Battered, bruised and reeling, the few survivors of the home computer wars exhibiting here can't quite tell if they're seeing a light at the end of the tunnel or a firefly buzzing around in a bottomless pit.
At this year's Summer Consumer Electronics Show, where Texas Instruments Inc., Coleco Industries Inc., Mattel Electronics, Timex Inc. and other home computer aspirants once displayed their hardwares, the only serious home computer contenders appear to be Commodore International and Jack Tramiel's Atari Corp.
Despite research indicating that consumers simply don't know what to do with home computers, both companies are counting on new high-powered machines to spark interest in a home technology that many retailers and analysts have come to view as little more than a fad. Still, the industry believes that new machines with greater capacity will translate into new buyers.
Commodore, which reported a $20 million loss in its most recent quarter, showed off its previously introduced C128 machine -- an upgrade from its best-selling C64 workhorse that the company claims is powerful enough to compete with the Apple II line of personal computers. Commodore hopes that a good portion of America's 2 million-plus C64 owners will want to trade up for the added benefits the 128, priced at roughly $300, should provide. The company says that more than 100,000 have been ordered already by distributors.
But Commodore's real technology and marketing gamble wasn't on public display in Chicago; it was off in a suite in preparation for a formal debut in July. The Amiga is Commodore's bet that people are willing to spend more than a thousand dollars to get a state-of-the-art personal computer featuring high-quality graphics and lots of software.
Commodore thus is embarking on the riskier path of marketing its machines based on value rather than price. The company that made its fortune selling low-cost machines in high volume by making the home computer an impulse buy now will have to convince potential buyers that home computers are worth a thousand dollar-plus investment.
If people don't really want or need the higher-horsepower machines, then Commodore stands to take a multimillion-dollar beating with the Amiga.
Atari chief Jack Tramiel, on the other hand, is sticking with the least-cost strategy he pioneered at Commodore. In a tiny room away from the main show floor, a small band of Atarians put the "Jackintosh" 260 ST and 520 ST through their paces.
The 260 ST, tentatively priced at $499.95, will come with 256K (more than 256,000 bits) of memory and 3.5-inch microfloppy disc drive. Likewise based on the 68000 chip, the 260 ST is Tramiel's low-budget response to the Macintosh. The 520 ST, complete with mouse, video monitor and GEM operating system, will go for $799.95. Reportedly, the 520 ST was being shipped in quantity this past week.
However, there is enormous retailer skepticism over whether Tramiel can actually deliver a significant number of machines at the promised prices.
Earlier this year, he said he would sell "hundreds of thousands" of the new STs. However, one buyer for a retail chain, who requested anonymity, said that "I've heard a lot of talk from Jack, but I haven't seen the computers. I'm not going to commit money for something I can't see." Other skeptical buyers suggested that Tramiel seemed more adept at manufacturing publicity than home computers.
However, industry analysts agree that the momentum in home computer sales has dramatically diminished and that it will take either new hardware or new software to build a new wave of sales.
"There still aren't an awful lot of reasons to own a home computer yet," conceded William Bowman, chairman of Boston-based Spinnaker Software Inc. "This is a real transition year. There is a much more moderate level of growth than anyone had anticipated."
Indeed, the software market has been so bleak that the Electronics Industry Association has halved its 1985 software sales forecast to under $1 billion.
Partly in recognition of this, Spinnaker has just developed a line of videocassette programs to complement its line of educational software. Bowman expects the cassettes to account for more than $2 million of the company's nearly $20 million in anticipated sales this year.
Unlike the video games boom, which was fueled by hit games such as Pac Man and Space Invaders, the home computer market has seen a curious but complete absence of the kind of software that generates home computer sales or word-of-mouth excitement.
The general industry turmoil and shakeout is a far cry from the heady days of video games and the emerging home computer market, which saw software companies experience exponential growth in a matter of months.
Activision, once a leading video games company with sales approaching $100 million a year, has been making the painful transition of becoming a home computer software company that had 1985 fiscal sales of under $28 million.
"It's been very difficult," said James Levy, Activision's chairman, who added that the company had chopped expenses by more than 80 percent in the past 18 months.
But Activision, which premiered several programs that captured retailer enthusiasm, projected that it won't be until late next year that the software industry might return to the days of high-speed growth.
"Right now, the ability to survive is as important as the ability to grow," Levy said.
Though both Levy and Bowman are hoping that the new machines will spur software sales, they believe they can still grow even if home computer sales stay the same as last year's level of roughly 5 million units. Still, both they and other software companies no longer expect explosive or dramatic growth.
"We're more concerned about costs than marketing," said Kenzi Sugihara, director of Bantam Books' electronic publishing division.
Indeed, the fundamental question facing the home software industry is whether there is a significant home market opportunity at all.
Other companies took more unusual tacks to enter the home computer market. Both Tomy Toys Inc. and Nintendo, two leading Japanese toy companies, stepped up their efforts to market robots to the home. Their exhibits gathered good-sized crowds curious about what the little robots could actually do. Tomy's robots were computer-programmable and could be programmed to wander around the house; similarly, Nintendo's robot was more of an electronic games-playing pet. Neither machine was positioned as anything more than a big-ticket recreational device.
Arguably the most successful product at the show was the compact audio disc player. Both audiophiles and computer buffs drooled at the declining prices and technological capabilities of the laser-based systems. Music lovers will be able to buy compact disc players for less than $200 by the Christmas season, both manufacturers and retailers predicted.
Moreover, because of their ability to store information in digital form, the compact disc players ultimately may serve as disc drives for personal computer systems (a compact disc can store as much information as 2,000 conventional floppy discs).
The electronics association anticipates that more than 700,000 disc players will be sold this year and possibly more than one million in 1986.
Prospects also look bright for the 8mm videotape. Hollywood studios are considering putting their films out on 8mm cassettes, and the standard is being supported widely by both American and Japanese consumer electronics firms. Ultimately, 8mm could come to rival half-inch Beta and VHS as a video format. Traditional VCR sales continue to grow at a 70 percent clip.
One theme that has yet to change from show to show is price. Retailers have bought in smaller quantities here because they expect prices to continue to decline. That means problems for the profit margins of manufacturers, but it continues to mean that consumers will enjoy the chance to buy consumer electronics products at still lower prices than they might have paid even three months ago.