Few new products have exploded into the American marketplace like the personal computer. Unhindered by the recession or by cutbacks in government spending, personal computers are racking up billions of dollars in sales and are increasingly being sold in department stores and discount houses like so many vacuum cleaners.
Retail sales volume for the computers alone, not counting related equipment, such as printers or the software that drives the computers, probably totaled at least $5 billion in 1982, and the market for supplementary equipment is much larger. According to a recent report by Kidder, Peabody & Co., the sale of each microprocessor, or small-computer central data processing unit, "generates over five times its own value in sales of peripheral and memory devices."
The boom in small computers shored up the computer industry as a whole, which is feeling the same recessionary pinch as the rest of the economy. According to the Commerce Department's annual report on U.S. industrial outlook, employment in the industry rose in 1982 by 5 percent, to 351,000, but that rate of growth was far lower than the 15 percent of previous years. Expenditures for plant and equipment of the eight largest computer companies rose only 2 percent last year, to $3.7 billion, down from 37 percent the year before, as domestic sales slowed and exports dropped in the face of Japanese competition.
Continued strong demand for desk-top computers is expected in 1983, industry watchers say, as students, small businesses, homeowners, game-players and self-employed professionals invest in what is becoming a basic tool.
But there are uncertainties in the market too, many caused by the spectacular entry of International Business Machines into the field. IBM, the giant of the industry, grabbed an estimated 22 percent of the market in its price range in its first year in the personal computer market and may be preparing to enter the fiercely competitive, lower priced field as well, computer experts say.
With its acquisition of 12 percent of the stock of Intel Corp., a major manufacturer of microprocessors and computer circuits, IBM appears to have ensured continued access to circuitry and computer "brains" that are at the leading edge of electronics technology. Industry analysts take for granted that IBM will make further inroads into a market formerly dominated by competitors such as Apple Computer.
IBM has concentrated so far on the business market, but is "perfectly positioned to go after the consumer mass market with a less expensive, consumerized product," said Tricia Parks of Future Computing Inc., an industry research firm in Richardson, Tex. "A lot of people think that's why they chose to advertise so heavily on television--they are preparing the consumer."
H. I. Sparks, director of sales and services for IBM's personal computer division, appeared to support that analysis in a recent interview with Washington Post staff writer Merrill Brown.
He said the selection of a Charlie Chaplin-type tramp character for the television advertising campaign stressed the product's "accessibility and association with Everyman" and established IBM's identity as "somebody everybody could relate to."
He also said the entire industry is "trending away from large central mammoth systems to one that puts the computing power in the hands of the individual." There is, he said, "no end in sight for the personal computer business."
Such is the market power of IBM that just by entering the field it has spawned a new group of ancillary corporations producing software that is compatible with the IBM equipment, bargain-priced equipment capable of running IMB's software and providing on-site repair services to supplement IBM's own in-shop service.
IBM was not the only major new player in the game last year. The other was at the rock bottom end of the price and capacity scale, the $99 Timex Sinclair model that is about the size of a cigar box and looks like a toy. Its limited range makes it useful mostly for beginners and users who do not need sophisticated computing capability. The model sold more than 600,000 in its first five months on the market.
"It's a novelty item that skews our market statistics," Parks of Future Computing Inc. said. "It will get put in the attic next year. But later people will buy something else."
As new products enter the market, consumers are becoming more sophisticated, the pace of research and development is rendering some equipment obsolete almost as soon as it is developed, and the competition for retail display space is heating up. As a result, Business Week warned in a recent survey of the industry, "it is clear that most companies in the market will not survive."
Many industry analysts, in fact, say that distribution, rather than performance, may be the key to survival for personal computer manufacturers. In the lower priced systems, department stores and discount houses may have the power to make or break any product by their decision to carry it and how prominently to display it. In the higher brackets, specialty stores, such as the fast growing Computerland chain, may hold the key.
Only the Tandy Corp., with its nationwide chain of Radio Shack stores selling the TRS 80, is fully independent of the whims of retailers. IBM uses both independent retailers and its own outlets. There are 35 of those now, and IBM is expected to expand the chain this year.
Already, despite the profusion of manufacturers and brand names, a few large manufacturers control most of the market, according to surveys by industry analysts. Among systems priced at less than $500, reports InfoCorp., of Cupertino, Calif., 95 percent of the market is held by five manufacturers: Commodore, Atari, Radio Shack, Sinclair Timex and Texas Instruments.
There is less concentration of market share among more expensive systems, InfoCorp says, but the five largest makers hold 58 percent of that market: Apple, Radio Shack, IBM, Nippon Electric and Commodore.
InfoCorp calculated total retail sales for personal computers in 1982 at $7.6 billion. For 1983, InfoCorp expects retail volume to be nearly twice as great, $14.6 billion. The greatest growth, InfoCorp says, will come in the higher priced range, in systems retailing at more than $3,000, including the IBM and the Apple III.
Egil Juliussen, chairman of Future Computing, gives these figures for sales volume and market share in the industry, excluding Timex Sinclair:
For lower priced systems, with an average retail price of $500, U.S. sales in 1982 were 1.5 million units, with a retail value of $900 million. This year these figures will more than double, to at least 3.5 million units, with a sales value of $1.9 billion. Texas Instruments' 99/4A is the market leader in this category, with a 34 percent share of domestic sales. The Commodore VIC 20 has 33 percent, the Atari 400 about 20 percent and the TRS 80 color computer about 13 percent.
In the hot-selling medium price range, with an average retail price of $3,000, sales in 1982 were 800,000 units, with a retail value of $2.2 billion. The projection for 1983 is growth of 50 percent, to 1.2 million units and sales of $3.3 billion. The Apple II has 25 percent of this market, IBM 22 percent and the TRS 80 19 percent.
In the higher priced category, with systems retailing for an average of $8,000 to $9,000 and aimed more at business customers than individuals, 160,000 units were sold in 1982, with a retail value of $1.5 billion. The projection for 1983 is 240,000 units, with sales of almost $2.2 billion.
The market share leader in this category is the relatively low cost Apple III, with 25 percent. The TRS model 2 and model 16 together have another 25 percent; Altos, a newcomer, has almost 12 percent, according to Juliussen's figures.