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Dell Computer is changing its tune about the costly middleman, announcing that the company will offer its personal computer to dealers in the U.S. with additional incentives of dealers financing and Web access to its products and services. The unbranded desktops, or white-box business is about 30% share of the U.S. personal computer market. Hewlett-Packard, Dell and IBM have about half of the sales share in the world. Dell believes that the white-box PCs sold by dealers are maybe a $3 billion market, yearly. The company will still make PCs to order.

As Apple Computer continues to fuel its comeback with well-designed new products, many Windows users are considering whether to buy them. There are several considerations that influence the decision: Mac is stronger for design, graphics processing, and virus safety, while Windows in better for price selection, more software and games, and faster overall processsing. The bottom line in favor of Windows is that most corporate office networks use it.

Computer manufacturers and retailers apparently are adding numerous features to their PCs to differentiate them from the vast majority of offerings that operate on Intel microprocessors and Microsoft operating software. By contrast, many of the computers available for the 1998 holiday season have shown unprecedented improvement in speed, cost and user-friendliness. The new strategy is confusing shoppers, may of whom cannot distinguish newer options such as modems and cache size. Another industry sales tactic consists of customizing a user's needs, which makes it more difficult for consumers to compare products from other stores. Customers also can experience frustration when dealing with computer stores' sales staff. Some representatives may recommend a product to receive compensation from manufacturers, while other temporary seasonal helpers may lack the basic knowledge to help novices.

Dell Computer, already hugely successful at direct selling, is emerging as an industry leader in electronic commerce on the Internet. Dell says its 'Web-generated' sales already amount to $10 million a day, although only about 30% of the sales are actually completed using the Internet. The rest typically involve browsing on line but ordering by telephone or fax. Dell is placing heavy emphasis on its Internet strategy. For example, the company's Web site is configured to permit customers to track orders and retrieve service information. Dell's competitors on the Net include Compaq, Gateway and IBM. Gateway and IBM are hosting private areas for large customers on their sites.

Though they might not like it, Compaq computer dealers and distributors understand the move the company is making toward selling directly to small- and medium-sized businesses in order to compete more effectively with Dell. Compaq Computers is the leader today because of those very dealers and now will use Internet and telephone sales to try to slow down Dell which just moved into 1st place in the 3rd quarter of 1998. Compaq is offering dealer incentives to get them to refer their customers to the company. Besides selling direct, Compaq is promising 5-day delivery on orders to beat Dell by 2 days.

Apple is unveiling a $100 million advertising campaign to promote its $1,299 iMac consumer PC. The company's largest-ever ad effort will focus on Steve Jobs's bid to position the iMac as the new Macintosh. Ads will debut on TV, print and radio starting Aug 15-16, 1998, and run throughout the remainder of 1998. Billboards, meanwhile, also will appear in 10 major US cities. Online correspondence among Mac enthusiasts has raised interest in the speedy entry-level iMac, which contains a PowerPC G3 microprocessor. Jobs surprised the computer industry by announcing the iMac in May 1998. The iMac lacks some of Macintosh's revolutionary qualities, and other shortcomings may deter potential buyers. Problems include the absence of a disk drive and incompatibility with many existing Apple printers.

According to a survey by ZD Market Intelligence, retail sales of PCs in May 1998 grew only by 0.7% compared with the yearly increase of 35% for the preceding four-month period. The slowdown has resulted in an 18.7% drop in revenue for computer manufacturers, who are already in a tight profit squeeze caused by the introduction of sub-$1000 PCs. The slump is attributed to consumers waiting for the introduction of Microsoft's Windows 98 OS. Early indications are that Windows 98 sales are strong. US stores sold approximately 277,000 copies of the software during the first 24 hours after the OS went on sale on Jun 25, 1998. Analysts expect PC sales to rebound in Jul 1998 when vendors are expected to release their new models with Windows 98 OS to capture the back-to-school market.

Compaq has won exclusive rights to supply PCs to Tandy's Radio Shack chain. Compaq, which prevailed over incumbent supplier IBM, will increase domestic distribution of its Presario consumer PCs from 6,000 stores to about 13,000 stores. Another condition of the three-year deal calls for Compaq and Tandy to share marketing costs expected to reach the tens of millions of dollars. Executives said Compaq differentiated itself by offering more money for promotion and preparing special 'store within a store' display areas for Radio Shack stores. Radio Shack also gained the lucrative right to offer service on Compaq's commercial PCs, although they will not be available through its stores. Radio Shack derives about 12% of its $3.2 billion in annual sales from computers and related products. A Radio Shack executive said the 6,800-store chain will begin offering Compaqs in Apr 1998.

