The personal computer industry, one of the fastest growing segments of the American economy, "appears to be trapped in a giant rut," Apple Computer Inc. President John Sculley told the Comdex Computer Convention here today.
Sculley's sentiments were echoed by several participants at the Comdex/Fall show, which, with more than 1,400 exhibitors and more than 90,000 visitors, is one of the largest trade shows in the world. The show will run through Sunday.
Many analysts and industry participants say that the multibillion-dollar industry, despite its continuing growth, is in a state of consolidation as weaker companies fall by the wayside and stronger companies improve their marketing and distribution positions.
As a result, Sculley and others assert that innovation in the field is suffering.
Sculley, who was the show's keynote speaker, said the personal computer industry is in a rut partly "because so many companies are trying to avoid big investments in research and development, avoid commitments in this country in manufacturing technology, and avoid learning how to become consumer marketers.
"The result is that it is becoming harder and harder to figure out where a lot of these companies are going."
Other industry representatives at the convention agreed with his remarks. "The entire microcomputer industry is taking a little breather," said Peter Nalle, the group vice president of McGraw Hill Book Co., a major publisher of computer books and software.
"A lot of people here have the same product they had last year," said Bruce Sperka of Pentagon Systems Inc., a Los Angeles-based personal computer retailer.
The proliferation of both computer hardware and software also has shifted the industry from a sellers' market to a buyers' market, thus creating real pressure on profit margins for both computer companies and their retailers.
"They are finally dealing with price-conscious and educated shoppers," said David Wagman, chairman of Softsel, a leading hardware and software distributor. However, he says that the industry overall is growing at a very strong rate and his own company's revenue jumped 80 percent over last year's levels.
Nonetheless, signs of a shakeout are continuing.
"The software industry stinks," says Elliott Dahan of Mimic Systems. "Outside of two or three companies, there's no business. In 18 months, 50 percent of the software companies exhibiting here will be gone."
"If my mail is any indication, there will be more companies for sale at Comdex than products," said William L. Dunn, president of Dow Jones & Co.'s information services, which markets computer software.
However, Sheldon Adelson, who runs the Comdex show, points out that for every company that drops out of Comdex there are five and a half waiting to replace it.
Comdex statistics also reflect fundamental changes in the industry. The number of computer systems companies exhibiting at the show has dropped 22 percent while the number of software companies participating remains flat.
On the other hand, the number of computer communications companies here has increased 6 percent over last year and the number of computer peripheral companies has jumped close to 9 percent.
Additionally, a number of companies here, including Data General and Texas Instruments, feature new portable computers.
However, Adelson notes one Comdex trend that reflects the continuing turmoil of the industry: "We've got more requests for delayed payments than we ever did before."