Home Computers Are in Same Spot as Model T in 1919

The home computer, centerpiece of an emerging industry with enormous possibilities, is right now where the automobile was in 1919--on the verge of a takeoff that will make it a familiar product in 80% of American homes within five years and a necessity of life within a decade.

That takeoff will accelerate this Christmas shopping season as an estimated 7 million consumers plunk down $2,000 apiece to take home a computer for work and play. It’s no fad. By one count, sales of home computers will surpass sales of office computers this year.

Already the home market is driving major business events, such as the negotiations between one-time rivals IBM and Apple Computer toward an agreement in which IBM would invest in Apple in return for rights to use the Macintosh software operating system.

Also, Microsoft agreed last week to pay $1.5 billion for Intuit Co., developer of the personal finance program Quicken, with an eye to the growing millions who keep track of investments on home computers.

The new mass market is coming fast. According to Dataquest, a San Jose research firm, 6.9 million computers will be sold for home use this year, compared to 10 million for “professional” use. Other research firms--Computer Intelligence Infocorp and Link Resources--count separately computers used for work at home and conclude that “home” and office computers are now neck and neck.

And the growth, 30% a year, is in the home; from 32 million U.S. homes with computers today to more than 80 million in 1998.

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The business is going to be enormous and the biggest companies are struggling to get it right. IBM brought out a new line of home computers this year, called Aptiva, but underestimated demand for them and so won’t have enough in the stores this Christmas season. Longer term, though, IBM could recover some of its lost glory in the home market.

Negotiations with Apple are discussing just how much IBM will pay for rights to Macintosh--reports say $1 billion. “A linkup would have advantages for both companies,” says computer consultant Bob Djurdjevic, head of Annex Research in Phoenix. Gaining the easy-to-use Macintosh operating system would help IBM in consumer markets, while IBM’s backing would lend market power to Apple, which after all the years still has only 10% of the personal computer market.

Apple’s position in the home is ironic. From its start in 1977, Apple produced the most consumer-friendly computers. But for over a decade its energies have been spent fighting IBM, Compaq, Dell and AST Research--all of which have had their own problems--in business markets. Now Apple has another chance.

“The home market should be Apple’s,” says Ian Gilson, computer analyst at Van Kasper & Co., a Los Angeles investment firm. “If it misses it, then worries about the company’s future could be well founded.”

Meanwhile, home computing’s greatest success thus far is Packard Bell, a smallish Westlake Village company--$2.3 billion in revenue this year--that took on an old television brand name when it started business in 1986. From the beginning, Packard Bell operated on two key insights: It sold computers through Wal-Mart, Sam’s, Price/Costco, Sears and other mass retailers.

And it produced the most powerful computers possible, because founder Beny Alagem understood that home users needed more computer power than office tasks demand. Home customers use computers for games, personal finance, education for the kids and lately to communicate through the Internet or services such as Prodigy, America Online and Compuserve.

They want processing speed, powerful modems and the ability to create three dimensional effects in games and educational programs. Thus, home customers have provided the big market for Intel’s powerful Pentium microprocessor. And their demands will push development of more powerful processors, Intel’s P6 due in 1996 and PowerPC’s 620 version on which Motorola and IBM plan production next year.

“As capability increases, so must the sophistication of our programs,” says Robert Davidson, president of Davidson & Associates, producer of “Math Blaster,” “Kid Phonics” and other educational software.

The Davidson company, founded by former schoolteacher Janice Davidson, also reflects a deeper trend: With entry to the home, computer technology loses its ivory tower image and instead becomes increasingly democratic. Educational programs are created not by scientists but by former schoolteachers like Davidson and Ann McCormick, founder of The Learning Co., who now is starting up another company named Media 3.

People do their own thinking and talking on the Internet; they don’t sit listening to government or experts tell them what to think.

And further possibilities of the home computer are only dimly perceived as yet. To begin with, comparisons to television are imprecise; the computer is more than an entertainment appliance. Rather, like the refrigerator, it will be left on all the time and will control lighting, heating and air conditioning in the home. Electric utilities as well as telephone companies will have a greater connection to the home computer than is recognized today.

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Steven P. Jobs, the founder of Apple Computer, saw the implications years ago. “As the bicycle extends muscle power, allowing human beings to go farther and faster,” Jobs used to say in Apple’s early days, “so the computer extends the mind, allowing us to learn more, know more.”

It took Henry Ford, who built the Model T in 1908, a decade to sell 1 million of them. But after that, ten million were sold within five years and then more and more as Americans seized on the automobile, as Ford himself put it, “to get out of the shells in which they had been living.”

There may not yet be a computer equivalent of the Model T, but one is just around the corner. And so is the enormous industry and social revolution that goes with it.