Comdex, the huge trade show at which personal computer makers display their wares to dealers, has always been a high-spirited affair overflowing with hype and hoopla worthy of a glamorous growth industry. But at last week's extravaganza in the Georgia World Congress Center in Atlanta, the glamour was tempered by a touch of gloom. Attendance was disappointing, most of the new products were unexciting, and exhibitors were hard pressed to drum up enthusiasm. Even the shapely brunet in a bright-red leotard who was posted in front of the NEC Corp. booth did not attract a crowd. Summed up Morton Goldman, vice president of Elek-Tek, a Chicago-area retailer: "We're very disappointed. This business is in trouble right now."
After years of rolling on what seemed like an unstoppable joyride, the personal computer industry is going through a bumpy stretch of slowing growth, sagging profits and ruinous competition. Rough times have arrived for almost everyone in the business, from computer manufacturers and retailers to the semiconductor companies, which supply the microchips that make the machines work.
Personal computer sales rose 11% in 1984, to 7.5 million. That rate would be high for an industry like steel or rubber, but it was much less than the 107% gain in 1983 and far below expectations. Moreover, the growth came primarily from computers for office use. The once sizzling home computer market now seems to be fizzling. Sales of machines targeted for the home actually declined by 4% last year, to 4.8 million. The industry originally expected to sell 7 million home computers in 1984. Says Charles Martin, editor of Personal Computing magazine: "The business has now returned to earth."
During the go-go days of the early 1980s, when the market seemed unlimited, the lure of making a fast fortune enticed hordes of companies and entrepreneurs into the industry. The bruising competition that resulted has turned into a battle for survival. Future Computing, a Dallas-based market research firm, says that in the past two years the number of personal computer manufacturers has shriveled from more than 200 to about 150. Some companies, including Mattel and Timex, have simply dropped their home computer lines, but several smaller firms like Gavilan Computer of Campbell, Calif., and Beehive International of Salt Lake City, have filed for bankruptcy. Last year 570 of 3,800 computer retailers in the U.S. closed their doors or were taken over by large chains. Even the number of computer magazines has tumbled from some 150 in 1983 to about 40.
The shakeout is most severe in the home computer business, where price competition has been fierce. Coleco slashed the cost of its Adam computer from $750 to $500 last year in an unsuccessful effort to spur sales. In January the company decided to drop the Adam altogether after suffering a 1984 loss of $259 million on the machine. Commodore lost $20.8 million in the first three months of this year, partly because it reduced the basic price of its model 64 by 25%, to $145. And even IBM two months ago halted production of the PCjr, which had sold poorly with its price tag of up to $1,200.