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 Systempro 486

Text File | 1990-06-24 | 7.1 KB | 179 lines | [TEXT/GEOL]

Confidential / Need to Know

Apple Competitive Analysis


COMPAQ DEBUTS NEW HIGH-END PCs AT LOWER PRICES


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SUMMARY

Compaq introduced the promised 486 version of its Systempro server July 23, and
also rolled out a new 33 MHz 486 desktop machine and an EISA version of its 33
MHz 386 Deskpro.  Pricing on the new systems is about 5% to 15% lower than
previous equivalent models, depending on configuration.  Prices on one existing
machine were also decreased, and two older models were dropped.

The announcements are part of Compaq's long-term strategy to position itself as
a network systems vendor.  The strategy is having little sales impact so far,
but Compaq claims the market will take several years to mature.  In the
meantime, the price cuts increase Compaq's competitiveness -- its 33 MHz 386
machine is now less expensive than the Macintosh IIfx, and Compaq's 25 MHz 486
is now $500 less than the equivalent IBM machine.


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THE MACHINES

• Systempro 486
    --486 processor at 33 MHz
    --8 M RAM
    --512k cache
Pricing:
    240 M disk:  $20,999
    420 M disk:  $23,999
    840 M disk:  $29,999

Comments:
    A 486 version of the Systempro was promised when Compaq unveiled the
machine last year.  The 486 version is a few months late, but no one noticed.
Since the Systempro can take two processor boards, existing owners can add a
486 board to their existing systems for $6,999.  Or they can trade in their 386
processor and get a 486 board for $4,999.  We think this is the first trade-in
upgrade ever offered by Compaq.


• Deskpro 486/33L
    --486 processor at 33 MHz
    --4 M RAM
Pricing:
    120 M disk:  $13,999
    320 M disk:  $16,499
    650 M disk:  $19,499

Comments:
    Compaq claims this machine is up to 50% faster than IBM's 486 machine,
which runs at 25 MHz.


• Deskpro 386/33L
    --386 processor at 33 MHz.
    --4 M RAM
Pricing:
    120 M disk:  $9,999
    320 M disk:  $12,499
    650 M disk:  $15,499

Comments:
    This machine replaces the Deskpro 386/33, which was discontinued.  The
biggest change is that the new machine has EISA slots instead of AT-bus.


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MARKETING ANALYSIS

The servers.

Compaq continues to hammer away at the networking theme.  Its press releases
positioned the new machines for use in networks that would also feature the
recently-announced 286N and 386N desktop machines.  This is a switch from the
company's original Systempro positioning, which put it head to head against
minicomputers and didn't say much about traditional PC servers.

The Systempro is selling slowly (about 1,000 units a month or less), so it
isn't a major competitive issue today.  Although Apple doesn't offer a
dedicated server that could counter the Systempro directly, Apple does have
some answers to Compaq's broader networked systems sell.  Apple makes
connectivity software; Compaq doesn't.  This gives Apple the ability to deliver
personal computer systems that can connect to other systems in ways Compaq
can't match.  In a discussion with a customer, this should lead into a general
discussion of the connectivity features of Macintosh.

The important distinction to make is the difference between a hardware vendor
(Compaq) and a personal computer system vendor (Apple).


On the desktop.

The new Deskpro models are 5% to 15% cheaper than Compaq's previous equivalent
models.  The biggest price cuts came in machines with very large hard disks.

Compaq's high-end prices are now slightly below IBM's.  A Deskpro 486/25 with a
120 M hard disk costs $12,499 (down from $13,999).  The IBM PS/2 70-486, which
also runs at 25 MHz, costs $12,999.

Price comparisons to Apple are more difficult, since the Macintosh IIfx runs at
40 MHz and there are no 40 MHz Intel-based PCs.  The IIfx is more expensive
than Compaq's 33 MHz 386 machines, but cheaper than the 486-based machines.
For example, the new Deskpro 386/33L (33 MHz 386) costs $9,999 with a 120 M
hard disk.  A Macintosh IIfx (40 MHz 68030) with a 160 M hard disk costs
$10,969 (and the Compaq has built-in video, whereas the Macintosh needs a video
board at extra cost).


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TECHNICAL ANALYSIS

Software that takes advantage of the Systempro's advanced features (disk
management, multiprocessing) has been very slow to appear.  Without special
software, the machine is just a very fast, very large, very expensive PC.  The
new announcements don't change that.

A Systempro version of Unix, that takes advantage of the machine's multiple
processors, was shipped by SCO in June.  We expect other software to appear,
but only slowly.

On the desktop, the new Deskpros are, as usual, evolutionary improvements over
the previous generation.  They offer more RAM expansion (100 M vs. 16 M
maximum), two serial ports (vs. one on the older machines), and an architecture
that allows a 386/33 to be turned into a 486/33 with a motherboard swap.  This
will allow dealers to carry both machines with fewer boxes.  Since high end
machines sell in low volumes, this will make life easier for dealers.


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IMPLICATIONS

• Does Compaq know what it's doing?

Although Compaq officials admit to a little disappointment over the sales of
the Systempro, they claim they expected the market to grow slowly, and are
positioning themselves for rapid growth later in the 1990s.  For that
prediction to come true, Compaq will have to overcome a couple of big
obstacles:
    --The dealer channel has a lot of trouble selling a $20,000 box, let alone
providing service and support for it.  Think about it -- if you were the owner
of a medium-sized business, would you trust your central files to a machine
installed and maintained by Computerland?
    --Software.  Compaq may be in the old installed base trap:  Without
specialized software, the company can't sell a lot of units.  But without high
unit sales, the installed base is not big enough to attract software
developers.  As NeXT has proved, you can't sell a specialized machine, no
matter how innovative it is, without software that takes advantage of its
special features.

Beyond that, Compaq must demonstrate that its approach to networking will drive
up sales, which are sluggish, especially in the US.  We don't see an upturn in
the near future, but we're reluctant to count the company out in the long term.
If Compaq gets the client-server software it needs, on either OS/2 or Unix, its
lead in server hardware development and market positioning will help it
penetrate new accounts with the Systempro.  Once those accounts turn to Compaq
for the server, they will also be more likely to buy Compaq PCs for their
desktops.


• Goodbye 286.

Compaq discontinued the Deskpro 286e.  This was expected, since the new 286n
had undercut it in price substantially.  But this also marks another step away
from the 286 processor, which is now available from Compaq only in a two-slot
machine positioned as a network terminal replacement.  As we expected, the
386sx chip is taking over the position (and price points) of the 286, which in
turn is becoming the standard processor for low-end PCs.


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