BIG BLUE HAS A CLONE OF ITS OWN
There's one factor that Eckhard Pfeiffer doesn't name when he lists the reasons for Compaq Computer Corp.'s impressive comeback. And it might be the most important one of all: While Pfeiffer's troops have been pumping out ProLineas, ProSignias, Conturas, and other low-priced machines that have pumped up Compaq's volume, IBM has been sitting on the sidelines. Despite repeated hints since June by IBM officials about Big Blue's plans for entering the low-priced PC fray, nothing happened. So Compaq had four months to put its new PCs on the map without having to sell against comparable IBM machines.
The honeymoon is over. The ValuePoint line, IBM PC clones built by none other than IBM, is finally hitting the market. Introduced on Oct. 20, the line of four systems is aimed directly at Compaq's ProLineas. They start at a Compaq-matching $795 and carry lots ofservice and support, not to mentionwhat remains the industry's most powerful logo.
"A Big Blue box is going to get serious attention, even at the low end," says Tim Bajarin, analyst with Creative Strategies Research International Inc. "They have the brand-name identity. They are known for service. They are known for quality. They've just never been known for price."
SLIPPING SHARE. IBM has a lot riding on the ValuePoints. While Compaq and other rivals have been enjoying big runups in unit shipments this summer, IBM's market share has been contracting, partly because its big business-oriented PS/2s and home-market PS/1s missed the value-oriented buyers who are the fastest-growing part of the market. A Computer Intelligence buyer survey indicates IBM's share of PC units bought in the U.S. fell from 19% in May to 16% by August--despite price cuts on PS/2s.
When IBM rocked Wall Street with its disappointing third-quarter earnings report on Oct. 15 (page 28), PCs were singled out as a significant earnings drag. IBM blamed PCs for two-thirds of a 6-percentage-point drop in its overall gross margins, and analysts estimated that PC revenues in the quarter dropped by 30%.
Did IBM pass up sales by delaying ValuePoint until 20 days into the fourth quarter? "It could be true," concedes Angelica P. Horaitis, IBM's marketing brand manager for the new line. But she says the company is still well-positioned to capture the bulk of corporate orders in the remaining 10 weeks of the year. And, she adds, IBM had good reason for delaying the rollout: In September, it announced formation of the IBM PC Co., a more autonomous unit for building and selling personal computers. Big Blue also revamped its PS/1 and PS/2 lines and wanted to avoid confusing customers and dealers. "I think that the criticism was going to be there no matter what," says Horaitis. "If we had announced earlier, people would have said we should have waited."
Now that ValuePoint is here, analysts give it a good chance among savvy business buyers. The line uses 386 and 486 microprocessors built by IBM that are faster than the standard Intel Corp. designs, giving ValuePoints a slight performance edge, analysts say.
Unlike ProLinea, which is widely distributed through mass merchants, the ValuePoints are positioned primarily for corporate buyers, says Horaitis. They will be sold by PS/2 dealers and through an 800-number, direct-response IBM unit in Atlanta.
"I don't know that they bring anything to the table that ProLinea doesn't," says Bill L. Fairfield, president of InaCom Corp. Except, of course, an unbeatable name, which Fairfield says will win over thousands of IBM mainframe and minicomputer owners who would prefer to buy IBM PCs--if they're priced right.
Can IBM turn the tables on Compaq? "Everything is very dynamic in this industry," says Sanford C. Bernstein & Co. analyst Michael Kwatinetz. After all, he notes, a lot of people counted Compaq out a year ago.
One thing is certain: For IBM to be a threat to Compaq--or the hundreds of other cloners--it will have to carry out its plans a bit faster. Ask Eckhard Pfeiffer: Time is money.Catherine Arnst in New York