I.B.M. Drops PCjr Production

By Andrew Pollack
The New York Times

San Francisco -- March 19, 1985 -- The International Business Machines Corporation said yesterday that it will cease production next month of its PCjr home computer, a machine that never quite caught on in the marketplace.

I.B.M. said it was taking the action because inventories were sufficient to meet future demand. The company said it would continue to market the remaining computers and to support the product by providing software, spare parts and optional hardware attachments.

Nevertheless, the surprise announcement in effect signals the end of the PCjr, a product that was once expected to establish the same dominance for I.B.M. in the home market that its initial PC established in the office market.

Latest Casualty

I.B.M. thus becomes the latest casualty of the disappointing market for home computers. Many other companies, including Texas Instruments and Coleco Industries, have withdrawn from the market after embarrassing failures. Commodore International has seen its sales and earnings plummet and Apple Computer recently announced that it would close its factories for a week because of bulging inventories.

''The home market didn't expand to the degree I.B.M. and many observers thought it would,'' said John Q. Pope, a spokesman for I.B.M. in Boca Raton, Fla., where the personal computer operations are based. ''But that doesn't mean the home market doesn't exist.''

I.B.M. did not say whether it would abandon the home market completely or whether it was planning a new product. Some analysts said it would be inconceivable that I.B.M. would would desert the lower-priced market, especially because that market includes schools.

''I can't imagine they would give up that low end of the market,'' said Egil Juliussen, chairman of Future Computing Inc., a Dallas market researcher, which estimates that I.B.M. sold 275,000 PCjr's in 1984. ''From a strategic point of view they ought to have something to take its place.''

Many analysts are expecting I.B.M. to soon introduce the PC2, an advancement on the original PC office computer that is expected to have a more powerful microprocessor. The price of the original PC is also expected to be cut.

The cancellation of the PCjr indicates that an even broader realignment of I.B.M.'s product line might be in store. However, the I.B.M. spokesman indicated that a machine to replace the PCjr is not likely to be introduced soon.

Norman DeWitt, director of the personal computer industry service for Dataquest, a market researcher, said he thinks that I.B.M. made its decision because it was not making a sufficient profit when on the PCjr it sold below $900, which was the price required to stimulate sales. He said the dropping of the PCjr would be good news for Apple Computer, whose Apple II line competed directly wuth the PCjr.

Troubled History

The PCjr had trouble from the start. Introduced in late 1983, it did not reach the market until early 1984, missing the 1983 Christmas season. The machine also was ridiculed for its keyboard, whose rubberized keys resembled Chiclets chewing gum. I.B.M. eventually replaced the keyboard with a more conventional one.

Sales of the PCjr spurted late in the year, however, when I.B.M. introduced heavy discounts and rebates that brought the price down to below $900 for a complete system with monitor and some software.

But sales fell off sharply after Christmas, especially after prices rose again in February. The price for a machine with one disk drive and 128,000 characters of memory is now $1,000, without the monitor. Future Computing, the market researcher, said that computer stores sold an average of 50 PCjr's in December, 20 in January and only 2.4 in February.

Price Cuts Expected

The announcement is expected to set off retail price cuts as dealers seek to unload remaining inventories of the home computers.

I.B.M. said it would continue to market software in cartridges and spare parts and provide customer support through a toll-free number. But it did not say how long it would continue this support. It also did not say how long it expected existing inventories of the PCjr to last.

The PCjr is made for I.B.M. by a division of Teledyne Inc. in Lewisburg, Tenn. Berkley Baker, a spokesman for Teledyne, said that the cutback would lead to layoffs in the division, which employs 1,600 people. He said the number of layoffs would depend on what other work the division can come up with by next month.

Latest Disappointment

The PCjr is one of several disappointments for I.B.M. in personal computers, although on the whole it has done extremely well. Its portable computer failed to catch on and its new PC-AT has been beset by shortages and manufacturing quality problems. Last week, I.B.M. said that Philip D. Estridge, head of its Entry Systems division, was being moved to a new job in corporate headquarters in Armonk. N.Y., to take charge of worldwide manufacturing.

I.B.M.'s stock rose yesterday, but lost some of its gain in trading on the Pacific Stock Exchange after on the PCjr announcement. The shares closed up $2.50 on the New York Stock Exchange, but finished up $2.125, to $130.50 on the Pacific Exchange.