I.B.M.'s New Reply to 'Clones'

By David E. Sanger
Special to the New York Times

Boston, Sept. 2, 1986 -- In its recent efforts to ward off a raft of low-cost competitors in the personal computer market, the International Business Machines Corporation has slashed prices, tossed in free software and touted its tradition of reliability - all to little avail.

So today the world's largest computer maker, struggling to recover from a surprising loss of market share, took a new tack. It introduced a significantly faster version of its PC XT - the first major change in its basic PC design since I.B.M. entered the personal computer business in 1981 - in hopes of bringing some of its largest corporate customers back into the fold.

The $3,995 entry, called the PC XT Model 286, is built around the Intel 80286 microprocessor, the same chip that powers I.B.M.'s top-of-the-line PC AT.

I.B.M. called the new model ''an excellent-priced performer'' and said that ''initial reaction from our dealers is very favorable.'' But most analysts termed it a stopgap move, intended to fend off PC ''clones'' until the company's next generation is introduced, probably early next year.

'Just a Holding Action'

''There's no question this is just a holding action,'' said Aaron Goldberg, who follows the personal computer industry for the International Data Corporation, a consulting firm based in Framingham, Mass. ''All the same, it's got to be better than getting into price wars that I.B.M. can't win.''

I.B.M.'s move came just as several key competitors are preparing new assaults on the personal computer market. The Sperry Corporation, which is merging with Burroughs, is scheduled to introduce its new entry Wednesday, and the Digital Equipment Corporation is expected to begin its latest effort to enter the personal computer market on Thursday, with a system that runs I.B.M. software and connects painlessly to Digital's own line of powerful VAX minicomputers.

And next week, the Compaq Computer Corporation will become the first of the leading personal computer manufacturers to introduce a model that uses the next-generation Intel chip - the 80386. The move is considered a risky one for Compaq, which usually waits for I.B.M. to lead the way in leapfrogging existing technology.

Industry insiders say the new Compaq machine will sell for $6,300 to $7,500, depending on options, and can be expanded to up to 32 million bytes of internal memory, making it one of the most powerful personal computers on the market and perhaps the fastest.

Label May Be a Misnomer

While I.B.M. called its new computer an XT, the designation for its midsized PC, analysts said the label might be a misnomer. In reality, they said, the machine's design makes it a stripped-down version of the more advanced PC AT, raising the possibility that it may cut into sales of I.B.M.'s most profitable personal computer offering.

I.B.M., for its part, says it does not see this as a problem. ''We think it falls nicely between the XT and the AT in terms of price and function,'' said Michael H. Starks, a spokesman for I.B.M.'s entry systems division.

Like the AT, the new PC XT model allows several users to share the processing power of the Intel 80286 through remote terminals. And like the AT, the new unit's internal memory can be extended to more than 12 million bytes, or more than 20 times the memory of the older XT model.

The new XT is also fairly expensive - about $1,000 less than a similarly equipped AT, but about $1,000 more than the older XT's, which come in several varieties.

''I think it's hardly the price we'd like to see to strengthen I.B.M.'s PC business,'' said Frederic H. Cohen, the computer analyst at L. F. Rothschild. ''But I'm sure it will be discounted.''

Critics of I.B.M.'s personal computer strategy, who have been legion on Wall Street in recent months, said that because the new machine included virtually no new technology, the company should have introduced it more than a year ago. The unresolved question is whether I.B.M. can regain its position, now that lesser-known ''clones'' have seized a good part of the market.

A Mixed Forecast

''I don't think this will hurt Compaq or many of the other clone makers,'' said Mr. Goldberg of International Data. But other analysts said the new machine might be embraced warmly by retailers, who have sought a midpriced computer to offer to corporate customers who demand a fair amount of computing power.

The new PC is not likely to dampen speculation about I.B.M.'s next move. Company officials have already said they plan to make it far more difficult for low-cost competitors to copy I.B.M. technology, which probably means a new, more powerful machine making extensive use of proprietary I.B.M. chips rather than off-the-shelf parts.

Most expect the next machine, like Compaq's upcoming entry, to use the new 80386 chip. But it will probably be 18 months or more before a wide range of software is available that can take advantage of the speed and versatility of the 80386.

''Until we get that done,'' one I.B.M. official conceded privately last month, ''it's just a more expensive box.''

A computer roster

I.B.M.'s current lineup of personal computers, ranked by power.

K: kilobyte
MB: megabyte

Copyright 1986 The New York Times Company