Apple's announcement on Jan 3, 1997, that holiday sales of its Performa line of home computers are lower than expected, prompts doubts regarding the viability of the company's turnaround strategy. Sales of Performa products in the home market, which account for 15% to 20% of Apple's revenue, have declined despite Apple's price reductions and mass-marketing campaigns. Apple plans to report a 10% decrease in sales for its fiscal 1st qtr ended Dec 27, 1996, and it also expects to announce a $100 to $150 million operating loss for the same period. Apple is predicting a 34% decline in 1st qtr revenue from the same period last year. Apple's perpetual year-to-year sales declines in four consecutive quarters reveal its inability to keep up with the industry's overall 15% quarterly growth. Apple's announcement is simultaneous with its MacWorld trade show in San Francisco, where Apple CEO, Gilbert F. Amelio, will detail Apple's plans to enhance its Macintosh operating system with its newly acquired Next Software products.

Experienced microcomputer users who know what they are looking for are increasingly turning to mail-order services to get products quickly and at lower prices. First-time computer buyers tend to require the advice of sales personnel and prefer the opportunity to actually try out a system before they buy it. Experienced buyers are often willing to pay higher prices for more advanced systems than computer novices. These systems tend to have higher profit margins, which benefit the mail-order vendor. Repeat buyers accounted for 57 percent of the new computers purchased in 1995. Problems associated with purchasing equipment by mail include long delays in obtaining repairs or returning products. Shipping charges are added to the purchase price and some states require sales taxes.

Compaq is targeting the home computer market with the introduction of five new lines of products ranging from laptops to complete multimedia systems. The products, priced from $1,699 to $3,999, will be available before the 1996 school season begins. Some of the products are expensive for a market that has been viewed as a low-price segment, but Compaq believes some customers are looking for such extra features as speakers and videophones. The company expects the largest sales to come from the low-end products priced under $2,000. Research shows experienced customers purchasing their second or third system are more likely to want more options. The Presario 8000 multimedia system's features include 3D graphics and high-quality speakers. The Presario 3000 series is 40 percent smaller than most desktop PCs and is easy to move between locations, although it weighs 26 pounds. Compaq has upgraded its Presario 4000 home system and the Presario 6000 office model with faster processors and larger disk drives.

Numerous Japanese computer manufacturers, including Sony, Hitachi PC, Fujitsu PC and NEC, are preparing to enter or expand their roles in the US market as a means of remaining competitive in the consumer electronics field. Consumers are the most likely beneficiaries of the increased competition, as prices continue to decline in an already depressed US computer market. Industry executives fear potential product dumping by the aggressive Japanese firms, in the event that they are unable to sell the great majority of the computers they manufacture. Japanese firms such as Matsushita Electric Industrial and NEC have attempted and failed to penetrate the US market in the past, but company officials suggest that many US computer vendors are currently especially vulnerable against increased competition.

HP is releasing a line of NetServer Pentium Pro-based systems that incorporate both Intel's microprocessor design and Microsoft's Windows NT operating system. The release is HP's latest attempt to wrest share of the high-end computer market from market-leading Compaq as well as IBM and Sun Microsystems. The release marks another step in HP's strategy to offer Windows/Intel-based (WinTel) products that actually compete with the company's proprietary line of servers. HP's marketing and developmental credibility is expected to provide WinTel servers with an edge in the competition against servers from IBM and Sun Microsystems for the $223 billion annual high-end market. Despite their lower profit margins, HP will aggressively market the WinTel line of NetServers, offering financial incentives to its salesforce.

Sun Microsystems records an impressive $143.3 million in net income for 1st qtr 1996 on total revenue of $1.84 billion, an increase of 33% from the same quarter in 1995. The financial report considerably exceeds many analysts expectations and is due primarily to Sun's continued success in the network computing market. The increasing corporate reliance on Internet technology for the implementation of intranets is driving the entire network computing industry, and Sun is strategically placed to take complete advantage of the market trend. To this end, Sun also introduces the Ultra Enterprise, a line of high-end SPARC-based servers that are expected to compete favorably with products from HP and IBM. The Ultra Enterprise line will provide hot-swappable technology and enhanced performance for as much as 45% less than competing units.

