An article featured in the Information Processing section of Business Week's Sept. 25 issue supplied the topic for this Sunday night conference on AOL. On hand to talk about the increasingly competitive fight to sell computers to consumers were Anindya (Andy) Bose of Link Resources Corp. and Gary McWilliams of Business Week, who wrote the Sept. 25 story.
OnlineHost: Copyright 1995 America Online, Inc. Material entered into AOL by persons other than those identified as Business Week's employees or authorized representatives, acting on behalf of Business Week, is material for which Business Week assumes no responsibility.
OnlineHost: Good evening and welcome to Business Week Online's regular Sunday evening conference. Tonight we're talking about the battle of the home PCs, as all the manufacturers scramble for your attention--and your dollars--in this increasingly important sector of the market. It's a featured story in the current issue of Business Week (Sept. 25).
OnlineHost: With us to offer their insights--and answer your questions--are Anindya (Andy) Bose of Link Resources Corp. and Gary McWilliams of Business Week, who wrote the Sept. 25 story. Andy Bose is responsible for managing and directing Link's consulting and research services. He has 15 years of experience in the computer, communications, and electronic entertainment industries. Widely recognized for his analysis of markets such as personal computers, telecommunications, and multimedia, Andy Bose holds a BBA in statistics and market research from the University of Iowa and an MBA from the University of Texas in corporate finance and strategic planning.
OnlineHost: Gary McWilliams has a BA in journalism from the University of Massachusetts. After stints on Electronic News and Computer System News, he joined Business Week in the Boston bureau in 1989. He has built coverage of small-business technology into one of his specialties. Gary has been Houston bureau manager since January.
OnlineHost: The moderator tonight is Bob Arnold (BobABW), editor of BW Online and senior editor of Business Week. And now on to our discussion--and the questions about the home PC market you send us here on stage via the Interact button.
BobABW: Hi Andy & Gary, and welcome.
Gary2A: Hello to all from Austin, Tex.
AndyBose: Hi everyone.
BobABW: Gary, would you like to start things off?
Gary2A: Yes. Andy, why is the home market becoming so important? Is it the customer or the machines?
AndyBose: Well the home market is becoming important because if you look at the number of PCs being sold in the U.S., forty percent go into homes. The customer is always important but it's also the PC which is equally important because the PC is a TV, it's a CD player, a VCR, so all the products that we use at home and are very familiar with today are all coming together in the personal computer. This device is very unique in that it is continually expanding in terms of its capabilities so that we keep discovering new things to do with it. Once you start using a PC you are completely hooked on it and it is very hard to imagine life without it.
Gary2A: Andy, are the home buyers spending more than commercial customers, then?
AndyBose: No not quite. Even though each year the consumer spends more, typically, on a new PC than the previous year. We at Link have been tracking this market through extensive consumer research since 1983 and we find that even though prices keep falling, people are spending more each year on buying a computer, and on average people spend about $1,800 on their new PC systems
BobABW: Andy, try this one next, from Grold:
Question: I just got a Compaq Presario 486 66 mhz w/ a quad speed CDROM, speakers, and tv compatible (with) 8mb of RAM (random access memory) for only $1,299. Good deal, or take it back?
Gary2A: If the TV is important, it's a good deal. You won't find TV in the newest Presarios.
AndyBose: I think it's a great deal. You should keep it.
BobABW: Grold's question brings up another thought:
Question: Andy, what's your definition of a home PC (including its price?)
AndyBose: Today a home PC would be something that is first of all a multimedia computer, has CD-ROM, prefereably 4X speed. Preferably 8 megabytes of RAM and has at least A 640-megabyte drive. This is the ideal PC to have. It should also have a modem for on-line communications.
BobABW: Here's a related question from Mike in New Jersey:
Question: Andy, what price level do you think decently powered (Pentium
90/16mb ram/CD-ROM/etc) computers will have to drop to before they become truly mass-market appliances, rather than toys for the rich?
AndyBose: I would say, given that people are spending and average of $1,800--I would say such machines would have to be priced around the $1,500-$1,800 range to appeal to households that have identified the PC as being an important device.
BobABW: Ed Walton has two questions on Windows 95:
Question: What requirement do I need to look for in a new PC if I want to run WINDOWS 95...and is it worth it?
