or more specifically systems like the IBM and the Sirius) without making any major impact.

Yet the company has an excellent international distribution set-up, generally sound marketing with only occasional public squabbling, and a software base that is worth a fortune. A Japanese company could be tempted if Apple fails to come up with something good in the next year.

In that respect, Commodore is slightly better placed. It looked almost dead on its feet a year ago, but now it has a whole range of products available (or coming, at least). It also has a good distribution set-up, especially in Europe. Commodore's biggest weakness has, however, always been the fact that its penetration of the US market has been weak, with European sales supporting the operation. As the company has broad base, with manufacturing in a variety of product areas, the right offer from a Japanese company for the microcomputer bits could be tempting.

But what of Ms Isaacson s other prophesy, that IBM would be number one in a joint venture with Tandy?

Well, apart from the fact that, at first glance, IBM stands a good chance of being number one all on its own, the suggestion of a joint venture with Tandy does make some sense. This is especially so outside the US, where IBM has yet to get its marketing act together formally.

In practice, such a venture is unlikely. IBM will no doubt announce soon enough that it is appointing dealers in the UK. Everyone knows it is talking and planning, and knowing my luck, it will have already announced details by the time you read this.

Nevertheless, such a joint venture would have a great deal going for it. Both companies have design and manufacturing skills par excellence, both have strong marketing. Tandy has the distribution game sown up tight, while IBM has the name to put on any box that is liable to be called a computer. Last, but by no means least, the combined financial clout of the two companies would mean that no investment - either in developing new products or in bombing prices to kill the opposition - would be too excessive.

It is an interesting exercise to guess market leaders for the future, though rarely one to do in public. Already, in two years, the whole scenario on which expert judgements were based has changed significantly. I will, this time, opt out of such endeavour, but I will leave you with the latest US suggestions on the subject.

Given that there are now several personal computer markets, and that the following is not concerned with the one created by Clive Sinclair, but more about the professional and business/commercial market, then two names now emerge. For anyone who has had anything to do with the mainstream computer business it will be just like old times, for the projected leaders in the future personal computer market are - yes, you guessed it - IBM and Digital Equipment Corp.

end