12/11/95 AIR FORCE DOGFIGHT

AIR FORCE DOGFIGHT
PC makers vie for a mammoth contract
This is the big one--the single contract that can turn a computer maker's fortunes around overnight. It's worth some $900 million right off the bat, and it influences the selections of computer buyers throughout the federal government.
Not surprisingly, the U.S. Air Force's latest personal-computer contract, known as Desktop V, has drawn an impressive crowd of contenders. Among the big-name manufacturers involved in the bidding: Compaq, Dell, Digital Equipment, Hewlett-Packard, IBM, and AT&T.
The winners--two are expected--could be named as early as mid-December. They will supply the Air Force with 360,000 machines and perhaps more. For the first time, the contract will include laptops and network-powering servers, which carry far richer profit margins than plain-vanilla desktop machines.
``VERY INFLUENTIAL.'' More than that, though, the contract is prized for its outsize clout on the U.S. government's $9.1 billion computer budget. The Air Force's reputation for technical excellence makes Desktop V ``very influential,'' says Theresa Garza, a vice-president at Dell Computer Corp., whose products are included in several bids.
It's a critical test for Zenith Data Systems, the $1.3 billion PC division of France's Groupe Bull. Zenith Data has won or split three of the first four Air Force PC contracts, and government contracts account for 20% of its total revenues. Since it shared the 1993 Desktop IV contract, though, the company has landed just one major federal win. Meanwhile, Dallas-based Electronic Data Systems Corp. (EDS) has snatched four major government PC contracts this year alone. While Zenith has a reputation for top-notch service, EDS has thrived by submitting two bids for each contract, one with branded equipment and a second with cheap, no-name machines.
Whichever company wins Desktop V will get a revenue boost at a time when consumer PC sales growth is expected to slow to 15% in 1996 from 25% this year, according to IDC/Link Resources Inc. For the next several weeks, then, the PC industry will have one eye trained on crucial Christmas sales--and the other on the Air Force Secretary's office in Washington. Which is more important? Christmas comes but once a year. The government just keeps on buying.
By Gary McWilliams in Houston