Computer demand slows in U.S.

Press, 4 April 1989, Page 35

Computer demand slows in U.S.

By

Catherine Arnst,

of Reuters

(through NZPA) Boston The computer industry in the United States is beginning to show its age. After almost 40 years of rapid expansion it appears to be settling into a cyclical and slower growth pattern more reminiscent of steel or heavy machinery than high technology. “There is too much new product from too many vendors,” said Mr David Linehan, a computer analyst with Kemper Financial. “Everyone’s old products are not that old, so the actual need for new equipment is not that pressing.” The wide range of competing goods, combined with conflicting industry standards and shortfalls in compatibility, are creating a “pause” in demand that could last well into next year, analysts and manufacturers say. But today’s high tech regions are still a long way from being

tomorrow’s rust belts. The Commerce Department estimates that total American computer-industry shipments will rise only 6 to 10 per cent this year compared with 14% in 1988. In previous years the computer industry grew an average 20% to 30% regardless of the state of the economy. United States demand has been slowing for some six to 12 months with no immediate sign of a turnaround, and only orders from Europe and Asia are allowing computer manufacturers to show any growth at all this year, analysts said. Warnings about the outlook for 1989 sales have already been issued by Microsoft Corporation, Prime Computer, Digital Equipment, and International Business Machines.

Computer makers are finding that the fast pace of technological change is making users reluctant to buy a new generation of

inachines only a few years after they invested heavily in the last generation. This is particularly true at the top end of the market — the mainframe and minicomputers that Can cost between 10,000 and one million dollars.

Fairly new products in that category are being offered by IBM, Digital, and a host of other competitors in a fight for a segment of a market which after surging two to three years ago is showing the least growth now. Personal computers and work stations are bucking the trend with shipments expected to grow 12% to 17% this year. Mr John McCarthy, a consultant with Forrester Research, suggested the growth might be at the expense of minicomputers. "I think we’re beginning to see the disappearance of the mini. It is being replaced by networks of PCs (personal computers),” Mr McCarthy said. Systems integration — linking

computers together into one network that can share data — is one of the fastest growing segments of the industry. Market research group Input Inc. expects sales of hardware and software used for integration to increase 31% this year. But confusion over industry standards has helped to dull over-all demand. While manufacturers battle over the parameters for such emerging technologies as the Unix operating system and the architecture of the next generation of personal computers, customers are staying on the sidelines.

“This is a maturing industry, but it is not a mature industry,” said Mr Donald Bellomy, a consultant with International Data Corporation. "We can no longer expect the kind of growth rates we saw in its early adolescence, but there is still a lot of growth and change and development in front of it.”