AndyBose: Windows 95 takes up a lot of system memory, so ideally you should look for a PC with 16mb RAM on the system side. Such PCs would typically come with a sufficient hard disk drive, but system memory ram that is the more critical element to run Windows 95 effectively. Windows 95 is not absolutely necessary right now. But over time the applications that will be written for it will make it worth it.
BobABW: Gary wants to elaborate.
Gary2A: Ed, two issues on buying Win95: One is, will you be buying new applications for your PC. The other is, can you afford it? Win95 is good for people counting on spending on new software and upgrading their machines. Otherwise, current operating software will do must of the same jobs--run games, business software, access online services and the Internet.
BobABW: Next, we have a question on Apple Computer:
Question: Everything I've read lately about Apple talks about how it underestimated demand and is now hurting. Do you think it will recover in time to record a strong holiday sales season?
AndyBose: Apple has a good following, but unfortunately the market today is quite different than it used to be and with the introduction of WIndows 95 and the new Pentium machine, Apple's competitive edge is lessening every day. But, we think Apple should still have a good Christmas.
Gary2A: Apple's problems are logistic. Management didn't count on demand and couldn't line up sufficient supplies. One thing is sure in a consumer market: You can't make such missteps and not lose customers. Apple this year should still sell well. It has a loyal audience. But long term, these missteps hurt, and other companies are always ready to take advantage of such mistakes.
BobABW: Next, two questions from Bret AA:
Question: 1: Do you think the industry will move too fast for the consumer and shoot itself in the foot? 2: How long do you expect today's high end Pentiums to last until replaced by the P6 in the mainstream?
AndyBose: One has to realize that this industry doubles in its capabilities every 18 months and not just in terms of processing speed. In every aspect it doubles. If you lived in a home and it doubled (in size) every month you would have to discover new things to do, how do you use all that space, etc. This product conceptually is very similar. Every 18 months its capabilities are doubling, which means you will be continuously discovering new applications.
In the next 12 months, for example, we will see a lot more happening in terms of voice recognition, in terms of richness of color, graphics, animation, sound, communications. In fact, in the next 12 months to 18 months we will see high end home PCs being sold with video conferencing built in. So that would make it possible for us to interact with full motion video sessions as well as access rich multimedia databases. I don't believe Intel will push the P6 aggressively in the next 12 months to the consumer market, because they would really want the consumers to make full use of the P5 chip.
In the next 12 months these machines are not going to be obscolete. The P6 chip is going to be impacted a lot more by software design. We are pretty much pushing the limits of how many transitors we can squeeze onto these chips. Looking out into the future, the real innovation behind these chips will come from software design and not just processing speed. Because, technologically we are reaching the limit of how many transitors we can keep squeezing onto these chips.
BobABW: Andy, try this on CD-ROM products:
Question: Do you think CD-ROM makers--hardware and software--learned their
lesson from last Christmas and will be making sure the darn things work when installed? Lots of people lost faith last year when they found how hard these multimedia gizmos were to get going.
AndyBose: I think we saw a tremendous rush into multimedia, CD-ROM titles, with the aggressive introduction of multimedia machines. It is really no different than the book publishing industry or CD audio titles, in that there are good titles and bad titles, best-selling books and junk books. There is no doubt there are going to be thousands of CD-ROM titles coming out. There will always be very good innovative titles and yes, I think given the experiences consumers have had with some of the CD titles, i.e. getting them to run on their computers, that in the future publishers are really trying to focus their efforts on taking care of these technical glitches.
BobABW: Speaking of other things gone wrong, Gary has another question:
Gary2A: Andy, apart from technology, there's a growing public concern associated with the home PC and the recent ties to child porn and even kidnapping. Do you see the seeds of a parental backlash cutting into purchases?
AndyBose: No I don't. Simply because the computer today is as important to own as having a telephone or a television. The TV, telephone, and PC are the three most important platforms through which information and entertainment will be delivered to anyone's home on a global basis. So the PC is here to stay.
So what that really means is much the same as we have different types of programming on television, not all of which is good. And also we might receive crank calls through the telephone. So too, the PC will be subjected to such types of unfortunate experiences, but that just means there will be more controls by the government, by industry people, to ensure that consumers get quality programs. When something becomes very popular, there are unfortunate things that come along with it. But the PC is considered an essential device on a global basis as having a strong positive influence on childrens' education and on working from home. So the PC is definitely here to stay. The question is how do we deal with some of these unfortunate things that are happening?
