ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Tuesday, November 12, 1996 TAG: 9611120102
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
DATELINE: NEW YORK
SOURCE: Associated Press
CALLED "NETWORK COMPUTERS," they're intended for the workplace. They're cheaper, easier to maintain and less versatile than their personal computer counterparts.
If IBM Corp. has its way, millions of U.S. workers could be using stripped-down, cheaper versions of today's personal computers by the next decade.
Boosting its commitment to the so-called ``network computers,'' IBM on Monday said it had created a new division to sell machines that are dependent on corporate computer networks for performing functions.
The unit will coordinate all IBM's efforts to develop, make and promote these computing devices, which are expected to go on sale early next year at less than $700 apiece, not including a monitor. While IBM introduced a version of the new product in September, its reorganization signaled the effort has top priority at the world's largest computer company.
The network computers are a centerpiece of IBM's new strategy to reap strong profits from the combination of Internet and traditional mainframe computer technologies.
``This is a fairly big deal,'' said Greg Blatnik, a computer industry analyst at Zona Research Inc. ``It goes well beyond just producing a cheap piece of desktop hardware.''
IBM Chairman and Chief Executive Louis Gerstner, in an internal company announcement, described customer demand as ``extremely high'' for the networked computers and said IBM, the No.2 maker of PCs, wants to be a leader in both.
IBM's initiative is the latest behind the slimmed-down office PC. Sun Microsystems Inc., Microsoft Corp. and other high-tech companies all are promoting versions of computers cheaper to buy and maintain than $2,000 to $3,000 personal computers. Software for the machines is downloaded via the Internet or corporate networks, instead of requiring costly installation on each machine.
A Gartner Group study found the typical company spends $10,000 to $12,500 a year to maintain each of its PCs, including time spent by technical staff to install software upgrades and company help for PC problems.
But the computers also reduce what employees can do. While workers can browse the Internet, for example, most would not be able to install their own software on their machines.
Some business technology managers have greeted the new offerings with skepticism. An immediate concern is a lack of existing software that can be downloaded from a central computer to the networked devices.
But makers of the computers are bullish about future sales.
Internal IBM forecasts call for network computers to capture more than 20 percent of the corporate PC market by 2000 - up from 1 percent now.
That is much more optimistic than many analysts' forecasts. International Data Corp., based in Framingham, Mass., expects annual U.S. sales of 2.5 million network computers in 2000, or about 3 percent of the 80 million corporate PCs expected to be sold that year.
``Today, it's not necessarily a favorable environment for these devices,'' said Dan Kusnetzky, a research director at International Data.
But ``we're expecting it to build up over the next three to four years,'' he said.
Despite concerns that the new stripped-down computers will cannibalize sales of personal computers, some industry analysts say the trend can only help margins at IBM and other computer companies.
That is because businesses will need to buy more of the high-margin computers, called ``servers,'' that feed information to network machines. IBM dominates in these mainframes or powerful corporate computers that store and route information to other computers.
``It's much better for margins,'' said Kimball Brown, a computer industry analyst with DataQuest. ``The whole point is it will sell more servers.''
LENGTH: Medium: 75 linesby CNB