Apple Reference & Presen…rary 8 (Internal Edition)/Apple R&P Lib Internal v8.0.iso/3-Presentations/Apple Computer Inc./Industry Competition/ROMs/Compaq/Compaq N Series

Text File | 1990-06-24 | 15KB | 285 lines

COMPAQ’S NEW DeskPro 286N & 386N:  Diskless PCs or a 25% Price Cut??
Customer & Competitive Analysis Report
Contact:  Ken Lim

_______
SUMMARY

On May 21, Compaq announced two new, compact, 2-slot systems that are being
positioned as diskless, networked PCs for the SystemPro fileserver.  They are
very similar to existing products in Compaq’s line but priced 25% lower
($900-$1000 less).  Since the new PCs are expandable and can take hard disks,
we believe that they will more likely be sold as standalone
low-priced/high-volume PCs.  This marks a major change in Compaq’s direction in
terms of pricing and target markets--Compaq is returning to the high-volume
segment of the PC Market.  We believe this will increase attention on the
low-end and may instigate a major round of price cuts from other vendors.


______________________
PRODUCT ANNOUNCEMENT:

The DeskPro 386N and 286N are low-profile desktop PCs available in diskless,
floppy, and hard drive configurations. The DeskPro 386N is a 80386SX, 16 MHz
unit priced at $2,299 in a diskless configuration, $2,399 with a floppy drive,
and $3,199 with a 40 MB hard drive. The DeskPro 286N is a 12 MHz 80286-based
system priced at $1,699 in a diskless configuration, $1,799 with a floppy
drive, and $2,599 with a 40 MB hard drive. The new systems are available
immediately and are priced $900 to $1000 lower than existing Compaq models with
the same CPUs.  Although no price changes or product discontinuations were
announced on other models at this time, we are expecting some soon as the new
machines ramp up.  Compaq also introduced a 14-inch monochrome VGA CRT at $299.
See the last page for detailed specifications and pricing.

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ANALYSIS

Compaq’s press release pushes hard to position the new systems as network nodes
for the SystemPro fileserver.  Although this fits well with the company’s
recent marketing directions toward high end and distributed computing, we have
a major question: Does Compaq really believe this?  If they do, then they are
fooling themselves and their customers since they offer no networking hardware,
cabling or tools. The only specific network-oriented features listed in
Compaq’s statement refer to keyboard locking and “local media access control.”
Without a Compaq-labeled LAN board either bundled or built-in on the
motherboard, the new machines are unlikely to be sold the way Compaq is
positioning them.

OR, could it be that Compaq is very cleverly disguising a 25% price cut and
re-entry into the low end of the PC market?  By publicly positioning the
products as terminals/diskless PCs, Compaq can quietly sell thousands of them
as full-fledged PCs without looking like it is foresaking any margins or
abandoning its premium image.  We think that this is the most likely scenario,
but let’s take a look at the viability of the new DeskPro N series (N for
Network?) from three different angles to find out why.


As SystemPro Terminals: Not likely

After Compaq's entry into the multi-user market last fall with the Systempro,
dealers and users asked Compaq for a low-cost workstation or terminal for
complete Compaq multi-user systems. Compaq's two new DeskPro Ns offer more
functionality and expandability than terminals and many diskless PCs.  Except
in the case of intensive data-entry uses, PCs which can run real MS-DOS
applications are usually worth the extra cost over plain terminals. As much as
Compaq would like to think of itself as competing with mainframes and minis, it
really is very much just a PC vendor and a rather incomplete one at that.  It
offers no LAN cards, cabling or tools; no printers, no filesharing or
translating utilities.  Whether SystemPros are used as multi-user systems with
terminals or as file servers with client PCs, Compaq just doesn’t cut it as a
single-source networking vendor.


As Diskless PCs: Treading on the bones of a bygone era

At $1,699 list price for a diskless 286N and $2,299 for a diskless 386N, the
new DeskPro N models are competitive with current diskless PCs from ATT, NCR
and Wyse. Although many terminal and third-tier clone firms have been into
diskless PCs for several years, Compaq's entry is significant since its
marketing clout might actually convince some users that diskless PCs are a real
option. BUT, so far diskless PCs have been miserable failures for all but a few
vendors.  The industry is strewn with the bones of terminal and PC vendors who
haved dared to go diskless.  Nearly all users want local processing power and
removable storage media; remote processing and storage are remnants of the
“Mainframe-o-saurus” era.  And Compaq is still missing the LAN pieces from the
above scenario.  (Besides, Compaq’s only charging $100 for the floppy!  Who’s
NOT going to buy it?)


