GOT A GRAND? GET A PENTIUM PCMonorail's edge: It doesn't make, stock, or fix its machines
It's the personal computer industry's biggest challenge: how to sustain the home-PC market's 25% growth rate. Analysts think sales growth could stall as early as 1998: As PC makers cram more technology into their machines to appeal to upper-income families, they've driven the average price to $2,200, from $1,900 in 1993. That brings higher margins, but it squeezes the number of middle-income consumers who can afford PCs at all.
Doug Johns hopes to change all that, with a machine that radically challenges traditional notions of what a PC should be and how it is made and sold. Come Oct. 28, his Atlanta startup, Monorail Inc., will unveil a powerful PC for novices that runs Windows 95, plays music CDs, and handles the Internet with ease. Retail price tag: $999.
In part, Johns' solution relies on technological simplicity. Instead of a big, costly monitor, Monorail's PC is built around an inexpensive, 10-inch flat-panel display. Rather than constructing a box with multiple microchips and rarely used expansion slots, its charcoal-gray case has a powerful Pentium-class microchip, stereo sound, 16 MB of memory, and a superfast 33.6 kilobit modem.
BUDDY SYSTEM. This from a company with just 40 employees that does no manufacturing and owns no inventory. The PCs are made by Phelps Technologies Inc. Finished PCs go from Phelps to Federal Express Corp. vans and direct to dealers. FedEx also handles dealer orders, delivers machines, and accepts and sends electronic payment.
By January, Johns hopes to eliminate retail inventories altogether: Consumers will get machines delivered to their homes in two days. For repairs or upgrades, customers call FedEx and schedule a pickup. The machines will be returned to Phelps and then sent back again by FedEx. Monorail ''will redefine distribution and customer service,'' says Timothy P. Bajarin, president of consultant Creative Strategies Research.
Johns, who as Compaq's PC division chief guided the cost-cutting that led to the company's 1992 turnaround, left the big computer maker in 1993--but hung on to his Rolodex. Phelps had built the mechanical guts of Compaq's first low-cost business PC. Monorail's electronics are supplied by Mitac International, which builds some of Compaq's Presario home PCs.
Monorail also boasts a cadre of Compaq designers and marketers. Co-founder Nick Forlenza designed Compaq's Presario 3000 home PC, and Greg Adams engineered the Compaq Portable III. Johns insists he isn't out to knock off Compaq: ''Our chief rivals are things like the $500 Sony Playstation, the $1,300 trip to Disneyland.'' Even so, he may give the big PC guys a scare.
By Gary McWilliams in Houston, with Kathy Rebello in Scottsdale, Ariz.
Updated June 14, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.