Lower prices, new XT configurations, new buying strategies, and PCjr withdrawal. (IBM images) Will Fastie.

Lower prices, new XT configurations, new buying strategies, and PCjr withdrawal

To say the least, I am stunned. I thought the IBM would go to the ends of the earth rather than risk the embarrassment of having a product fail, especially one for the high visibility home or educational market. But that, indeed, is what IBM has done. The PCjr is no more; frankly, I am saddened. I seem to be alone among my editorial peers when I say this: PCjr was not a bad computer. It is clear in retrospect that IBM made a few early mistakes that cost it dearly. The keyboard was one (IBM fixed it, but initial sales were slowed by the error) and the price was another. Had IBM offered a more competitive price to begin with, there might have been more interest. Of course, the biggest problem may have been that IBM missed Christmas '83 because of late delivery and thus missed a good, early market opportunity.

In making the announcement, IBM said that the machine would continue to be supported. I think you can be sure that IBM will provide service, at least for some number of years; that is simply sound business practice. Software additions are likely, but that is not a problem considering that PCjr is a full-fledged member of the PC family and thus will run much of the software for its bigger siblings. Hardware additions are unlikely, in my opinion, because an installed base of 250,000 machines is not large enough to interest IBM, whose attention will be focused on the four million PCs sold to date. I might also suggest that IBM will continue to make PCjr available through OEM channels. I know of one such deal in the works: the buyer will use the basic components of the machine as the controlling computer in their product. They are looking at a quantity in excess of 10,000 units. Given that the machine would be sold direct in such cases, IBM can lower the price and still collect a tidy profit.

There is always a silver lining, the old saying goes. In this case, it may be that the price of the remaining PCjrs in the retail channels will hit rock bottom and thus present an attractive buying opportunity. For those looking for a cheap, IBM-compatible computer, now just might be the right time to think jr. A word of warning to owners: consider buying add-on equipment soon. Because the market is suddenly so limited, and because not all PCjr owners will expand the machine, add-ons will become less attractive as a business, and that means some of the companies who have products today will discontinue them tomorrow. A few smaller companies will be able to make some money building expansion hardware for a while, however, so all is not lost if you own the little guy.

Caveat Emptor!

The second big piece of news from IBM is that prices for the PC and XT have been reduced, and the XT has become available in two new models. The two new XTs are not really new: in a fairly standard marketing adjustment, IBM is offering two new configurations of the same computer. The first model is an XT with one floppy but without the hard disk, and the second model has two floppies and no hard disk. You might ask how that makes the machines XTs; after all, XTs are supposed to have hard disks, aren't they? Actually, the answer to that question is no. What makes an XT is its system board (8 slots, XT BIOS chips) and its power supply (130 watts). Each of these new machines is so equipped. The hard disk controller and the disk drive itself have been lowered in price and are available as products, not just as spare parts. The prices for all of these are shown in Table 1, along with new prices for the PC Portable and the PC. Some price adjustments are not shown: other IBM products based on the PC or XT (like the 3270-PC) were also reduced.

These price reductions are interesting. I suggest that IBM is phasing out the PC and will soon sell only the XT. This allows them to build only one 8088 system board instead of the two they now build (the PC Portable already uses the XT system board). The hard-diskless-XT is also preferable to the PC because with more slots and a bigger power supply, just about any kind of expansion is possible. I'd much rather have an XT-based system at home than the PC. I could still use my Kamerman disk and I'd have empty slots again for adding other boards, including my game port (which had to come out when I bought the Kamerman). Many businesses are also feeling the slot crunch by now, and IBM needs to be sure that additional enhancement products, such as internal backup tapes, network boards, or other IBM communications products, can be added.

IBM may also be responding to having painted themselves into a corner. Some recent add-in board products (such as the Professional Graphics Controller) have required two adjacent slots for a rigidly connected two-board combo. Slot spacing in the basic PC remains at 1 inch, but in every other machine, as well as expansion boxes, the spacing is .8 inches. Something that might require two boards (given IBM's tendency to be conservative and have wide appeal) might be an IBM-supplied accelerator card, a device that replaces the 8088 processor with a faster chip and thus delivers AT-like performance in a PC.

