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Text File | 1990-06-24 | 16.3 KB | 304 lines | [TEXT/GEOL]

Confidential / Need to Know Apple Competitive Analysis ROMlink -- Contact: Ken Lim _______________________________________________________________________________ NeXT's Next Step: General Purpose “InterPersonal Computing” ___________________ EXECUTIVE SUMMARY On September 18, NeXT announced a new family of PCs/workstations based on its two-year old NeXT computer. All three machines are based on a 25 MHz 68040, the Motorola 56001 DSP and Next's Integrated Channel Processor chip. Four of the NeXT system’s biggest problems have been solved - color, floppy disk, higher performance and a standard hard disk instead of optical drive are all now available. The new machines are priced at $5000 to $8000 for full, complete systems. Education prices are about 40% lower. The new systems appear to be very powerful and are attractively designed and priced. On paper, NeXT's hardware is clearly THE price/ performance leader at this point in time. It is well ahead of Sun’s SLC and IPC. NeXT has also begun to attract the attention of software developers. Several new and very interesting applications were announced including some from big names like Ashton-Tate, Lotus. With some heavy promotion and a few more breakthrough applications, NeXT could re-establish itself as a contender in the PC industry. However, we believe that NeXT will find it impossible to displace Sun as the preferred UNIX workstation vendor and very difficult to achieve more than 2% market share in PCs. We think NeXT will be a moderately successful, minor player in niches like multimedia, high-end DTP, technical documentation and financial analysis. It is also likely to become the preferred development platform. Industry-wise, NeXT will have broad technological impact but we expect little initial unit or revenue impact. ______________________________ PRODUCT & PRICING INFORMATION All three machines are based on a 25 MHz 68040, the Motorola 56001 DSP and Next's Integrated Channel Processor (ICP) chip. NeXT rates all machines at 15 MIPS (Motorola’s claim for the 68040). All systems also include both thin and twisted-pair EtherNet with TCP/IP support, two RS-422 serial ports, a SCSI-2 port, serial laser printer port, DSP port and CRT connector which includes CRT power, video, keyboard, mouse and audio in and out. The NeXTstations are low-profile boxes with no expansion slots. The NeXTcube has the same 12-inch cubic case as the original machine. Base configurations and list prices areas follows: • NeXTstation - 8 MB RAM, 2.88 MB floppy drive, 105 MB hard disk, 17" mono, and software bundle at $4995. Available November 1990. • NeXTstation Color - 12 MB RAM, 1.5 MB video RAM, 2.88 MB floppy drive, 105 MB hard disk, 16" color CRT, and software bundle at $7995. Color depth is 12-bit plus 4 bits of transparency control, yielding 4096 colors each at 16 levels. Available Q1 91. • NeXTcube - 8 MB RAM, 2.88 MB floppy drive, 105 MB hard disk, 17" mono CRT, and software bundle at $7995. Available November 1990. (NeXTservers are monochrome NeXTcubes configured with 32 to 64 MB of RAM and 660 MB to 2.8 GB of hard disk storage. NeXTservers priced from approximately $18,000 to $35,000. Available Q1 91.) Color Graphics Processor: NeXTdimension Board - this is a $3995 video board with 33 MHz Intel i860 RISC chip, C-cube Image Compression/Decompression chip, 8 MB RAM and 4 MB video RAM. Features include NTSC and S-video in and out (PAL optional), RGB EGA output, genlocking, support for Teletext, VITC and Closed-Captioning. Resolution is 1120x832 pixels with 32-bit color per pixel (with 8-bit alpha channel). NeXTdimension is a very high-powered image processing board with realtime JPEG video compression that blows away IBM/Intel's DVI system. Think of this as an 8•24 GC card, a RasterOps 364 card, a Mass Micro ColorSpace II card, an Aaps Digivideo II card, with Avid and ImageStudio all combined on one board. It plugs into the Nextbus in the NextCube (not NeXTstations). Available Q1 91. Storage Options: The 2.88 MB floppy drive and 105 MB hard disk are standard on the base models. Other storage devices include: • A 340 MB drive replaces the old 330 MB drive at $2995. • The 660 MB drive was reduced from $5795 to $3995. NeXTcube only. • A new 1.4 GB hard disk comes in at $5995. NeXTcube only. • The 256 MB read/write optical disk is now optional at $2995. (blank disks are $149.) NeXTcube only. • A CD-ROM drive has been added at $895. NeXTcube only. Printer: The NeXT 400 DPI Laser printer is unchanged except for a drastic price reduction from $3495 to $1795. Bundled Software: The following applications and tools are all pre-installed on the hard disk. • Mail - The NeXT E-mail system has been greatly enhanced. In addition to the text and voicemail capabilities previously shown, text can now be fully formatted. Files, folders and graphics can be inserted by directly dragging icons from the desktop or documents and dropping into the mail message. Spell checking has also been added. • Digital Webster - the dictionary and thesaurus are the same with the pictures stripped out to save space (since its on hard disk instead of optical now; the complete version is still availble as an option.) • Digital Quotations - same as before, Oxford Dictionary of Quotations • Digital Librarian - searching and indexing tool, "The Complete Works of Shakespeare" is now optional, again to save space • WriteNow - WYSIWYG word processor, no change • TeX - powerful, programmable typesetting environment for technical publishing, includes macros, font design and handles PostScript graphics. New to bundle. • Interface Builder - object-oriented interface prototyping tool, no change • AppInspector - New graphical debugging tool and runtime tracer • Edit - a mouse-based UNIX text editor • Object Kits - reusable objects and code for use with Interface Builder. Includes objects for interface, music and sound programming and network administration. • Basic Development Tools - includes Objective Compiler, GNU source- level debugger, GNU Emac editor and full technical documentation online. • GNU-56 and Macro Cross Assembler (ASM56000) - tools for programming the 56001 DSP chip. • Lotus Improv will be bundled free with every machine purchased before the end of 1990. Third-Party Software and Peripherals: The new fall 1990 NeXT Software and Peripherals Directory lists: • 18 Development tools and languages including FORTRAN, COBOL, C, Modula and Pascal • 4 "Medical" programs including "Gray's Anatomy - digital version" • 7 "Multimedia and HyperText" programs • 5 "Math and Statistics" programs including Mathematica • 6 "Databases" including INGRES, ORACLE and SYBASE SQL Server • 11 "Connectivity and Communications" products including MicroPhone II, MacLinkPlus, SoftPC 2.0, and three Gator products from Cayman systems. • 14 "Publishing and Graphics" programs including Adobe Illustrator, FrameMaker 2.0, TeX, WordPerfect and several font and clip-art products • 13 "Business" programs including Lotus Improv, Ashton-Tate PowerStep, Informix WingZ. Four are spreadsheets, four others are calendar/ rolodex-type products. • 26 "Peripherals" including 5 scanners, 3 floppy disk drives, 2 fax boards, 4 audio digitizers and 2 video digitizers. Most of the products listed are available now or will ship in November; about a quarter of them are scheduled for Q1 91. Breakthrough Software: We believe that at least two of the new NeXT-specific programs, Lotus Improv and Omen III, are “killer apps” that are good enough to actually drive hardware sales. Improv is a very flexible, highly object-oriented, multidimensional spreadsheet with multiple views, linkages and excellent presentation tools. Omen III is a realtime financial analysis tool for Wall Street-type traders. There may be a few others that will be unveiled soon. Service and Support: There is NO mention of this in any public NeXT documents. Discount Structure and Manufacturing Margins: All prices mentioned above are List Prices. Educational discounts will be in the range of 35 to 40%. The biggest Higher Ed discount on the $4995 monochrome NeXTstation gives a price of $2995. BusinessLand's dealer costs are quite odd--NeXT offers 15 points on the NeXTcube, 24.5 points on the NeXTstation and a whopping 42 points on the color version. As for NeXT's own margins, we estimate they are in the range of 20 to 25%. NeXT is clearly trying to buy market share and establish a good installed base with its lowball pricing. ______________________________________________ NEXT DIRECTIONS: Group and InterPersonal Computing NeXT is greatly broadening its overall market directions. Instead of the original positioning as the higher ed "Scholars' Workstation" the new NeXT systems are officially aimed at "group-level interpersonal computing." Emphasis is on extending group productivity via multimedia, E-mail and access to shared information. Specific niche markets where NeXT is strong via third-party solutions are image processing; music and audio processing; graphics design, layout and production; and integrated information systems (realtime spreadsheets/ databases) systems for engineering and financial analysis. _________________ TECHNICAL ANALYSIS NeXT is clearly the new price performance leader. The 25 MHz 68040, the DSP and the ICP provide very high performance. (NeXT has dropped the ASIC for the optical drive since it is now optional and can be handled by the ICP.) NeXT's use Motorola's 15 MIPS figure for the '040 may be actually understating overall system performance since it doesn’t account for the ICP and the DSP chips. The ICP chip handles 9 independent/simultaneous DMA channels for I/O at 40 MB/second. Sun’s highly touted IPC costs twice as much as a NeXTstation with the same MIPS rating and a somewhat slower architecture with NO coprocessors. Performance should also be greatly improved by the 17 ms access time of the standard hard disk compared to the slower optical drive previously used. The new 2.88 MB floppy drives are also faster than standard drives. On the system software side, release 2.0 of NeXTStep appears to be somewhat faster and more robust than 1.0, but it is too early to call it a success. Some of the new features include: • more direct manipulation and object-orientedness, e.g. icons in windows or on the desktop can be dragged and dropped directly into documents; fewer dialog boxes, less modal than Macintosh • built-in system-wide fax facilities for apps (all apps can print to and open faxes, but fax software/hardware for the DSP is still required) • voice as data-type in all apps (System-wide access to “LipService”) • database objects can be embedded in any app to call in