Issue 20 Contents Issue 20 Contents News


Some micros may die

THERE ARE conflicting reports about the imminent demise of the home computer market. The affairs of Grundy Business Systems, makers of the NewBrain, are in the hands of a receiver. Sales of the Dragon have been less than expected and predictions of profit have not been realised.

It looks a little like the situation in the U.S., where the price war at the cheap end of the market has meant that both Texas Instruments and Atari computer operations are said to be running at a loss and sales of Timex Sinclair machines have been sliding. The T/S problems led Sir Clive Sinclair to state in his chairman's report detailing the annual results of Sinclair Research that it has resulted in "much lower sales volume in money terms than we expected."

Against that must be set the news of increased profits for Sinclair Research. They rose by 65 percent to slightly more than £14 million on turnover which was doubled to £55.5 million, compared to last year. Prism Microproducts, mainly because of its distribution link with Sinclair, recorded turnover of £10 million in its first year. Managing director Bob Denton said the company is moving between £500,000 and £1 million worth of Sinclair goods each week.

In addition, there is the news of the deal for the sale and making of ZX-81s in China which opens vast new possibilities. The fact that the deal was agreed so quickly shows how keen the Chinese must be to take advantage of this new piece of technology and join the computer age. Other business people who have tried selling in that market must be envious of the speed with which the business was transacted.

At first sight it would appear that the situation on the other side of the Atlantic is being repeated here, with a few notable exceptions. On closer inspection, however, it is more likely that it exemplifies the differences between the two markets. In the States there is a definite split between the games consoles produced by makers such as Atari and Mattel and home computers like those of Commodore and Texas Instruments.

Sinclair entered that market with its British background of satisfying both areas just as there were moves in the U.S. to link them more closely. The ZX-81, and later the T/S 1000, however, were looked on mainly for their ability in the home business market and their attractiveness rested on their low price. When the competition responded by cutting prices, despite the likelihood of losing money, customers moved to machines with better capabilities.

The troubles in Britain seem to stem mainly from special problems exceptional to the companies involved. Grundy was taking-over a machine which was out-of-date by the time it was launched. What had been a new idea when it was conceived had been overtaken by the Sinclair machines, while its own future was being affected by delays. There is a chance that the NewBrain will survive but the market for which it is intended will have to be re-appraised.

Dragon difficulties appear to be the opposite of those suffered by Sinclair. Instead of under-estimating the market, the company was too optimistic of prospects and budgeted accordingly. It is also likely to be under pressure from its parent, Mettoy the toy maker, which has been looking to Dragon to ensure its future. Last year it had to sell part of Dragon for new finance to enable the company to take advantage of growth prospects in the computer market but Dragon is still its main source of income.

The lesson from both the problem companies seems to be that although there are great opportunities in the home computer market, it is not immune to the normal constraints of business. No-one, not even Sinclair Research, can afford to ignore them, although Sinclair is probably in a better position than most. As it was first into the market, it has had a little more time than others to put itself into good shape, a process which has been proceeding since the company was started four years ago.

That kind of extra time does not exist for the companies which have since started selling home computers. Even the production of a successful machine is no guarantee of business success. Dragon has regularly been one of the top-sellers but that did not prevent it running into difficulties.

As in all businesses, the route to success is to predict demand accurately and adjust supply to meet it. It would appear that demand for home computers is not so easy to predict as some would have believed. With a potential of all the homes in Britain and the sales having reached only about 10 percent of them, it would have been logical to expect that any machines with a reasonable specification and price would sell as fast as they were produced.

Dragon found that was not so. The conclusion to be drawn is that the potential market is not that big, at least not until the price falls to that of a large calculator.

Sinclair experience, however, is that it can sell all its Spectrums, yet the ZX-81, despite its low price, is falling from favour. That can be rationalised by saying that Sinclair is in a class of its own and has found its niche in the market for a relatively low-cost machine with relatively high specifications. The BBC Model B machine is in a similar situation but the rest are chasing what is left.

With more and more machines seemingly arriving every week, the chasing will become ever more frantic until the manufacturers which fail to get it right have to call it a day. It is unlikely that will happen before Christmas, given the pre-festive boom which can be expected. By this time next year, however, following the fall in sales at the beginning of the year, it could be that many of the less familiar names will no longer be with us.

All of this, of course, would be proved wrong if some company offered a 48K machine with colour, sound and expansion capabilities for less than £10, but is that likely?

Issue 20 Contents Issue 20 Contents News

Sinclair User
November 1983