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'It's Like Buying A Concorde When A Cessna Will Do'

The Upgrade of Next's workstation may be too much, too late

Barbara Buell in San Francisco
Business Week

September 24, 1990

Steve Jobs is still trying to launch the next computer revolution. In 1988, when the Next Inc. chairman first introduced his distinctive coal-black computer cube, he promised the new machine would so dazzle buyers that its influence would eventually change the course of computer technology. It hasn't worked out that way. Computer jocks loved the machine's sound and programming features, but sales stalled when customers balked at its price tag and lack of software.

Now, Jobs will try again--with a big splash at San Francisco's Louise M. Davies Symphony Hall on Sept. 18. The three new Next machines will be more powerful. They will use a new Motorola 68040 microprocessor chip to boost their speed, and analysts say Jobs will add a much-needed color monitor to his product line. Meanwhile, aggressive pricing on two new models will make them competitive with rivals in the $5,000 range.

More important than the new hardware is this: With his usual missionary zeal, the former Apple Computer Inc. chairman has enlisted two dozen or so key software developers to join him at the unveiling. Many of them will introduce new programs for Next's machines. Giant Lotus Development Corp. will show Improv, its new financial-modeling program that, for now, will be available only for Next. WordPerfect Corp., the No. 1 word processing software maker, will unveil a Next version of WordPerfect, and Ashton-Tate will show its new ''talking'' spreadsheet that allows users to annotate the ledger with voice messages.

This new software, says Jobs, ''is going to make a lot of difference.'' After all, that's what helped Jobs's brainchild, the Apple Macintosh, take off.


But this time, Jobs faces a tougher challenge. Businessland Inc., Next's only retail outlet, admits it fell short of plans to sell some 10,000 units, or $100 million worth of machines, by the end of July. Instead, estimates market researcher InfoCorp, Next will ship only about 8,000 units in 1990.Sun Microsystems Inc., by comparison, sold 115,000 machines during its fiscal 1990, ended June 30. Says James H. Clark, chairman of rival workstation maker Silicon Graphics Inc. of Mountain View, Calif.: ''They're dead meat.''

One problem has been the $10,000 price tag on Next's technology, which includes high-quality sound capability and an optical disk drive--features that many customers don't want anyway. The price is more than Sun and others charge for comparable speed and power. ''Next machines are fabulous, but it's just overkill,'' says Gary Etchison, a computer buyer for the fund-raising department at the University of California at Los Angeles. ''It's like buying a Concorde when a Cessna will do.'' Others say Next's Unix operating system complicates integration in offices using IBMs or Apples.


A crowded field of well-established rivals also makes a Next revival unlikely. Sun, Hewlett-Packard, and Digital Equipment are entrenched as market leaders (chart), with machines that better target workstation buyers. And IBM's new RS/6000 workstation has sold out for 1990. ''They're not going to penetrate,'' says Kathleen Hurley, an analyst at market researcher Dataquest. ''The market is overpopulated, and the top vendors already own 85% of it.''

To make matters worse, Businessland has problems of its own, including a loss of $23 million for fiscal 1990, ended June 30. The chain may not devote sales resources to a product that isn't selling well. ''Businessland will sell what's easy,'' says Bruce Lupatkin, an analyst at Hambrecht & Quist in San Francisco. That's one reason Jobs will unveil expanded distribution plans at Symphony Hall: He's planning to increase his direct sales force and add a cadre of specialized resellers to push the machine.

Some of these marketers will take a different approach: They'll emphasize the Next cube's NextStep software, which allows developers to write programs in a fraction of the time normally needed. That could drive a new market: corporate computer departments that do in-house custom programming.

Next has plenty of cash to keep going: Jobs raised nearly $200 million from investors, including H. Ross Perot and Japan's Canon Inc. Besides, Jobs says that Next is catching on. He points to a 300-unit sales deal with the William Morris Agency Inc., and claims other big, unidentified buyers are lining up. But for now, Jobs's revolution has found few followers.


Copyright 1990 McGraw-Hill, Inc.