DEC officials announce the company's intention to redirect its marketing focus away from the home computer market, placing its marketing efforts into the less competitive business market instead. Digital's PC unit posts a revenue growth rate of 40% in 4th qtr 1995, but the majority of these earnings come from DEC's server and high-end desktop sales. The increasingly competitive home market is negatively impacting numerous unit vendors, such as Apple and Packard Bell, as prices continue to decrease for consumers. In pursuance of this marketing shift, DEC will discontinue its Starion line of Pentium-based systems. Analysts suggest that DEC's lack of a specific core competency has hindered its ability to differentiate itself in the consumer market. DEC will expand its distribution efforts beyond the reseller channel to include select retail computer outlets.

Several computer manufacturers are targeting the over-50 demographic with their marketing campaigns because they have noticed a steady upward trend in senior citizens using computers. The Sun City West retirement community near Phoenix, AZ, illustrates this trend. The community sponsors classes to teach retirees how to use computers. The community's computer club has jumped from about 200 members in 1989 to 2,200 in 1995. Seniors use computers for a variety of tasks including personal finance, family tree research and home will preparation. Many seniors use E-mail to correspond with their children and grandchildren. A recent poll found that the number of people 65 or older who report that they use a home computer jumped from 7% in 1994 to 9% in 1995, which represents almost 600,000 people. Computer makers such as Compaq and Acer Group Inc are targeting this growing niche with advertising campaigns.

Sony may reveal the specifics of its long anticipated entry into the US home PC market at the 1996 Comdex computer show. The Japanese consumer electronic giant is not expected to have products on shelves before Christmas, however, and is not expected to compete in the office computer market. The success of Sony PCs is uncertain due to an impacted US PC market where margins are tight, competition is fierce and players hope to survive an impending selection to enjoy times of greater profit ahead. In Sony's favor are its formidable name recognition, attractive design style, established distribution channels in consumer retail outlets and a potential cost advantage resulting from their US factories that already produce PC components.

PC vendors traditionally compete on technology and price issues, but the increasing standardization of PC computer components and features has led manufacturers to use marketing campaigns to distinguish their products. Surveys indicate users are less interested in paying premium prices for the once popular AST Research, DEC and Apple products while they are prepared to invest more in HP, Dell and Compaq products. Apple's widely known name does not preclude brand troubles. Apple's internal conflicts and Power Macintosh shortages have led to an ambitious marketing campaign aimed at changing user perceptions. AST Research also lost ground due to long-term internal problems and plans a campaign to help refocus the organization's public image. Marketing is also becoming more essential for suppliers. Microsoft's Windows 95 advertising frenzy resulted in business users willing to pay significant sums for an upgrade from IBM's OS/2 system while Intel's 'Intel Inside' campaign had similar positive results.

Germany's largest PC maker, Vobis Microcomputer, is participating in a sales joint venture with British retailer PowerStore Trading. The venture represents Vobis' second attempt to enter the fierce British personal computer market. The company's first attempt, partnered with Dixons Group, captured a meager 1% of the UK PC market. The German company will control the Vobis-PowerStore venture that will locate Vobis PC departments inside 88 PowerStore locations. Vobis expects to reap greater profits and provide more exposure for the Vobis brand name. Margins in the British PC market are so slim that most profits are made when customers purchase software and additional componentry. However, the venture may spark a new round of cost-cutting as Vobis-PowerStore competes with Escom and other retailers for market share.

A market research firm has indicated Packard Bell Electronics Inc has increased its market share in the US market by 12.7%, improving its position as the top PC seller in the 1st qtr 1995. IBM posted a moderate comeback, increasing its market share from 7.9% to 8.8%, taking over the fourth position. Compaq and Apple stayed at numbers two and three respectively, but lost ground to both IBM and Packard Bell. Gateway 2000 placed fifth with a 5.4% market share. Industry analysts see Packard Bell's taking the number one slot two years in a row as significant. However, they also warn that IBM is preparing to bounce back. Market research shows the PC market continues to grow as US industry shipments climbed up 23% in the 1st qtr. Many analysts are predicting year-end growth to reach between 20% and 25%.

Apple is planning to invest tens of millions of dollars to develop its Asian business over the next three to five years. The company will target, China, India, South Korea and Japan, among other regions, to expand market share in these emerging markets, according to John Floisand, Apple's senior vice president responsible for Asia Canada and Latin America. Apple is attempting to push brand recognition and localize its products to lure customers in each country. Floisand says sales in the Pacific region, Apple's fastest-growing market segment, are at nearly two-thirds of the company's US sales. However, he says increased sales in Asia should push the region above the US in terms of revenue and units. Floisand says an important piece in the strategy is the development of its Singapore-based operation, from the standpoint of manufacturing, distribution, information and finance.

