Tandy's new computer for small business

Information Processing

Computers

Business Week

June 11, 1979

Tandy Corp. has proven to most everyone's satisfaction -- and to some surprise -- that it can move a lot of barebone microcomputers to hobbyists and professionals through its 4,000 Radio Shack stores and computer centers. The Fort Worth (Tex.) company is easily No. 1 in the personal computer market. Now it is taking a major gamble by trying to repeat its success in the emerging very-small-business market.

With the launching of its TRS 80 Model II on May 30, Tandy will be selling a second-generation microcomputer that it claims will pack as much power as International Business Machine Corp.'s 5110 desktop minicomputer. Offering twice as much speed and several times the power of Tandy's earlier unit, the new machine -- actually a series of models -- also sports a significantly higher price tag. It starts at $3,450 and works up to $8,737.

Tandy is gambling that in selling the larger machine through its retail chain, it will succeed in holding down marketing costs, keeping them in line with the falling cost of hardware. The computer industry is searching hard for a new formula to sell computer power to the very-small-business market, because traditional industry marketing efforts are far too costly for it to use in the $10,000-and-under systems market.

Heady with its success in the low-priced microcomputers, Tandy's management is confident that it can move the high-priced microcomputer through Radio Shack." We have 4,500 store managers and salespeople who have 20 months of experience in facing consumers with a computer and selling both hardware and software," says Lewis F. Kornfeld, president of Radio Shack. "We have a colossal head start on everyone."

Price-cutting

Competitors are not so sure that a head start will be enough. "There's a need here -- solving the problems of small-business men," says one industry expert who does not believe Tandy will be able to fill the bill, "but they need plenty of service and hand-holding." Michael J. Connor, dealer manager at Apple Computer Inc., agrees. He likes the Model II hardware but says, "The only question I have is whether they have the people and the vehicle to sell this product."

Tandy is betting that a great many small businesses will place price ahead of personal attention. John V. Roach, Radio Shack's executive vice-president, claims that his company's marketing and distribution system will allow Tandy to undercut the prices set by leading computer manufacturers. In fact, Tandy executives claim that the TRS 80 Model II machines will beat IBM's prices for equivalent 5110 hardware by about 50%.

But even that may not be enough. Says Jerry Cullen, vice-president of product marketing at Datapoint Corp.: "I don't think the price of the TRS 80 Model II sounds as remarkable as the price of the TRS 80 Model I." His San Antonio company has a $10,200 machine, with most of the memory power of the new Tandy product, plus additional tele-communications capability. "They are getting into a very competitive market-place, and their success to a large extent will depend upon their software and service backup capability," Cullen says.

'Buy two.'

The Model II will come with business software. But at the moment, Tandy has no provisions for on-site maintenance for the machine. Roach says he expects to sign a contract for third-party maintenance in the next few months. Until then, users of the new system will have to take the 50-lb. machine into the shop or follow Roach's suggestion that "if you want some support, buy two of them."

This kind of attitude could mean trouble for the company. "They have a job to do in educating the business public," says Sidney V. Thompson, retail analyst for Dallas-based Rauscher Pierce Refsnes Inc. "They have a good-sized system and they're just going to have to go out and convince people that it makes sense to give up the hand-holding to get something at half the usual price."

GRAPHIC: Illustration, no caption; Picture, Radio Shack's Kornfeld claims a "head start on everyone" with the TRS 80 Model II microcomputer. Jarrold Cabluck