Texas Instruments' Pullout
By Andrew Pollack
The New York Times
October 31, 1983
Texas Instruments' move out of the home computer business may be of little help to its competitors, except for I.B.M. Page D4.
The losing battle of Texas Instruments Inc. in the home computer market has taken a severe toll on the company's finances, its reputation and its employees. Yet more than one million other people - the owners of the Texas Instruments 99/4A home computers - will suffer as well.
They are likely to find it much more difficult to get their machines repaired and to find new programs and peripheral equipment, such as data storage devices and printers, to use with the machines. Their situation, will be somewhat akin, but perhaps more severe, to the situation confronting those who own eight-track tape players and find that many of the latest recordings are no longer available in that format, analysts say.
''It's a real letdown to have almost 2 million users left without a country,'' said Roger Harrison, vice president of a group of Texas Instruments home computer users in Northern New Jersey. ''All of a sudden, we're aliens.'' Mr. Harrison's estimate of the number of users is higher than many others.
Texas Instruments announced late Friday that because of continuing heavy losses, it was ceasing the manufacture and sale of its 99/4A home computer. But it said it would continue to advertise the 99/4A and slash its price to clear inventory.
The company reported that it had lost $110.8 million in the third quarter, following a loss of $119.2 million in the second quarter. It also said it took a $330 million write-off against earnings to cover losses and withdrawal from the home computer business. That followed a second-quarter pre- tax loss of $183 million on home computers.
Further Shakeout Expected
Texas Instruments is not the first and is not likely to be the last company to get out of the highly volatile home and office computer business.
The Osborne Computer Corporation, which made somewhat more expensive machines than Texas Instruments, declared bankruptcy last month. Many other smaller companies are expected to fall by the wayside and even some larger companies might pull out of the business, which is plagued by severe price cutting and rapidly changing technology that can make a product obsolete overnight.
Buying a home or office computer is thus becoming a risky task for consumers. Analysts say the net result of both the Texas Instrument pullout and the Osborne bankruptcy is that consumers will either defer purchases of computers until the market settles down or will stick with big companies such as the International Business Machines Corporation and Apple Computer Inc.
Some think that Texas Instruments' abandonment of the market, despite repeated statements to the contrary, will also discourage people from buying its more expensive office personal computer, the Professional Computer, which the company is continuing to manufacture.
Indeed, analysts say the pullout leaves the market even more wide open for I.B.M., which is expected to introduce its home computer, the PC Jr., on Tuesday. The machine, with a starting price of about $800, is expected to bring some stability to the market. Apple is expected to counter by dropping the price of its Apple IIe into the same range.
Texas Instruments, Commodore International Ltd. and Atari unit of Warners Communications have been battling at the low end of the market, with computers selling for $200 or less. Both Texas Instruments and Atari have been plagued by heavy losses. Commodore, which has emerged the victor for now, also seems to be hurting, with product reliability problems and product shortages. The PC Jr. and Coleco's new Adam will move the market toward more expensive and more powerful machines.
Future Services Questioned
For Texas Instruments customers, the future is not clear. The company has said little about how customers are to be supported in the future. Future Computing Inc., a market research company in Richardson, Tex., estimates that between 1 million and 1.5 million 99/4A computers have been sold, making the machine the second most widely owned machine after the Commodore VIC-20 and slightly ahead of the Apple II line.
Texas Instruments did say it would continue to provide service for the computer, meaning owners can send broken computers to the company's service centers for repairs. It is not clear how long that will continue, but it should be for at least a year, since the company is selling its computers today with a one-year warranty.
It is likely that it will be more and more difficult to get new software or new peripherals, which expand the machine's capabilities. How seriously this affects consumers depends on how they use the machine.
''If you bought it for $99 and use it to give your kids experience on computers, it will be fine,'' said C. David Seuss, president of Spinnaker Software, a leading manufacturer of home computer programs. ''If you had dreams of doing your accounting or word processing on it, you're in trouble.''
Schools Could be Hurt
Particularly hurt could be the many elementary schools that bought Texas Instruments computers and will now find it difficult to obtain more of them as their needs grow. The computers were popular for school use because they were the first machines to be able to use LOGO, a programming language particularly suitable for use by children.
Schools with some Texas Instrument computers could start buying different brands, but that is more difficult because new software has to be purchased and teachers trained in the use of a second machine.
The bulk of Texas Instruments programs, which come on plug-in cartridges, cannot be used on other machines. Programs on disks can be transferred to other machines, but only with great difficulty because the language in which Texas Instrument programs are written is not the same as that for other computers, so some translation is needed. Disk drives and other peripheral equipment are likely to be extremely scarce since Texas Instruments is going to stop manufacturing them. While there is an oversupply of the 99/4A computer, disk drives are already in short supply and prices on them might rise. This could be a problem for many users who bought the basic computer first and discover in the future that they need a disk drive to store data.
Others Could Provide Software
As for software, a spokesman for said the company would continue to supply some. But it seems clear that while existing software might be sold, new software - such as the latest video games and educational programs - will not be made available unless a software company wants to undertake that production and marketing task on its own.
Some analysts think that software companies will find it attractive to try to sell software to the large user population. ''You can't ignore a million and a half people,'' said Charles W. LaFara, a large mail-order distributor of the 99/4A and related products. ''With that large an installed base, it's not just going to die out overnight.''
But software company officials disagreed and said they have no intentions of continuing to provide new software for the machine.
''We won't be supporting them simply because retailers don't stock software for hardware they don't carry,'' said Douglas Carlston, president of Broderbund Software. He said he had already talked to several retailers and ''there isn't any interest at all in T.I. software.'' The result, Mr. Carlston said, is that ''there is a huge base out there, but we can't find any way to get to them.''
The software problem is exacerbated by the company's longstanding policy of marketing virtually all software for its computer by itself, so that there are few companies already in the business of supplying software for the 99/4A. Most computer companies allow independent software companies to market software for their machines.
It is now considered likely that Texas Instruments will allow independent software companies to make and market software for its machine without threatening them with copyright infringement suits. However, software officials say it is too late.
Texas Instruments has made a series of missteps, and indeed, there are few tears being shed in the industry now that the company is leaving the home computer business.
Texas Instruments entered the home computer market in 1979 with a machine selling for more than $1,100 that was a failure. It was only late last year, when price wars and less expensive parts brought the price down to $200, that sales started to soar. Texas Instruments was an eager participant in the price wars, believing that a low price gained market share and that the higher volume that resulted yielded a profit.
However, the company started losing money because prices were too low, while Commodore International, its chief rival, could continue to produce its VIC-20 at the same low price for a profit.
When the big loss was announced last quarter, Texas Instruments announced it would stay in the business. William J. Turner, the head of consumer operations, resigned in July and was replaced in late August by Peter A. Field, a general manager of Procter & Gamble's coffee division. The company also cut the price of expansion devices that attach to the computer, and sales of those devices grew rapidly. But the efforts did not work. On Sept. 20, Mark Shepherd Jr., chairman of Texas Instruments, again said the company would remain in the home computer business, but added that ''success is by no means certain'' and that ''in the longer term, this business will have to pull its weight and prove itself a profit maker.''
Apparently, mounting losses convinced the company that the home computer business would never pull its weight.
GRAPHIC: graph of Texas Instruments ; photo of children using computer terminal
Copyright 1983 The New York Times Company