data • Improved Browser with a “Shelf” for aliases (pointers to frequently used files and programs) • “Find” function now does content searching (like “OnLocation”) We will be evaluating the products when they are available, so stay tuned. _________________________ MARKETING/INDUSTRY ANALYSIS Developer and user reactions to the announcement were highly favorable; analyst and press reactions were more guarded. Analysts have been disappointed by NeXT's performance over the last two years. We believe that this is a MAKE OR BREAK situation for NeXT. For NeXT to be a viable PC supplier it must strongly execute its strategies in the next twelve months. Four things are crucial to NeXT's survival in the marketplace, regardless of their technology and products: • First, they must meet their promised delivery dates or customers will lose faith and the excitement that was generated at the announcement will be wasted. NeXT is at the mercy of Motorola and may have been too aggressive on its shipment dates. • Secondly, applications are still crucial. Although NeXT has picked up a lot of developer interest and Lotus Improv and Omen III promise to be "killer" applications, NeXT still needs several more general business productivity applications from big name suppliers and a lot more vertical apps. Many crucial programs are still missing from the NeXT software catalog such as accounting, general ledger, inventory, simple drawing and painting, etc. We believe NeXT also needs a killer database frontend and a multimedia authoring tool. And, of course, a couple of whiz-bang games wouldn't hurt either. • Third, NeXT's current distribution channels of its Higher Education direct sales force and BusinessLand are not enough if it intends to be a serious broad based supplier. VARs will be crucial in establishing NeXT in new niches and creating NeXT's service and support infrastructure. • Finally, NeXT also needs to establish an infrastructure to support its products. These would include a user group, a developer organization like APDA, a strong consortium like AUC and perhaps a "NeXTWorld" conference. Even if NeXT accomplishes these four things over the next year, it must still contend with Sun Microsystems. NeXT is more in competition with SPARC workstations than they are with general DOS or Macintosh PCs. Both are trying very hard to become general-purpose, broad-based alternatives to the DOS and Mac worlds. We believe that NeXT is clearly much more PC-like and has a better "look and feel" than Sun. But NeXT will have a very difficult time overcoming Sun's tremendous market lead and installed base. NeXT does have the advantage that they can sell into the UNIX workstation and the PC markets, but we think that right now, NeXT is to Sun as Macintosh was to IBM in 1984——a tiny, but threatening alternative. A final note on NeXT’s marketing: some of us believe that NeXT will find it impossible to gain market share with the unfocused marketing message of “increasing group productivity via interpersonal computing.” NeXT may need to pick specific market/application niches and market heavily toward them in order to establish a beachhead for attacking the broader general-purpose markets. _______________________________ Higher Education Market Impacts NeXT is moving away from it's early emphasis on Higher Education in attempt to place more resources on wooing the business market. Although many in Higher Education remain interested in 'NeXT- the Toy', we haven't seen movement in the academia to 'NeXT- the Tool' that will be needed for mainstream acceptance in this market. Non-aggressive marketing, non-existant support, and a perceived reduction in interest in this market, leaves the academic community wondering. With new offerings and aggressive seeding in this price performance range including the IBM RS6000 series and new SUN systems, the CS and Engineering Higher Ed. market is going to get progressively more difficult to break into, even at the price-point of these new machines. These new CPUs, however, cater to the general academic population more than either SUN or IBM, and it is there that Apple goes head to head with NeXT. ____________ IMPLICATIONS NeXT has had and will continue to have a significant impact on the industry in terms of user interface, developer tools, and new technologies such as digital signal processing and Display Postscript. However, its sales impact has been miniscule. IDC estimates NeXT has sold just 7,000 units over the past eighteen months (we believe this might even be a little high). At yesterday's announcement, Steve Jobs claims to have 15,000 orders in hand. We think these are likely to be just commitments, not real hard contracts. Even if this is true, this is a drop in the bucket compared to PCs and still small even compared to most workstation vendors. In the rare cases where Apple reps may run into NeXT, we believe that virtually all the Macintosh advantages still hold true (but to a lesser extent.) Mac’s advantages over workstations (more and cheaper software and peripherals) hold true as well. But Apple's real advantage over NeXT will be in our excellent software base, safety, service, and support (just like what IBM reps say about IBM). In this case, WE are the established vendor and THEY are the unpredictable, flaky start up. _________________ We welcome your feedback. Please link us at COMPETITION.