Intelligent Electronics, the country's largest computer reseller, has been charging manufacturers, such as Apple and HP, more than it was spending on advertising, mailings and brochures. In fiscal 1991, the reseller received $32.4 million to handle various marketing campaigns, but spend only one-third of the amount. Manufacturers were unaware Intelligent Electronics was receiving such a premium for its marketing in an industry known for its small profit margins. As a result, the company's CFO, Garland Asher, resigned over what insiders say was the issue of marketing profits. In Sep 1993, an employee responsible for securities compliance and marketing profits was fired and has since filed a wrongful-discharge suit against the company. However, the marketing profits continue to be included in internal financial records, which indicate from Feb 1992 to Jul 1993 the company had a marketing surplus of $20.3 million.

IBM's ailing PC Div is unveiling its redesigned commercial PC line, the first machines to bear the influence of its new Senior VP G. Richard Thoman, a former executive at RJR Nabisco and American Express. Thoman is moving to solve some of IBM's problems, such as its practice of using many different parts to make similar PCs. This practice raises costs and renders it almost impossible to step up production of a strong-selling PC by taking parts from a slow-selling model. Since his arrival at IBM in early 1994, Thoman expressed awe at some of the practices of the computer industry, citing a recent survey stating 25% of new computer owners are dissatisfied with their PCs. Having spent the majority of his career outside the computer industry, skeptics wonder if Thoman is merely a messenger for IBM Chmn Louis V. Gerstner Jr. Even though the two worked together at three other companies, Thoman insists he is calling the shots.

PC makers are increasingly resorting to somewhat misleading marketing practices to push their products for home and business use. Apple markets Macintosh Quadras to companies and Macintosh Performas to the home market, though both models are essentially the same. Packard Bell Electronics excels at this type of 'derivative model' marketing, offering the 'Legend' at Circuit City and Best Buy electronics outlets, the 'Axcel' at Office Max and Office Depot office superstores and the 'Force' at CompUSA and other computer superstores, even though few differences exist among the various models. IBM supplies different configurations of its PS/1 models so that chain stores, such as Wal-Mart, can offer systems unique from those at other stores. However, the inconsistent marketing tactics have confused many potential consumers and some vendors, including Compaq, have begun streamlining their product lines.

IBM hopes to regain lost market share in the microcomputer market by replacing its PS/1 PC line with a new Aptiva line geared toward the home user. IBM's PC division reported a 29% drop in shipments for its 2nd qtr, compared to the same period in the previous year. The company also slipped to fourth place in US market share in 1994 from second place a year earlier. IBM hopes that the new Aptiva line will help the company reverse this downward trend. The Aptiva line will include seven models for home users, all offering multimedia technology, such as stereo sound and CD-ROM players. The Aptiva PCs will also boast voice control features, which allow the user to activate commands orally, and 'wake-up' features, which allow the user to program the PC to turn itself on at a pre-set time. The base Aptiva model will be priced at slightly over $1,000 and will include a color monitor.

The proliferation of computer models and names has confused buyers. From the basic choice among an IBM, an Apple and one of several lesser brands in the early 1980s, the number of computer models has grown to include over 1,000 labels and about 11,000 possible configurations. Some models from the same company may have the same CPU, the same storage and the same memory but sell for vastly different prices. Some competing companies may sell the same computer under different names. A recent survey of 500 non-computer users reveals that around half cannot differentiate among computers from the top three vendors. As a result of the confusion, some manufacturers are consolidating lines and dispensing with duplication. These companies plan to base their appeal on company name and to classify computers according to family name and type of consumer.

IBM plans to scale back a marketing push for its once-vaunted PowerPC microcomputer due to production delays. IBM officials had announced that the PowerPC systems would be on the market by summer of 1994. Now, it appears the systems will not be available until 4th qtr or later. The PowerPC line, which features a PowerPC microprocessor jointly developed by IBM, Motorola and Apple, represents IBM's attempt to garner a larger stake in the PC market. The company first previewed the PowerPC microcomputer with much fanfare in November 1993 and touted it as a serious rival to the market leading Intel-based PC running Windows. The company, however, has had to since reset release dates for the PowerPC line due in part to internal conflicts on marketing strategy for the new line. The late rollout is also partially due to the company's delay in developing a new version of its OS/2 operating system for the PowerPC platform.