Home computer boom losing its thunder
There are signs that the home computer boom is losing steam. After several years of superheated growth, driven by plummeting prices and extensive ad campaigns, the rate at which increasing numbers of Americans take computers home may soon begin to moderate.
If so, it could spell harder times ahead for makers of home computers that sell for under $1,000 and are not designed for business.
Bert Cowan, director of the small computer software project at Frost & Sullivan, a market analysis firm, suggests, ''Home computers could turn out to be a repeat of the middle days of hi-fi. Sales took off like a skyrocket, as the upwardly mobile began buying. But before long they hit a plateau at a large but limited number of people.''
Frost & Sullivan's best guess is that demand for home computers will continue to spurt for another two to three years, slow, and then drop off.
But there are indications the slowdown may be coming more rapidly:
* In the last several months, the explosive growth in newsstand sales of computer magazines has slowed. Many of these readers are prospective computer buyers. So this could translate into slower computer sales in coming months.
* INFO Research Inc., which surveys 80,000 households every six months, found that in the first half of 1982, only 0.5 percent of those responding said they had purchased a computer. In the last six months of 1982 this jumped fourfold, to 2.1 percent. While the proportion of those purchasing computers rose again in the first half of this year, it was by a much smaller increment, totaling 2.4 percent.
* After more than a year of media fascination with computers and overwhelmingly positive coverage, analysts are beginning to see an increasing number of articles critical of the computer boom.
''I think the media are going to turn really nasty toward us in the coming year,'' says Robert J. Lydon, editor and publisher of Personal Computing, America's largest computer magazine. Such a backlash, should it occur, could make the public more resistant to buying computers.
Over the last five years, home computer sales have exploded.
According to Infocorp, another market analysis company, only 2,000 home computers were sold in 1979. This year's sales are projected at 4.9 million. This translates into a 375 percent compound annual growth rate. Nevertheless, computers in homes are as rare as swimming pools: Only 5 percent of the nation's households have them.
As any market matures, growth rates naturally moderate. So Infocorp, along with a number of other industry analysts, calculates that home computer sales should grow by 80 to 100 percent this year. And most project double-digit growth for the foreseeable future. The underlying argument - strongly held within the industry itself - is that computers are a revolutionary new product with so much potential power and utility that they will steadily spread into every home in the country.
Officials of Future Computing, a firm that compiles monthly reports on computer sales, say they have seen no sign of a slowdown.
Instead, they report that the market continues ''on track'' at their predicted, 100 percent growth rate. But Texas Instruments Inc. recently acknowledged that sales of its home computers fell short of expectations in July and August.
Should home-computer market growth fall much below anticipated levels, it would be hard on manufacturers such as Texas Instruments that already have excess production capacity. TI alone has an excess inventory estimated at 150, 000 machines, which it hopes to dispose of at Christmas. Too much inventory already has contributed to the industry's recent losses. This year, the home computer industry as a whole lost money. Only one major manufacturer, Commodore, has managed to maintain its profitability.
Frost & Sullivan's Mr. Cowan and others more skeptical of the industry's future predict conditions will worsen. They look at the market differently than does the industry. Pointing out that people are buying home computers predominantly as ''upscale video games,'' Cowan suggests that this market could well follow the pattern of other consumer electronics: an early period of rapid growth followed by years of extremely slow growth.
John Markoff, a columnist with InfoWorld, a computer news weekly, also has argued that home computer sales, at least in their present form, will probably not continue to increase.
''Consumers have been buying home computers for reasons that are not clearly defined. They have been swept up into the fad: They want video-game players; they have the general notion that their kids need to be 'computer literate'; or possibly they really believe that they can store their recipes or balance their checkbooks better by using these machines. Whatever the reason, once the attraction of the gadgetry wears off, the home computer is likely to . . . end up in the closet,'' Mr. Markoff has written.
Most industry observers agree with Esther Dyson, president of Rosen Research Inc., when she says that ''the industry has penetrated close to 100 percent of the easy-to-sell market, the part of the market that understands computers and is willing to teach itself and experiment.''
So the crucial question in the industry's future is whether it can produce computers that are truly useful in the home, that are easy enough for the rest of the public to master, and can successfully convince those who are not predisposed to buy their products that they are worth the price . . . and do this before the novelty wears off. Here opinions are strongly divided.
''What fascinates me,'' says Cowan, ''is just what people can really do with a computer in their home.'' He has yet to see an answer to this question that satisfies him. Most people do not do enough writing, filing, and financial budgeting to justify a computer, he argues.
It is a question that IBM apparently has difficulty with as well. At the speech at the IBM PC Faire here recently, Philip D. Estridge, vice-president of IBM's Systems Product Division, struggled with this question and did not come up with any answers.
On the other hand, Karen Carper, a computer industry expert with Arthur D. Little Inc., a Boston-area management consulting company, feels there are good answers. ''Applications are plentiful. It's a matter of getting the message across.'' The industry's main problem, she maintains, is poor marketing.
She also dismisses the argument that computers are still too difficult for most people to use.
''People are willing to learn something difficult if they are convinced the product is nifty enough,'' she says.
What will happen to this volatile industry in the near future is anyone's guess.
As Bill Slapin, no-nonsense publisher of Computer Merchandising magazine, puts it: ''There are an awful lot of so-called experts out there. But no one really knows what's going to happen. We're doing something that's never been done before.''
But he adds, ''It's almost academic whether the industry grows at 20, 40, or 60 percent. It's still the growth industry of the '80s.''