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PUBLISHED IN LIMA NEWSLETTER FEBRUARY 1991

     ^^^^^^^^ SELLING THE 99/4 AND THE 99/7

     Ever hear of the TI-99/7?  Probably not.  It is
discussed in the following article by Bro Uttal, originally
published in the June 16 1980 issue of FORTUNE magazine.
The article's discussion of TI's marketing strategy for the
99/4 could very well have been written 3 1/2 years later as
a discussion of TI's marketing blunders with the 99/4A.

     --------------------------------------
     John V Roach, executive vice president of Radio Shack,
the leading producer of personal computers, says he doesn't
like to knock the competition.  But at a recent brokerage
house seminar on electronic technologies, the genial Texan
just couldn't restrain himself.  Having stepped to the
podium, Roach pointed to a demonstration model of Texas
Instruments' new home computer, the 99/4.  "I'm sure glad
somebody brought a TI computer here today," he deadpanned.
"it's only the second one I've seen - and the first was when
they launched it at the consumer electronics show last
June."  Roach's wisecrack brought down the house.
     The butt of the gibe is TI's first entry into a market
that could become the consumer electronics bonanza of the
Eighties.  Less than five years old, the personal computer
business should rack up world wide sales of over $650
million this year.  By 1984 it could top $3.5 billion, more
than the combined value of all the digital watches, stereos,
and video recorders sold in the U.S. in 1979.  Scores of
companies have launched personal computers to stake their
claims on this new Golconda.

      A BUNGLED OPPORTUNITY:
     But the innovative giant of consumer electronics was
slow to move, and when it finally did, it chose a
wrong-headed marketing strategy and a product that
relatively few people seem to want.  "Basically, the 99/4 is
a dog," says a disgruntled distributor, "and TI has no
concept of how to sell it.  When I asked a TI exec why
anyone should buy it, he couldn't say."  The company has
dropped about $20 million trying to crack the market, says a
former executive, and it has bungled a major opportunity for
growth.
     TI refuses to talk about the 99/4, but the problems are
obvious.  It started shipping last October (of 1979) and by
the end of this year had expected to sell at least 50000,
worth roughly $35 million at wholesale.  But Dataquest,a
market-research firm, now estimates that TI will ship less
than half that number.  New England Electronics Ce., one of
the top ten personal computer distributors in the country,
has quit carrying the machine; it is trying to help its
dealers by shifting 99/4's from the many stores where they
are gathering dust to the few that have found a way to move
them.
     Although some of TI's troubles can be laid to start up
problems, the debacle raises fundamental questions about the
company's strategy.  Unlike most of its rivals, TI is
concentrating on selling to the ordinary consumer, who
would ultimately produce a much bigger market than computer
hobbyists, engineers, small businessmen, and professionals.
To appeal to Mr. end Mrs. America, the company designed the
99/4 to be the least threatening of computers, with a full
color TV screen, programs that simply snap into the keyboard
console, and a speech-synthesis chip that enables it to
"talk."  this friendly machine is supposed to help its owner
play games, educate children, and manage household finances.

