AT&T Introduces Computer Gear Aimed at IBM-Led Office Market

By Janet Guyon, Staff Reporter
The Wall Street Journal

March 27, 1985

New York -- American Telephone & Telegraph Co. introduced four office-automation products aimed at bolstering its efforts to compete in the market led by International Business Machines Corp.

The products are a personal computer called the Unix PC, enhancements for its existing PC 6300 personal computer, a local area network, and a terminal with a phone. They represent the first demonstration of AT&T's communications expertise in the information systems market, analysts said.

While analysts generally hailed AT&T's new products, the company faces major challenges in trying to revive its lagging efforts in the computer market. The Unix PC isn't compatible with the PC 6300 introduced last year. And AT&T must persuade makers to write programs for its Unix operating system, which currently has only a few dozen software programs compared with more than 5,000 for the IBM line. In addition, major parts of AT&T's network linking personal computers won't be available until late this year or early 1986; IBM's PC Network is expected to be available by the end of this week.

Moreover, some analysts said AT&T's new products don't offer a clear-cut price advantage over comparable office-automation equipment made and aggressively marketed by such competitors as IBM, Data General Corp., Apple Computer Inc. and Compaq Computer Corp.

Despite these problems and AT&T's inexperience in selling office-automation equipment, the industry takes AT&T's new products seriously because of the company's massive resources and presence in telephone markets. "This is a turning point in AT&T's whole computer strategy," said Elizabeth Menten, a computer research analyst at Gartner Group Inc., a Stamford, Conn.-based consulting firm. "It's nice to see IBM getting some serious competition."

In composite trading yesterday on the New York Stock Exchange, AT&T closed at $21.375 a share, up 12.5 cents.

The most significant of the new AT&T products are its local area network, called Starlan, which links personal computers through existing telephone wiring, and the Unix PC, which prior to its introduction had been referred to as the PC 7300 by industry observers.

The Unix PC is impressive, analysts said, because of its power, its ability to do several things at once and its built-in ability to connect to the telephone. Because it uses existing telephone wiring, Starlan doesn't require businesses to tear down walls to install new wiring, a problem cited by potential buyers of other such networks.

The enhancements to the PC 6300, the IBM-compatible machine that last year marked AT&T's entry into the desktop computer market for major corporate users, and the introduction of a "dumb," or non-memory, terminal with sophisticated phone functions gives AT&T a more complete line of office-automation equipment.

But AT&T may encounter trouble selling its latest offerings because they aren't significantly less expensive than the newest machines made by IBM. The Unix PC ranges in price from $5,095 to $7,290, depending on options, while the enhanced PC 6300 can cost as much as $5,915. Those prices aren't significantly lower than prices of IBM's PC AT and, in some configurations, are higher. The PC AT, IBM's latest and most powerful personal computer, is priced at $6,320, compared with $5,695 for a Unix PC with similar features.

The AT&T machines aren't "going to be a terribly easy sell," said Kenneth Bosomworth, president of International Resource Development Inc., a Norwalk, Conn.-based consulting firm. He said that when AT&T first began developing the Unix PC, which is being made by Convergent Technologies Inc., Santa Clara, Calif., it was considering a price range of $7,000 to $9,000. However, the introduction of the IBM PC AT last year forced AT&T to cut profit margins as low as possible.

Analysts also criticized the price of AT&T's Starlan network. The network is technically impressive because it eventually will allow IBM computers to talk to those using AT&T's Unix operating system, said Robert Fleming of the Gartner Group. But, he added, at between $700 to $800 per connection, it is priced only 10% to 20% lower than IBM's PC Network.

"AT&T really missed the boat," Mr. Fleming said. "Selling the network itself isn't key, the key is selling the entire package (of computers and networks). They could have undercut the IBM PC Network by 50%."

By introducing a personal computer using its Unix system, AT&T underscored its commitment to an operating system different from that of IBM's machines. Enhancements to the PC 6300 include a software package that runs Xenix, a version of Unix, as well as a plug-in modem, a hard-disk for storage, and a co-processor that speeds up mathematical calculations.

One of AT&T's disadvantages in competing against IBM is the shortage of applications software for Unix-based machines compared with that available for IBM machines. AT&T yesterday announced 28 Unix software programs designed for the Unix PC.

The remaining question for AT&T is whether it can successfully sell computers. Last year, the telecommunications giant failed dismally, selling only about 28,500 of its PC 6300s, compared with 1.5 million personal computers for IBM. In addition, it sold only 10% of its 3B minicomputer line to customers outside AT&T's former telephone operating companies.

James D. Edwards, president of Computer Systems for AT&T Information Systems, an AT&T unit, said that the company has sold more PC 6300s in January and February of this year than all of last year and has received orders for several thousand Unix PCs. AT&T plans to sell two-thirds of its personal computers through its direct sales force, with the remainder sold by computer retailers and other distributors.

Additionally, the company is changing its computer advertising theme, starting with television ads next week, to "Computers with the Future Built In" from "Watson Watch Us Now." AT&T executives wouldn't disclose the budget for the advertising campaign.

"I think they're doing things right," said Michael Murphy, editor of California Technology Stock Letter. "They still have trouble selling stuff and it will be at least two years before they make money, but at least they have a product line."

AT&T Computers: How They Compare

Model                  Memory  Disk Hard  Price
                              Drive Disk
AT&T Unix PC              512   360   20  $5,695    kilobyte* kilobyte megabyte* (screen incl.)
AT&T PC 6300 Enhanced     512   369   20  $5,620    kilobyte kilobyte megabyte (screen incl.)
IBM Personal Computer AT  512   1.2   20  $5,795**  kilobyte megabyte megabyte (screen not incl.)
Apple Macintosh XL        512   400   10  $3,995    kilobyte kilobyte megabyte (screen incl.)

*One kilobyte is 1,000 bytes or "pieces" of data. One megabyte equals about one million pieces of data.
A 20 megabyte hard disk holds about 10,000 pages of typewritten, double-spaced text.

**IBM's PC AT with screen costs $6,320, including a $275 and a $250 adapter card.

Copyright (c) 1985, Dow Jones & Co., Inc.