As Low-End/High-Volume PCs: Compaq Returns to the Mainstream

Thus, in reality, the most common configurations of the new DeskPros will be
standalone floppy and hard disk versions. Although Compaq would not likely
admit this, this really marks Compaq’s re-entry into the low end PC market,
something they methodically avoided over the last few years.

The new DeskPro Ns will especially grab the attention of the burgeoning
cost-conscious buyers in the Small Business and Home markets. Compaq’s premium
pricing in the past has limited it’s appeal at the low-end, but with the new
CPUs’ aggressive pricing that should change quickly.  Buyers love the Compaq
name and reputation and now they can get it for just about the same street
prices as a Dell or AST.  At $900 to $1000 less than the older, 4-slot 286e and
386s, these machines should easily and quickly become Compaq’s biggest sellers
-- people aren’t going to pay a thousand dollars extra for just one slot.


________________________________________________________
EFFECT ON INDUSTRY PRICING OF 286 AND 386sx SYSTEMS:

For floppy and hard disk versions, the DeskPro Ns compare very well with big
name clones such as Tandy, Epson, AST and Dell.  This is a major move for
Compaq.  Basically, this amounts to a 25% price cut and positions Compaq as a
price leader for this class of PC. Surprisingly, the 386N is even more
aggressively pricesd than the 286N.  The second and third tier clones will
undoubtedly be adjusting their prices over the next few months.  Compaq,
whether it intended to or not, might have just kicked off an industry-wide
price cut of at least 15 to 25%.  See the Table below for comparison pricing
with Compaq’s older models and other vendors.

___________________
80386sx Competitors
(VGA onboard, no monitor; all 16 MHz)

Vendor                  RAM     HD Size     # Slots     SRP
--------------------------------------------------------------
Compaq Deskpro 386s     2M      40 M        3           $4,199
IBM 55sx                2M      30 M        3           $3,895
Tandy 4016SX            1M      40 M        6           $3,798
Epson Equity 386sx      1M      40 M        4           $3,698
Pack. Bell 386sx        1M      40 M        5           $3,595
NEC PowerMate SX+       1M      42 M        4           $3,499
** Compaq 386n**        1M      40 M        2 ********* $3,199 NEW!
AST Bravo 386sx         1M      40 M        3           $2,845
Leading Edge D3/SX      1M      30 M        6           $2,295


_________________
80286 Competitors
(VGA onboard, no monitor; 12 MHz unless otherwise noted)

Vendor                  RAM     HD Size     # Slots     SRP
--------------------------------------------------------------
Compaq 286e             1M      40 M        3           $3,599
Epson Equity IIe        1M      40 M        5           $3,098
IBM 50z (10 MHz)        1M      30 M        3           $2,895
NEC Power Mate 286+     1M      42 M        4           $2,799
** Compaq 286N **       1M      40 M        2 ********* $2,599 NEW!
IBM 30-286 (10 MHz)     1M      30 M        3           $2,595
AST Prem. 286 (10 MHz)  1M      40 M        2           $2,595
Tandy 2500XL            1M      40 M        3           $2,298
Pack. Bell PB686VGA     640K    40 M        4           $2,195
Leading Edge D2         512K    30 M        6           $2,195
Hyundai 286X            640K    40 M        4           $1,845


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WHY ARE THESE MACHINES IMPORTANT TO COMPAQ?

Compaq, like all PC vendors, anticipates a slowing U.S. PC market and is
looking for ways to reach new buyers and markets, while also supplying
replacement units to its installed base. The company may have topped out on the
high end & power user strategy and recognize that new growth must come from the
low-end.  The DeskPro 286N and 386N are not technological wonders, but rather
are practical low-end additions to Compaq's current product line which had been
shrinking at the low end for the last four years. Compaq also needs to ride
some of its server momentum in order to sell lower-end PCs, but more
importantly it needs low priced machines to replace aging 8088/86 and 80286
systems in its installed base.

Compaq realizes that more moderately priced products are now a market necessity
if it is to sustain growth, especially in the U.S.. Compaq has been losing
market share in the lower and middle price tiers of the U.S. market. Compaq
gave up on the 8086 market years ago and its share of the 80286 and 80386SX
market has declined recently as those markets matured and became more
price-driven. However, Compaq needs these markets to keep growing its bottom
line. Compaq has traditionally been very quick to adopt new processors early
with high-margin products but may have hit the limit with the SystemPro.
Compaq is doing very well in notebook PCs and is exploring the workstation and
distributed computing areas, but the mainstream desktop business MUST continue
to provide the biggest chunk of total revenue.

