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

Text File | 1990-06-24 | 17KB | 304 lines

Confidential / Need to Know

Apple Competitive Analysis ROMlink -- Contact: Ken Lim

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NeXT's Next Step:  General Purpose “InterPersonal Computing”

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EXECUTIVE SUMMARY

On September 18, NeXT announced a new family of PCs/workstations based on its
two-year old NeXT computer.  All three machines are based on a 25 MHz 68040,
the Motorola 56001 DSP and Next's Integrated Channel Processor chip.  Four of
the NeXT system’s biggest problems have been solved - color, floppy disk,
higher performance and a standard hard disk instead of optical drive are all
now available.

The new machines are priced at $5000 to $8000 for full, complete systems.
Education prices are about 40% lower.  The new systems appear to be very
powerful and are attractively designed and priced.  On paper, NeXT's hardware
is clearly THE price/ performance leader at this point in time.  It is well
ahead of Sun’s SLC and IPC.

NeXT has also begun to attract the attention of software developers.  Several
new and very interesting applications were announced including some from big
names like Ashton-Tate, Lotus.  With some heavy promotion and a few more
breakthrough applications, NeXT could re-establish itself as a contender in the
PC industry.  However, we believe that NeXT will find it impossible to displace
Sun as the preferred UNIX workstation vendor and very difficult to achieve more
than 2% market share in PCs.  We think NeXT will be a moderately successful,
minor player in niches like multimedia, high-end DTP, technical documentation
and financial analysis.  It is also likely to become the preferred development
platform.  Industry-wise, NeXT will have broad technological impact but we
expect little initial unit or revenue impact.


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PRODUCT & PRICING INFORMATION

All three machines are based on a 25 MHz 68040, the Motorola 56001 DSP and
Next's Integrated Channel Processor (ICP) chip.   NeXT rates all machines at 15
MIPS (Motorola’s claim for the 68040).  All systems also include both thin and
twisted-pair EtherNet with TCP/IP support, two RS-422 serial ports, a SCSI-2
port, serial laser printer port, DSP port and CRT connector which includes CRT
power, video, keyboard, mouse and audio in and out. The NeXTstations are
low-profile boxes with no expansion slots.  The NeXTcube has the same 12-inch
cubic case as the original machine.  Base configurations and list prices areas
follows:

•  NeXTstation - 8 MB RAM, 2.88 MB floppy drive, 105 MB hard disk, 17" mono,
    and software bundle at $4995.  Available November 1990.

•  NeXTstation Color - 12 MB RAM, 1.5 MB video RAM, 2.88 MB floppy drive, 105
    MB hard disk, 16" color CRT, and software bundle at $7995.  Color depth is
    12-bit plus 4 bits of transparency control, yielding 4096 colors each at 16
    levels.  Available Q1 91.

•  NeXTcube - 8 MB RAM, 2.88 MB floppy drive, 105 MB hard disk, 17" mono CRT,
    and software bundle at $7995.  Available November 1990.
   (NeXTservers are monochrome NeXTcubes configured with 32 to 64 MB of RAM and
    660 MB to 2.8 GB of hard disk storage.  NeXTservers priced from
    approximately $18,000 to $35,000.  Available Q1 91.)

Color Graphics Processor:
NeXTdimension  Board - this is a $3995 video board with 33 MHz Intel i860 RISC
chip, C-cube Image Compression/Decompression chip, 8 MB RAM and 4 MB video RAM.
Features include NTSC and S-video in and out (PAL optional), RGB EGA output,
genlocking, support for Teletext, VITC and Closed-Captioning.  Resolution is
1120x832 pixels with 32-bit color per pixel (with 8-bit alpha channel).
NeXTdimension is a very high-powered image processing board with realtime JPEG
video compression that blows away IBM/Intel's DVI system.  Think of this as an
8•24 GC card, a RasterOps 364 card, a Mass Micro ColorSpace II card, an Aaps
Digivideo II card, with Avid and ImageStudio all combined on one board. It
plugs into the Nextbus in the NextCube (not NeXTstations).  Available Q1 91.

Storage Options:
The 2.88 MB floppy drive and 105 MB hard disk are standard on the base models.
Other storage devices include:
   •   A 340 MB drive replaces the old 330 MB drive at $2995.
   •   The 660 MB drive was reduced from $5795 to $3995.  NeXTcube only.
   •   A new 1.4 GB hard disk comes in at $5995.  NeXTcube only.
   •   The 256 MB read/write optical disk is now optional at $2995. (blank
        disks are $149.)  NeXTcube only.
   •   A CD-ROM drive has been added at $895.  NeXTcube only.

Printer:
The NeXT 400 DPI Laser printer is unchanged except for a drastic price
reduction from $3495 to $1795.

Bundled Software:
The following applications and tools are all pre-installed on the hard disk.

