Ever since a Charlie Chaplin lookalike first peddled IBM's personal computer to TV viewers, PC makers have sought a magic formula that would turn computers into the next great home appliance. A decade later, no single variant of the PCs used in schools and offices has clicked with consumers the way VCRs and CD players have. But a significant if ill-defined market has emerged: students, technogeeks, white-collar workers burning the midnight oil, and millions of other Americans have ushered PCs into their homes.
Now, PC makers can't afford to skip the home market. Last year, 27% of all PCs sold in the U.S. went into homes. By 1996, the figure will be 42%, says researcher Channel Marketing Corp. The portion consumed by big businesses--historically the strongest PC market--will shrink from 30% to just 16%. The home market "will drive the industry for the rest of the decade," says Channel Marketing President David M. Goldstein.
ALL IN ONE. The last one into the pool, Compaq Computer Corp., is now trying to make the biggest splash. Last year, the Houston-based PC maker pulled out of a nosedive by slashing costs and marketing new low-priced models to corporate and small-business buyers. Some low-cost ProLinea PCs went to consumers via mass merchandisers such as Circuit City Stores Inc. But now Compaq is taking aim at the novice buyers that IBM (with its PS/1 line), Packard-Bell Electronics, and Apple Computer have been reaching for several years. With sales through such stores rising 25% annually, "the time is right," says Senior Vice-President Ross Cooley.
Introduced on Aug. 26, Compaq's Presario PCs include software aimed at neophyte PC users, including a word processor, games, and Quicken, a popular personal-finance manager. What's more, each Presario will come with a special fax modem that not only allows access to on-line services such as Prodigy but will let the PC double as a telephone answering machine. An "all-in-one" Presario, combining the monitor and electronics in a single box, similar to Apple's early Macintoshes, starts at $1,400, while a more traditional-looking version, sans monitor, will sell for about $100 less. Similarly powered PCs are available for as little as $1,000, but Compaq is betting that first-time buyers are willing to pay more for Compaq's name, service, and easy-to-use features.
To make the Compaq name better known, the company is hiking its advertising budget by 50% in the second half of 1993. The pre-Christmas-season advertising campaign will include the company's first television commercials since 1988 and print ads in consumer magazines such as Sports Illustrated and Working Woman. "It'll be hard to miss us in the fourth quarter," says Cooley. Andrew Bose, vice-president of market researcher Link Resources Corp., figures Compaq could double its share of the consumer market, to over 15%.
VARIETY. But Compaq risks repeating mistakes made by other PC companies. IBM, for example, wound up beefing up its PS/1 line because "We found that the consumer is even more technology-conscious than the business user," says Jim Keenan, director of consumer brands for IBM. And says Dennis J. Cox, director and general manager of AST's Consumer Products Group: "There is nothing [in the Presario line] that is a killer product."
Indeed, PC makers, such as IBM, AST, and Apple say what's needed is a range of products--everything from PCs for first-timers to low-budget versions of the most powerful machines sold to businesses. IBM's new Ambra Computer subsidiary now sells low-cost, high-powered PCs via an 800 number--just like Dell Computer and Gateway 2000. And IBM plans a raft of new PS/1s this fall. Most PC makers are betting on multimedia--PCs incorporating CD-ROM players. AST has new models with CD-ROM drives, and Packard-Bell says virtually all of its consumer PCs will have CD-ROM by next year.
Apple, which once ruled the home with Apple IIs, is now No.2 in the market, according to Link Resources. It could soon retake the lead. Apple says 91% of its low-end Performas are sold to consumers, and it is planning faster new models for the fall selling season. Like everybody else in the PC industry, Apple wants to be home for Christmas.