So Far, So-So, For Steve Jobs' New Machine

Information Processing

Sales of his Next computer are sluggish, but planned improvements could help

Richard Brandt in Redwood City, Calif., with bureau reports
Business Week

January 29, 1990

When Steven P. Jobs set out to change computing with the Apple Macintosh in 1984, he met with accolades--and then frustration: The Mac took two years to catch on. By then, Jobs had left Apple and formed Next Inc. to build another state-of-the-art machine, a sleek workstation that drew wide praise at its coming-out 15 months ago. But now, a familiar pattern has emerged: Initial raves have given way to criticism of technical shortcomings and high prices. Like Mac, the Next computer has not met ambitious sales goals. And Jobs is once more awaiting the development of software that will make his computer sell. ''Boy, does it ever feel like deja vu,'' says Amy D. Wohl, an industry consultant who worked with Jobs at Apple.

It is early to predict how Next will fare--and risky to underestimate Jobs's drawing power. Still, the initial reaction shows that Jobs faces a mighty challenge. When Businessland Inc. signed up as Next's exclusive dealer last year, its president, David A. Norman, said he would sell $100 million worth of machines--about 10,000 in all--by July, 1990. But the basic software wasn't ready until October, more than three months late. Then sales built slowly. Instead of reaching 1,000 units in the December quarter, as some analysts expected, sales through Businessland were ''in the hundreds,'' Norman says. He adds that he is still ''on the hook'' for moving his quota, having committed Businessland to do so. But now Norman says he won't complete the job until the end of 1990.

The early customer reaction shows why. Evaluators agree that Next's is an appealing machine--it has built-in programs that can play a Bach fugue or display quotations from the complete works of Shakespeare. ''It's a lot of fun,'' says Jeffrey D. Spirer, marketing manager of workstations for Intel Corp. in Hillsboro, Ore. ''Every engineer here has brought up the music synthesizer and chess program.'' But for serious work, he adds, they go back to their regular computers.

What gives many buyers pause is Next's use of technology that flouts an industry trend toward common standards. For example, although its NextStep display software gets high marks as a graphical user interface, it isn't compatible with the industry-standard X-windows screen management system. Even though IBM has licensed NextStep, most likely for workstations due out next month, the programs for those machines won't run on Next without being rewritten. Beyond that, Next's operating system, or basic software, is a version of Unix called Mach that is unlikely to supplant American Telephone & Telegraph Co.'s Unix System V, the leading contender to become the industry standard Unix. Says a computer buyer for a major university: ''The lack of standards is an extremely big negative.''

FEEDBACK

So is the machine's lack of speed. Many universities--a key market for Next--say Jobs's computer doesn't perform as well as engineering workstations from Sun Microsystems Inc. or Hewlett-Packard Co. that cost no more than Next's $9,950 ($7,000 for schools). These machines use especially fast RISC (reduced instruction set computing) processors, while the Next computer uses the slower Motorola 68030 chip that runs the most powerful Macintoshes. Next ''is more akin to a Mac II,'' says George R. Bateman, a computer buyer at the University of Chicago. That leaves some customers, such as Aetna Life & Casualty Co., yearning for big improvements. ''There could be a lot of similarities between where Next is now and where the Mac was years ago,'' says Catherine M. Mullane, an Aetna senior technical analyst. ''We are waiting to see how it evolves.''

Jobs has heard all the feedback. This year, he is expected to upgrade to the new Motorola 68040 chip. And although he insists that such conventional chips will provide adequate power, he adds: ''There may come a time when it becomes necessary to do some RISC stuff.'' In fact, Jobs is listening a lot better than he once did. As Mac sales stalled during his last year at Apple, for example, he resisted the improvements that buyers demanded but that he felt would compromise the principles behind the machine. After he left, the improvements were made, and Mac took off. ''I could have done better,'' he recalls.

PROMISES

That realization may help him at Next. Last October, for instance, when customers complained that his computer's optical disk drive was too slow, Jobs added a conventional hard disk to speed up the system. Rather than insisting on a ''closed,'' or proprietary, system, as he did with Mac, he has asked his engineers to design a chip that will make it easier for customers to connect accessories not sold by Next, such as floppy-disk drives. And to satisfy customers looking for a lower price, Jobs has added a version without the optical disk that sells for $7,995.

While he waits for such changes to work, Jobs is focusing on marketing. During last fall's slow start, he took over that role from Vice-President Dan'l Lewin. His strategy leans on what Jobs calls the third wave of personal computing. The first was spreadsheets on IBM PCs, followed by desktop publishing, initially on the Mac. The next wave, which Jobs calls ''interpersonal computing,'' will use advanced networking, electronic mail, and digitized sound to radically alter how organizations do business (box).

For now, Next remains strictly second-wave. Rather than hyping the machine's technological breakthroughs, Next's latest ads emphasize the machine's prowess in desktop publishing. That may be a wise move. Next buyers say that with its large, crisp screen and graphics software, Jobs's computer is the best for showing how a page will look on paper. Peter A. Jerram, director of technical publications for network software supplier Novell Inc., says that the Frame Technology Corp. publishing software he uses on Next actually runs faster on Sun workstations. But he says he finishes work faster on Next, because it's easier to use.

The question remains, however: Will the Next machine, like Macintosh, overcome its initial problems and go on to become a legend? Sales are picking up. Jobs says that several customers have ordered more than 100 machines and that at least one is ready to order more than 1,000. ''We're happy with how we're doing,'' he says. International Data Corp. predicts sales of 12,000 units in 1990. And with investors such as H. Ross Perot and Japan's Canon Inc., Jobs has plenty of staying power, including more than half of the estimated $200 million Next has raised since 1985.Ultimately, though, the fate of the Next machine may be out of Jobs's hands. As with the Macintosh, success will come from applications software that lures buyers. Next's built-in software for writing programs already makes it a favorite of software developers. But it will be a year before they produce many packages for regular customers. Jobs is especially enthusiastic about a new spreadsheet coming from Lotus Development Corp., the Cambridge (Mass.) software house whose 1-2-3 package ensured the success of the IBM PC. ''It's going to be awesome,'' says Jobs. ''They tried for a long time to put this on other computers and couldn't.''

This is where Jobs had better hope that similarities end between the Mac and the Next. Apple pinned its early ambitions for Mac on a new spreadsheet from Lotus. Introduced with much fanfare in 1985, Lotus' Jazz turned out to be a flop, and it was another year before software appeared that made Mac appealing to businesses--and Lotus still has no Mac spreadsheet. That kind of deja vu Next can live without.

WHERE NEXT IS GOING OUT ON A LIMB

Like Steve Jobs's original Macintosh, the Next workstation uses hardware and software that defy industry norms. Here are some examples:

OPTICAL DISK DRIVE

Next uses an erasable optical disk to store data and programs, rather than conventional floppy or hard disks. Moreover, the Canon drive in the Next computer is incompatible with all other optical disk drives

NEXTSTEP GRAPHICAL INTERFACE

This software gives Next machines a distinctive look but makes them incompatible with other Unix-based computers

INTERFACE BUILDER

Part of NextStep, this makes it easier to write programs for the Next machine using prepackaged computer code known as ''objects.'' But NextStep uses Objective C, rather than C++, a standard of the American National Standards Institute

MACH This version of the Unix operating system, the basic software that runs workstations, is not likely to become the industry standard

DATA: BW BOB HOLMGREN