We have already seen some evidence of government intervention, through the FBI crackdown on AOL-related (it was transmitted via AOL) child pornography. So we see such monitoring increasing to control these types situations.
BobABW: Here's a question from Jling. Put another way: If you buy a top-of-the line machine today, how long before you'll be thinking about upgrading?
Question: What is the average lifespan of a home computer? What is the average lifespan of software between major revisions?
AndyBose: It used to be that the average life cycle of a home computer was roughly six to seven years. Today, however, because of the rapid advancements in technology, the average life cylcle is three to three and a half years. PC-owning households will buy a new PC after those years.
The life cycle of the software program tends to be longer because people get used to a certain program and its features. However, because of very aggressive marketing pushes by software developers, especially Microsoft, the life cycle of productivity applications, such as word processing, spreadsheets, desktop publishing, and such applications, those also tend to be upgraded within a three year life cycle.
Entertainment and educational applications have a different life cycle because each title is used for just a limited time. And just like with books, we tend to get influenced by best-seller lists. So, too, do we get influenced for entertainment applications.
BobABW: On components again, try this from BF Hunt:
Question: I would think Apple's component shortages would affect all players.
Is the problem CPUs, RAMs, disks, "glue" chips? Why are the others immune?
AndyBose: It is true that the demand for PCs is expanding at a rate that many vendors couldn't quite anticipate. However, Apple still operates in a proprietary world because of its operating system. Because Apple is no longer the leader in volume, the impact is going to be less on the Intel side. More than 85 percent of the PCs that are sold to the computer market will be Intel-based or Intel compatible, so consumers have a lot of different options and brands to choose from. Whereas, if you are interested in buying an Apple, today there are just one or two other companies that make Apple-compatible machines.
BobABW: Here's another Apple question, from PeterC in New York:
Question: Do you think Macintosh users will experiment with Windows 95 and find the similarities agreeable to their working habits so much so that we'll start to see a shift of Mac user's to PCs?
AndyBose: If you look at the average PC-owning household, there are two to three users. We also find between 50-60 percent of new PC sales within the U.S. going back into existing PC households. So even an Apple-owning household conceivably could opt to have another non-Apple PC.
BobABW: Markyip1 has a forward-looking question:
Question: Do you think that the price of hard drives will go down even more, so in 6 months you would be able to buy an over 2.0 gigabyte hard disk, without it being very expensive. In other words, will it come with the standard home computers of the time?
AndyBose: It is true that we will see such types of hard drives. However, those would be limited to approximately no more than 15% of all PCs sold to U.S. homes. In addition, in the next 18 months we will see recordable CD-ROM drives being built into high end home PCs.
BobABW: Andy, try this next:
Question: What 4 or 5 tasks do people most use PCs for at home? Do you expect the list of top uses to change anytime soon?
AndyBose: The topmost application is word processing. The second most used category would be entertainment applications. Then comes education. Fourth, would be storing, filing, management/database types of applications. Fifth would be spreadsheets. What we see as becoming very popular would include desktop publishing, personal finance, and online communications.
BobABW: That's a wrap for tonight, folks. Thanks very much for being with us, Andy Bose. And thanks to you, too, Gary McWilliams.
AndyBose: Thank you very much.
Gary2A: Thanks and goodnight.
OnlineHost: Thanks to Andy Bose of Link Resources, Gary McWilliams of Business Week, and all the BW Online team for this conference on the battle for the home PC market. And thanks to all of you on AOL -- with apologies to any of you whose questions we didn't have time for.
OnlineHost: If you'd like to continue the discussion, we invite you to move to the BW Online Chat Room or post comments and questions on the BW Online Message Boards (try the Computers & Communications category). Transcripts of this and all other BW Online conferences are available soon after the event (look under Talk, Special Events, or Search BW, or for this one also in BW Online's Computer Room, via What's New on our opening screen).
OnlineHost: Come back to the Globe on Wednesday, Sept. 20, for an interview with author Kurt Eichenwald of "Serpent on the Rock," the saga of the Pru-Bache limited-partnership scandal (8 pm ET, Globe). And remember to join us in the Globe every Sunday at 9 pm ET for BW Online's weekly conference with editors and newsmakers, usually featuring a discussion of the Cover Story in the current issue of Business Week. Thanks again and goodnight!
OnlineHost: Material entered into AOL by persons other than those identified as Business Week's employees or authorized representatives, acting on behalf of Business Week, is material for which Business Week assumes no responsibility.