   •   Mail - The NeXT E-mail system has been greatly enhanced.  In addition to
       the text and voicemail capabilities previously shown, text can now be
       fully formatted.  Files, folders and graphics can be inserted by
       directly dragging icons from the desktop or documents and dropping into
       the mail message.  Spell checking has also been added.
   •   Digital Webster - the dictionary and thesaurus are the same with the
       pictures stripped out to save space (since its on hard disk instead of
       optical now; the complete version is still availble as an option.)
   •   Digital Quotations - same as before, Oxford Dictionary of Quotations
   •   Digital Librarian - searching and indexing tool, "The Complete Works
       of Shakespeare" is now optional, again to save space
   •   WriteNow - WYSIWYG word processor, no change
   •   TeX - powerful, programmable typesetting environment for technical
       publishing, includes macros, font design and handles PostScript
       graphics. New to bundle.
   •   Interface Builder - object-oriented interface prototyping tool, no
       change
   •   AppInspector - New graphical debugging tool and runtime tracer
   •   Edit - a mouse-based UNIX text editor
   •   Object Kits - reusable objects and code for use with Interface  Builder.
        Includes objects for interface, music and sound programming and network
        administration.
   •   Basic Development Tools - includes Objective Compiler, GNU source-
       level debugger, GNU Emac editor and full technical documentation online.
   •   GNU-56 and Macro Cross Assembler (ASM56000) - tools for programming the
       56001 DSP chip.
   •   Lotus Improv will be bundled free with every machine purchased before
       the end of 1990.


Third-Party Software and Peripherals:
The new fall 1990 NeXT Software and Peripherals Directory lists:
   •   18 Development tools and languages including FORTRAN, COBOL, C,  Modula
            and Pascal
   •   4 "Medical" programs including "Gray's Anatomy - digital version"
   •   7 "Multimedia and HyperText" programs
   •   5 "Math and Statistics" programs including Mathematica
   •   6 "Databases" including INGRES, ORACLE and SYBASE SQL Server
   •   11 "Connectivity and Communications" products including MicroPhone II,
       MacLinkPlus, SoftPC 2.0, and three Gator products from Cayman systems.
   •   14 "Publishing and Graphics" programs including Adobe Illustrator,
       FrameMaker 2.0, TeX, WordPerfect and several font and clip-art products
   •   13 "Business" programs including Lotus Improv, Ashton-Tate PowerStep,
        Informix WingZ.  Four are spreadsheets, four others are calendar/
        rolodex-type products.
   •   26 "Peripherals" including 5 scanners, 3 floppy disk drives, 2 fax
        boards, 4 audio digitizers and 2 video digitizers.
Most of the products listed are available now or will ship in November; about a
quarter of them are scheduled for Q1 91.

Breakthrough Software:
We believe that at least two of the new NeXT-specific programs, Lotus Improv
and Omen III, are “killer apps” that are good enough to actually drive hardware
sales.  Improv is a very flexible, highly object-oriented, multidimensional
spreadsheet with multiple views, linkages and excellent presentation tools.
Omen III is a realtime financial analysis tool for Wall Street-type traders.
There may be a few others that will be unveiled soon.

Service and Support:
There is NO mention of this in any public NeXT documents.

Discount Structure and Manufacturing Margins:
All prices mentioned above are List Prices.  Educational discounts will be in
the range of 35 to 40%.  The biggest Higher Ed discount on the $4995 monochrome
NeXTstation gives a price of $2995.  BusinessLand's dealer costs are quite
odd--NeXT offers 15 points on the NeXTcube, 24.5 points on the NeXTstation and
a whopping 42 points on the color version.  As for NeXT's own margins, we
estimate they are in the range of 20 to 25%.  NeXT is clearly trying to buy
market share and establish a good installed base with its lowball pricing.


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NEXT DIRECTIONS:  Group and InterPersonal Computing

NeXT is greatly broadening its overall market directions.  Instead of the
original positioning as the higher ed "Scholars' Workstation" the new NeXT
systems are officially aimed at "group-level interpersonal computing."
Emphasis is on extending group productivity via multimedia, E-mail and access
to shared information.

Specific niche markets where NeXT is strong via third-party solutions are image
processing; music and audio processing; graphics design, layout and production;
and integrated information systems (realtime spreadsheets/ databases) systems
for engineering and financial analysis.

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TECHNICAL ANALYSIS

NeXT is clearly the new price performance leader.  The 25 MHz 68040, the DSP
and the ICP provide very high performance.  (NeXT has dropped the ASIC for the
optical drive since it is now optional and can be handled by the ICP.)  NeXT's
use Motorola's 15 MIPS figure for the '040 may be actually understating overall
system performance since it doesn’t account for the ICP and the DSP chips.  The
ICP chip handles 9 independent/simultaneous DMA channels for I/O at 40
MB/second.  Sun’s highly touted IPC costs twice as much as a NeXTstation with
the same MIPS rating and a somewhat slower architecture with NO coprocessors.

Performance should also be greatly improved by the 17 ms access time of the
standard hard disk compared to the slower optical drive previously used.  The
new 2.88 MB floppy drives are also faster than standard drives.