Fire Sale or Market Strategy?

What may really be happening, however, is a fire sale on all 8088-based products. This theory is widely held because most analysts believe that IBM's new machine is going to have the 80286 chip and that the 8088 is going to be phased out. The general idea is that an 8088 is not powerful enough for the future.

As usual, I don't agree. There are a lot of PCs and XTs out there doing useful, productive work in a timely and efficient manner. Not every application needs a huge disk or gobs of memory. It is silly to think that every user of spread-sheets needs a 640K machine. (On a disk-based system, spreadsheets larger than a disk aren't possible anyway.) As for performance, a PC may not be the fastest machine around but it is usually more than adequate.

More memory, disk capacity, and performance need to be added as the individual system user tries to become more productive. A financial planner may be operating at the limit of main memory with spreadsheets and probably can benefit from the dramatic performance increase an AT or other newer desktop can offer. A clerk maintaining a large file of information may benefit from a larger hard disk and improved data transfer characteristics. But what about all those machines doing nothing but word processing? While a bigger disk or faster execution might make some difference, a PC nevertheless performs adequately.

Often, a PC is overkill for many applications. Consider the fact that the Apple II continues to sell well even though it operates at about half the speed of the PC. It may be an oversimplification, but I believe that the Apple II is just fine for loads of applications. If that's the case, and the PC has greater performance, then the PC in its current form is even finer. Better yet, the falling prices of the PC family and the greater expandability of the XT models make the machine even more attractive than before. Why should the availability of the more powerful AT, good as it is, affect the judgment of either IBM or its customers? It shouldn't, and I don't think it will.

IBM is doing itself a favor by making the PC less attractive and directing attention to the XT. As the prices of the XT models continue to fall, I predict that XTs will hold their own. IBM may be thinking this way too: it is not their nature to have a fire sale, and the price of at least one PC model actually rose!

Are the Prices Better?

If it's great for IBM, is it great for you? After all, if IBM wants you to buy XTs, they should make it worth your while.

The base price of a 256K, 2 disk drive system is now $2,295, while a like XT is $2,570. The difference of $275 is a little more than the cost of an XT power supply ($215) minus the cost of the PC power supply ($200) plus the cost of the asynchronous adapter ($100), so the XT still represents a small premium ($115).

How about buying a slim XT and later upgrading with the fixed disk? The base 256K, single disk unit now costs $2,270. The upgrade requires the fixed disk adapter ($495), the fixed disk ($1,195), and the asynchronous port ($65) for a total of $4,025. The configured XT lists at $3,895, a $130 savings.

These differences are not meaningful at all, especially when considered in light of street prices, which typically represent discounts of from 10 to 20% off list. Further, I can't imagine many folks buying a $1,690 fixed disk subsystem when you can get so many complete subsystems for under $700, some of which even include a 20Mb disk instead of the more usual 10Mb. In that light, the new PC price of $2,295 plus a $695 fixed disk from a third party gives a total of $2,990; compare that to the XT price of $3,895 and you have to wonder. Buy a slim XT and upgrade and you'll save another $25!

My conclusions? For companies buying any of these machines on a regular basis in quantity, the price changes represent some savings worth considering. For the buyer of just a few systems, the prices haven't changed much, although the 12% drop in configured XTs is more significant. As for the PC versus XT decision, there is little financial impetus for the slim XT. The motivation for going XT will be twice the power supply and 1.5 extra slots.

For the home buyer, these price changes do not bring a PC within easy reach. Assuming the now-extinct pricing of the PCjr, the PC is at least $700 more expensive for a similar configuration. For the serious buyer, that may not be too much and it will buy more expandability and some additional performance over the PCjr.

My recommendation? Forget the PC. Go XT, sans hard disk. It's a better base upon which to build, no matter what options you choose next.

Table: 1. IBM price changes.