Computers: The Peanut Meets the Mac

New entries from IBM and Apple battle for attention

When IBM introduced the PCjr last fall, it seemed to many industry observers that the personal-computer game was over. Initial buyer interest in the $1,269 machine was so feverish that sales of competing models slumped months before the so-called Peanut arrived at retail stores. Many dealers felt they would be selling PCjrs as fast as IBM could turn them out. “The market is voting with dollars,” said David Wagman of Softsel, the country’s largest independent software distributor. “And it’s saying, ‘IBM will be our standard.'”

Now those predictions appear to have been too sunny. Although IBM expects to ship more than three tunes as many personal computers this year (an estimated 2 million) as it did in 1983, many of the 1,400 dealers who carry the new PCjr have yet to sell even their initial 25-machine allotments. “Inventory is beginning to pile up,” says Alexander Stein, an analyst with Dataquest, a California research firm. Says one New York City dealer: “A Cabbage Patch doll it isn’t.”

Moreover, Apple Computer, which has been siphoning customers from Junior with price cuts on its $1,395 Apple He, has captured the imagination of much of the industry with its two-month-old $2,495 Macintosh computer. Since the Mac does not adhere to IBM’s programming specifications, its success directly challenges the standards set by the flagship of IBM’s personal-computer line, the venerable and highly popular IBM PC.

Those standards are part of Junior’s problem. IBM made the PCjr partly compatible with the PC, which means the smaller machine can run some programs written for the PC. But IBM engineers did not make it compatible enough. Internal differences prevent the PCjr from using more than 50% of the PC’s rich library of software. Among the supplements it cannot accommodate are such market favorites as the bestselling business program Lotus 1-2-3. “When a consumer walks in the door, he is under the impression that the PCjr will run most of the IBM software,” says Leon Wilson, general manager of Chicago’s Computer World stores. “That impression is incorrect.”

The Junior’s other problems are more visible. Dealers and users alike complain about its toylike appearance, its Chiclet-shaped keys, the built-in design barriers that make it difficult to expand the machine’s memory or attach extra disc drives. But its biggest drawback has been price. In the market for home computers, where most machines sell for under $300, even the stripped-down $669 version of the PCjr seems overpriced. “For its level of performance,” says William Bowman, chairman of Spinnaker, a leading software publisher, “it is simply the most expensive machine on the market.” Although the Macintosh was actually aimed to compete with the bigger IBM PC, the price difference between Mac and the Peanut shrinks to about $300 when the costs of IBM’s color monitor, joystick and software programs are added on.

The Macintosh has not only received consumer acceptance, it has even generated excitement. “I’ve never seen anything like it,” says one Manhattan dealer who sold four Macs the first day and has back orders for another 80. “We can’t get enough of the Macintosh,” reports Greg Register, manager of a computer store in Apex, N.C. Apple’s engineers, who decided not to make their machine compatible with IBM’s PC or their own Apple II line, were able to take advantage of the in creased power of the latest generation of silicon chips and new software that has made the Macintosh attractive to computer novices. “Once I saw the Macintosh I knew I wanted it,” says Richard Petroca, a civil engineer from Long Island who uses the machine for letters and busi ness reports. “It’s easy to use, and it’s fast.”

The machine has even caught the fancy of some Fortune 500 companies, a mar ket Apple had temporarily abandoned to IBM’s more seasoned direct-sales force. The accounting firm of Peat, Marwick, Mitchell & Co. has ordered 3,500 Macintoshes for use in its 200 offices around the country. Later this month Businessland, a computer distributor that had previously concentrated on IBM machines, will add Mac to its product line. Two other national retail chains, ComputerLand and Sears, are reported to be eyeing the new Apple.

Should Mac make inroads in the corporate market, 1984 sales could reach 500,000. This assumes, however, that delays do not occur in the shipments of component parts, especially the next generation of larger-capacity memory chips.

It is always dangerous to second-guess IBM, and nobody is about to write off the PCjr. IBM has just begun to roll out the Peanut’s estimated $40 million advertising and promotion budget, and it may yet correct some of the machine’s deficiencies. Says Bill Wallace, co-president of the Dallas-based Compco computer-store chain: “IBM will do whatever fine tuning it has to do to make its product viable.” In fact, says Ulric Weil, a computer analyst at Morgan Stanley, IBM could sell as many as half a million PCjrs by year’s end if it cuts its price by at least 15%. Warns Weil: “It’s premature to eulogize the Junior.”

Conventional wisdom maintains that computer buyers care less about technical achievement than about such factors as continuity, compatibility and customer support, prime virtues of IBM. In the vola tile computer business, however, history has shown that significant technical achievements can attract consumers away from the most deeply entrenched standards. Two examples: in the mid-1960s the minicomputers emerged and captured a sizable portion of the market once dominated by big mainframe computers; in the late 1970s microcomputers took business away from both mainframes and minis. Now Apple’s Macintosh may be providing another example of dubious conventional wisdom.

—By Phillip Elmer-DeWitt. Reported by Thomas McCarroll/New York and Michael Moritz/San Francisco