Kicking Junior Out of the Family

For almost a year before it was introduced in November 1983, IBM's PCjr was the subject of anxious speculation and the cause of many a sleepless night for computer-company executives. If Big Blue entered the home computer market, many asked, could firms like Apple and Commodore survive? Texas Instruments dropped out of the competition in October 1983, before it had a chance to find out. IBM played a cool hand: right up to the moment that the PCjr was unveiled, the company denied that such a product existed. Now some IBM executives may wish those denials had been true. The corporation announced last week that it is stopping production of the PCjr. The withdrawal of the computer giant from the home market marks a rare and embarrassing chapter of failure in IBM's long record of industry dominance.

In the wake of IBM's decision, questions arose once again about the future of the highly competitive home-computer field. The PCjr is only the latest machine headed for a home-computer graveyard crowded with models from such companies as Coleco, Timex and Mattel. The industry has suffered from fierce price competition, rapid product obsolescence and shifting consumer tastes.

The demand for home computers has been brisk but below expectations. Professionals use the machines to catch up with work at home, and many families enjoy playing computer games. But the range of other uses for computers in the home is still limited. Most consumers seem to think that a pencil remains the tool of choice for balancing the checkbook and updating the grocery list. Home-computer sales, which surged from 390,000 machines in 1981 to 4.8 million in 1983, declined by 6%, to 4.5 million, last year. Says John Pope of IBM's personal-computer unit: "Our expectations were overly optimistic. The home market did not expand to the degree that IBM, and others, thought it would."

The PCjr was troubled from the start, despite an estimated $40 million marketing effort that was characteristic of IBM's full-court-press style. Though the computer was announced in November 1983, sparking consumer demand long before it hit the stores, IBM missed the all important Christmas season because of production delays. When PCjr did arrive in January 1984, many consumers were disappointed. For one thing, its keyboard was difficult to use. Even worse, its memory was limited, an unpardonable offense in a / computer. It did not satisfy professionals looking for sophisticated machines, and its price range of $699 to $1,269 for various models (without accessories like a display monitor) was too steep for casual users. IBM responded to widespread consumer complaints last summer by reducing prices and improving the memory on new models and offering a better keyboard without charge to people who had already bought PCjrs.

During the Christmas season, dealers tried to spur demand by slashing prices further. Some stores, for example, offered a PCjr with color monitor for $795 instead of the usual $1,400. Sales finally started to take off. Of the estimated 240,000 PCjrs sold in 1984, about 200,000 were bought in the fourth quarter. But selling the PCjr at cut-rate prices was not especially profitable, and when dealers dropped the discounts in January, the PCjr, in the industry phrase, "stuck to the shelves" in stores.