Bothered and Bewildered

By Philip Elmer-DeWitt

First-time buyers face a tougher choice than ever

Robert Rabkin, a surgeon from Sausalito, Calif., considered himself a pretty savvy consumer--until he decided to buy a personal computer. Nothing he had learned while buying cars or stereo rigs prepared him for the trauma of shopping for a microcomputer. Not only was the equipment expensive ($2,500 and up for a complete system) and dauntingly complex, but the manufacturers seemed to be in a state of constant turmoil. "I didn't know what I was getting into," says Rabkin. "I was afraid anything I might buy would be obsolete within six months." For now, the doctor is just scanning computer ads and listening to friends talk about their machines.

Customers like Rabkin represent the personal computer industry's greatest challenge. The original buyers were often hobbyists or technically inclined businessmen, but today they are outnumbered by a new breed of consumer: the computer naive. These first-time customers are more cautious, less technically sophisticated and less convinced that computers will change their lives. By and large, they are right. "For the new consumer, the stuffs been oversold," says Esther Dyson, editor of RELease 1.0, an industry newsletter. "The technology is still too hard to use."

The most difficult task of all is deciding which computer to buy. Although Apple and IBM have emerged as the industry leaders, their success has not made the choice any easier. For example, in the market for business computers, where IBM is dominant, shelves are crammed with IBM look-alikes--machines that follow IBM's specifications down to the color of the keys, although they sometimes offer improvements in power or price. The market is now crowded with some two dozen of these IBM clones. Says Michael Shabazian, president of the ComputerLand chain of retail stores: "The differences between products are getting smaller and smaller."

As a result, buyers who do comparison shopping must select their computers on the basis of increasingly esoteric technical specifications. IBM alone sells seven basic variations on its bestselling model, ranging from the low-cost PCjr to the top-of-the-line IBM PC AT. To distinguish between these machines, consumers have to measure memory in kilobytes and disc storage in megabytes. To understand the pros and cons of IBM-compatible computers built by AT&T, Compaq or Hewlett-Packard, they must learn to identify silicon chips by name and measure their speeds in millions of cycles per second.

While most manufacturers have followed IBM's lead in the design of office computers, Apple has been pursuing its own ideas about what a personal computer should be. The Apple II series, which dominates sales to schools and shares the lead in the home market with Commodore, is comparable to, though incompatible with, IBM's machines. But Apple's Lisa and Macintosh computers, while considered state-of-the-art, will not run any of the thousands of programs written for the Apple II or the IBM. Emphasizing ease of use and attractive screen displays, Apple has gambled that it can buck IBM's marketing muscle with technological prowess and clever advertising. So far the wager seems to have paid off. Future Computing, a Dallas research firm, estimates that in the Mac's first year on the market, sales will reach nearly 383,000, making this the most successful personal computer launch to date. The company, however, has yet to ship large numbers of machines into the corporate market, where microcomputer fates are traditionally made or broken.

For the consumer, choosing between a Mac and an IBM PC means choosing between two fundamentally different philosophies of computing, a decision that many first-time buyers may feel ill-equipped to make. IBM's machines represent business-oriented computer technology--dependable but somewhat hard to use. The Mac, with its flashy graphics and hand-held "mouse" control system, is Apple's attempt to make a machine that even a computerphobe could learn to love.

Further complicating the picture is the likelihood that a new model or a sudden price cut will make this season's bargain look like last year's ripoff. Apple surprised the industry in October by bringing out, four months before it was expected, the so-called Fat Mac, a new version of the Macintosh with twice the memory capacity. At the same time, Apple dropped the price on the smaller Macintosh by $300, to $2,195. Reason: rumors about the introduction of a bigger machine were cutting into Macintosh sales. The company is now plagued by reports of yet another improved Macintosh that will have a hard-disc memory storage unit built in.

IBM has also had troubles with the rumor mills. The company was badly stung last year when its new PCjr could not live up to expectations. Computer Retail News, a trade tabloid, now reports that a new version of IBM's popular PC may be released within the next month or so.

Much is riding on what happens between now and Christmas, when the industry does 40% of its annual business. Companies had sluggish sales this summer, and several firms, including Gavilan and Franklin, went bankrupt during the slump. Retailers, especially, are counting on a robust holiday selling season. Says Dyson: "They're discounting like crazy just to stay alive." In San Francisco, the price of a Mac has dropped to $1,695, and PCjrs are going for $745, more than 40% off their original list price.

Luckily for the survivors, most analysts predict record Christmas sales, whipped up by promotion campaigns timed to coincide with the start of the buying blitz. Apple and IBM are expected to spend $30 million each on advertising before Christmas. Says InfoCorp Analyst Howard Purer: "December should just go off the page." -- By Philip Elmer-DeWitt Reported by Michael Moritz/San Francisco

With reporting by Michael Moritz