________________________________________
THE NEW “ROUGH AND READY” COMPAQ

Compaq’s corporate strategy and perhaps its own self image has been changing
lately.  The company appears to have gone through 3 stages.  In the first
stage, from 1982-87, Compaq seemed to simply concentrate on copying IBM, adding
a few features and building an enviable reputation as THE alternative to IBM.
In 1988 to mid-89, Compaq added high performance and fast time-to-market to the
corporate philosophy mix--premium image, positioning and pricing were the name
of the game. Sometime last year, Compaq decided it could crawl out from IBM’s
coattails and really be its own company.  With methodical planning and in rapid
succession, it introduced a new line of portables, a large fileserver, and new
bus and drive technologies.  The SystemPro was aggressively priced and the LTE
portables came in under the market-leader, Toshiba. Now, Compaq slashes 25% off
its low-end pricing.  The new Compaq looks like a very self-assured company
that is keeping all of its previous attributes yet is willing (perhaps
deceptively) to get right into the pricing fray with the rest of the industry.

FUTURE COMPAQ DIRECTIONS?

The timing of Compaq’s announcement is very curious.  Here they have the ideal
Windows 3 machines the day before the Windows 3 announcement, yet the systems
are being positioned as niche, diskless PCs.  Does Compaq really believe its
own positioning?  Will Compaq re-introduce them bundled with Windows at a later
date? (not too likely.)  Will it make a real stab at networking and announce
LAN hardware, software and tools?  Will it get in bed with Novell now that the
Lotus-Novell merger is off?  Stay tuned.  More info as it becomes available....


_________________________
APPLE IMPACT:

Compaq previously had among the highest prices, higher in some cases than even
IBM.  Most manufacturers set their prices to be 20 to 40% under IBM’s and
Compaq’s price points.  We believe the new Compaq machines are very
aggressively priced and, in turn, will cause other vendors to adjust their
pricing.  This will have substantial impact on average system prices and
margins throughout the industry.  Apple will be the least affected by Compaq’s
actions, but we will not be immune to this.

More importantly, Compaq’s recognition of and move back toward the low end of
the PC market along with IBM’s new emphasis on the Model 25 will focus even
greater industry and customer attention on the high-volume segment.  This will
set the stage for Apple’s intorductions later this year.

ONE POSSIBLE APPLE STRATEGY:

One thing we can do is to hope Compaq continues to position the machines as
primarily networked diskless PCs.  The more successful Compaq is in this, the
less impact they will have on the rest of the industry.  If people end up
ignoring the DeskPro Ns as desktop PCs and think of them only as terminals,
they will have much less effect.  Apple reps can play back Compaq’s diskless
positioning in bidding situations and emphasize Apple’s vast superiority in
networking.


_____________________________
APPENDIX:  SPECS & PRICING

                            DeskPro 386N         DeskPro 286N
                               _____________        ____________
Processor:                           80386SX         80286
Speed (MHz):                                16         12
Bus:                                  ISA (AT)         ISA (AT)
Optional coprocessor support:      80387SX/16         80287/8,80287/12
Standard RAM (Mb):                         1         1
Max motherboard RAM (Mb):                   8        1
Max total system RAM (Mb):                16         13
Expansion slots:              2 AT-slots,1 RAM        2 AT-slots,1 RAM
Video:                            16-bit VGA         16-bit VGA
Port(s):                 serial,parallel,mouse         serial,parallel,mouse
Floppy drive (Mb):              none or 1.44         none or 1.44
Hard drive (Mb):            none or 40 (29 ms)         none or 40 (29 ms)
Drive bays:                  2 (1/3 height)         2 (1/3 height)
Power supply (watts):           90 (110/220V)         90 (110/220V)
Dimensions (inches):           15 x 14.9 x 3.9          15 x 14.9 x 3.9
Warranty:                              1 year          1 year
PRICES
   diskless:                           $2,299        $1,699
   floppy                            $2,399          $1,799
   40 Mb drive                       $3,199          $2,599
Availability                         current          current

Options:
  Memory:                    expansion board using 1, 2 (386N only),
                                      and 3 Mb memory modules

  Fixed disk drives (Mb):    60 and 120 (l9ms), 20 and 40 (29ms)

  Floppy drives (Mb):        3.5" 1.44 and 5.25" 1.2

  Monitor:                  14" VGA Color ($699) or 14" Monochrome ($299)

  Modem:                      240O bps internal modem ($399)

  Software:                MS-DOS 4.0 ($150),
                             Compaq DOS 3.3 ($120), or
                             OS/2 1.2 ($340)



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