On the system software side, release 2.0 of NeXTStep appears to be somewhat
faster and more robust than 1.0, but it is too early to call it a success.
Some of the new features include:
   •   more direct manipulation and object-orientedness, e.g. icons in windows
        or on the desktop can be dragged and dropped directly into
        documents; fewer dialog boxes, less modal than Macintosh
   •   built-in system-wide fax facilities for apps (all apps can print to and
        open faxes, but fax software/hardware for the DSP is still required)
   •   voice as data-type in all apps (System-wide access to “LipService”)
   •   database objects can be embedded in any app to call in data
   •   Improved Browser with a “Shelf” for aliases (pointers to frequently used
        files and programs)
   •   “Find” function now does content searching (like “OnLocation”)

We will be evaluating the products when they are available, so stay tuned.

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MARKETING/INDUSTRY ANALYSIS

Developer and user reactions to the announcement were highly favorable;
analyst and press reactions were more guarded.  Analysts have been disappointed
by NeXT's performance over the last two years. We believe that this is a MAKE
OR BREAK situation for NeXT.  For NeXT to be a viable PC supplier it must
strongly execute its strategies in the next twelve months.

Four things are crucial to NeXT's survival in the marketplace, regardless of
their technology and products:

   •  First, they must meet their promised delivery dates or customers will
lose faith and the excitement that was generated at the announcement will be
wasted.  NeXT is at the mercy of Motorola and may have been too aggressive on
its shipment dates.

   •  Secondly, applications are still crucial.  Although NeXT has picked up a
lot of developer interest and Lotus Improv and Omen III promise to be "killer"
applications, NeXT still needs several more general business productivity
applications from big name suppliers and a lot more vertical apps.  Many
crucial programs are still missing from the NeXT software catalog such as
accounting, general ledger, inventory, simple drawing and painting, etc.  We
believe NeXT also needs a killer database frontend and a multimedia authoring
tool.  And, of course, a couple of whiz-bang games wouldn't hurt either.

   •  Third, NeXT's current distribution channels of its Higher Education
direct sales force and BusinessLand are not enough if it intends to be a
serious broad based supplier.  VARs will be crucial in establishing NeXT in new
niches and creating NeXT's service and support infrastructure.

 •  Finally, NeXT also needs to establish an infrastructure to support its
products.  These would include a user group, a developer organization like
APDA, a strong consortium like AUC and perhaps a "NeXTWorld" conference.

Even if NeXT accomplishes these four things over the next year, it must still
contend with Sun Microsystems.  NeXT is more in competition with SPARC
workstations than they are with general DOS or Macintosh PCs.  Both are trying
very hard to become general-purpose, broad-based alternatives to the DOS and
Mac worlds.  We believe that NeXT is clearly much more PC-like and has a better
"look and feel" than Sun.   But NeXT will have a very difficult time overcoming
Sun's tremendous market lead and installed base.  NeXT does have the advantage
that they can sell into the UNIX workstation and the PC markets, but we think
that right now, NeXT is to Sun as Macintosh was to IBM in 1984——a tiny, but
threatening alternative.

A final note on NeXT’s marketing:  some of us believe that NeXT will find it
impossible to gain market share with the unfocused marketing message of
“increasing group productivity via interpersonal computing.”  NeXT may need to
pick specific market/application niches and market heavily toward them in order
to establish a beachhead for attacking the broader general-purpose markets.


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Higher Education Market Impacts

NeXT is moving away from it's early emphasis on Higher Education in attempt to
place more resources on wooing the business market.  Although many in Higher
Education remain interested in 'NeXT- the Toy', we haven't seen movement in the
academia to 'NeXT- the Tool' that will be needed for mainstream acceptance in
this market.  Non-aggressive marketing, non-existant support, and a perceived
reduction in interest in this market, leaves the academic community wondering.
With new offerings and aggressive seeding in this price performance range
including the IBM RS6000 series and new SUN systems, the CS and Engineering
Higher Ed. market is going to get progressively more difficult to break into,
even at the price-point of these new machines.  These new CPUs, however, cater
to the general academic population more than either SUN or IBM, and it is there
that Apple goes head to head with NeXT.

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IMPLICATIONS

NeXT has had and will continue to have a significant impact on the industry in
terms of user interface, developer tools, and new technologies such as digital
signal processing and Display Postscript.  However, its sales impact has been
miniscule.  IDC estimates NeXT has sold just 7,000 units over the past eighteen
months (we believe this might even be a little high).  At yesterday's
announcement, Steve Jobs claims to have 15,000 orders in hand.  We think these
are likely to be just commitments, not real hard contracts.  Even if this is
true, this is a drop in the bucket compared to PCs and still small even
compared to most workstation vendors.

In the rare cases where Apple reps may run into NeXT, we believe that virtually
all the Macintosh advantages still hold true (but to a lesser extent.)  Mac’s
advantages over workstations (more and cheaper software and peripherals) hold
true as well.  But Apple's real advantage over NeXT will be in our excellent
software base, safety, service, and support (just like what IBM reps say about
IBM).  In this case, WE are the established vendor and THEY are the
unpredictable, flaky start up.

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We welcome your feedback.  Please link us at COMPETITION.