Commodore International Will Spend $40 Million Marketing Amiga Computer

By Randall Smith, Staff Reporter
The Wall Street Journal

Sep 27, 1985

New York -- Commodore International Ltd. unveiled a $40 million marketing plan for its new Amiga personal computer and said it has signed up 662 dealers to carry the machine.

But many software programs and other important features for the Amiga won't be available until November, the company said.

Commodore said it will begin volume shipments next week of the Amiga, which is crucial to the company's future, against a backdrop of losses that are likely to continue through the first quarter ending Monday.

"We believe that the marketing launch of the Amiga will be remembered as the time that the personal computer industry began to reverse its fortunes," said Thomas Rattigan, president of Commodore Business Machines Inc., the West Chester, Pa.-based company's U.S. unit.

Commodore said most of its $40 million marketing budget for the Amiga in fiscal 1986 will go for advertising, with the majority of the advertising budget to be spent before the end of 1985.

As reported, Commodore earlier this week posted a $113.9 million loss for fiscal 1985; for the fourth quarter, the company reported a loss of $124 million, including write-downs totaling $63 million. Commodore's auditors qualified their report on the computer maker's earnings after the company had to obtain waivers from its banks on certain conditions of its loan agreements.

More losses and possibly write-offs are expected in the current quarter because of the costs of laying off about 15% of Commodore's employees and because the company's long-term debt has been reclassified as current. When asked whether there are more write-downs to come, Mr. Rattigan replied, "I never use the word never."

Donald Greenbaum, Commodore treasurer, said the company won't need to ask its banks for cash to fund the current marketing and manufacturing program.

Mr. Rattigan said Commodore had exceeded its goal of lining up 450 dealers by this time, and the company aims to have 1,200 to 1,500 dealers by next summer. But he said a minimum dealer order isn't being required, which means that dealers don't have to make a big commitment to the product.

By comparison, about 2,500 dealers sell Armonk, N.Y.-based International Business Machines Corp.'s Personal Computer.

Although individual dealers in some major chains will sell Amiga, most of the dealers are smaller concerns and most of the largest chains haven't signed up. Charles Wolf, an industry analyst at First Boston Corp., said some dealers were reluctant to stock the Amiga because they had disputes with Commodore's former management and because of the lack of Amiga software.

The Amiga, which sells for $1,295, plus a $495 screen, is aimed at home and business markets. But Commodore yesterday said a hard-disk feature that makes the machine IBM PC-compatible, at 60% the speed of the IBM machine, won't be available until November. Features for full-speed IBM-PC compatibility will be available in December. Also, only eight of 20 scheduled programs will be available before November, and none of the eight is a major business title.

Mark Manson of Donaldson, Lufkin & Jenrette Securities Corp. calls Amiga "a great product for its price." But he said, "The underlying question of whether or not there's consumer demand for home computers seems more important than whether Commodore can design a slick advertising campaign."