     HOW APPLE GOT BITTEN
     Almost everybody else in the industry feels that the
consumer market is coming - but will take four or five years
to develop.  The leading companies - Radio Shack, Apple
Computer, and Commodore - have turned instead toward the
businessman and professional.  "TI is making the same
mistake we made three years ago," says Steve Jobs, the
25 year old vice chairman of Apple.  "The market now is for
machines that can solve serious problems, and to do that,
you need alot more than the 99/4 offers."  John Antonchick,
who follows the industry for Creative Strategies
International, a market research firm, estimates that the
home market is only one-eighth the size of the business
professional hobbyist segment - and will grow less than half
as fast for the next few years.
     TI figured that consumers would be willing to pay a
premium for the TI name, but the price of the 99/4 - now
$1400 - seems much too high.  Those few competitors who are
trying to penetrate the home market have kept prices well
below $1000.  Their machines are less versatile than TI's
but they feel the consumer simply will not pay for the extra
functions TI is offering.  Roach of Radio shack observes,
"When the computer does become a mass market appliance item,
it is very unlikely that it will sell for more than $500."
     In its single minded quest for the consumer, TI has
managed to exclude itself from the business and professional
market.  It designed the system in a way that makes it
difficult for small, independent companies to write programs
or make peripheral gear that can be used with the 99/4.
These creative suppliers have helped others in the industry
grow by providing software and peripheral equipment needed
to serve specialized markets such as dentists' offices.
Conrad Jutson, who left TI's personal-computer group to help
Atari get into both home and professional markets, notes:
"What the leading edge consumer needs is a lot of software;
without it, the computer is just so much old iron."  when
Atari introduces its new software this year, he says, most
of it will come from third party suppliers.
     So, it seems, TI has produced a machine too costly for
the mass market and too limited for the sophisticated user.
it has ended up, as a distributor says, "offering less
product for more money - the opposite of TI's usual
strategy."  This outcome can be traced to the way the
machine was developed.  From the start, the product lacked
focus.  It began as a video game, changed into a primitive
home computer, and, after surviving the ministrations of
three successive program managers, emerged as a hybrid.

     HEROES CAN BE EXPENSIVE
     TI's top managers loved to dabble with the library of
programs being developed for the new machine.  "some of them
saw in the 99/4 their private electronic fantasies," recalls
an engineer who worked on the project.  Another veteran
links the hazy focus to TI's famed management system, which
sets aside special funds for engineers to develop their own
ideas.  "An engineer comes along with a bright idea," he
says, "and before anybody on the operating side knows what's
happening, he's been finded, he's off and charging, and he's
a hero.  It works half the time.  But half the time, you end
up pouring an awful lot of money down the drain before
somebody says, 'Whoa! There's no marketplace.'"
     Ironically, TI killed two other computers that bid
fair to do better than the 99/4.  The first, a
"professional" model aimed at scientists and engineers,
would have gone head to head with the HP85, one of
Hewlett-Packard's hottest new products.  But since TI's
operating executives are required to meet tight development
budgets, the consumer products group bled funds from the
professional model to speed up introduction of the 99/4 when
it had fallen behind scheldule.
     The high end of the line was supposed to have been the
99/7.  According to managers who worked on that system, its
specifications, software, and price - about $5000 - would
have made it a strong contender in the business and
professional market.  Moore Business Forms Inc., the leader
of its industry, apparently agreed: it created a Texas
division to sell the 99/7.  Distributors of personal
computers were so impressed with the 99/7 that some of them
took on the 99/4 against their better judgement just to get
the more sophisticated machine.

     LEFT WITH THE LIMP OF COAL
     Internal competition ultimately put the kibosh on the
99/7.  TI's digital systems group, which is based in Austin
and sells minicomputers to small businesses, argued that it
should control development of the 99/7 because the machine
was designed for small businesses.  Besides, the 99/7 was so
powerful and inexpensive that it would have cannibalized the
low end of the minicomputer line.  The squabble went all the
way up to top management, which decided at the last minute
to cancel the 99/7 introduction and transfer the project to
Austin.  There, the "not invented here" syndrome took over.
Austin engineers started questioning the new product's
technical and economic feasibility, and within six months,
most of the project staff had left for other jobs in TI.
Looking back on all this, an allumnus concludes, "They threw
away the two pieces of gold and kept the lump of coal."
     Nobody doubts that someday, in some way, TI will be a
major factor in the personal computer market.  The questions
are when and how.  Given the disappointing results to date
and the slow evolution of the mass market, TI might well
decide to ease off on the business for several years.  That
would leave competitors laughing and dealers groaning - but
it would give TI time to develop a coherent strategy.

     FORTUNE, June 16, 1980, pages 139-140
     .PL 1