Interesting article from the journal;
The Wall Street Journal Interactive Edition -- June 4, 1996
ASIAN TECHNOLOGY
Acer Thinks It Has a Smart Move
By Introducing a Dumb PC
By WAYNE ARNOLD
Staff Reporter of THE WALL STREET JOURNAL
Maturity, and the good taste that comes with it, is knowing the difference
between what you can have and what you need. You don't need a glass of
Courvoisier if the Montrachet already has you aglow. You don't need a Ferrari if
your BMW gets your heart racing. You don't need another MX missile if you
can already barbeque the planet.
have Windows 95 -- its meager four megabytes of random-access memory and
100 megabyte hard drive won't support it. The AcerBasic won't even have a
monitor. Mr. Shih expects people to plug it into their television sets.
"People have been waiting for a $500 PC for many, many years," he says. "So if
we have the means, why not?"
Why not, indeed. Oracle Corp., International Business Machines Corp. and Sun
Microsystems Inc., all U.S. companies, asked themselves the same question and
came up with something they call the Network Computer. Both it and the
AcerBasic have been lumped together as "dumb PCs." The big difference is that
the Network Computer will derive its computing power from the Internet, thanks
to Sun's Java programming language. Users will log on and borrow as much
computing power as they need from powerful computers elsewhere on the
network.
Mr. Shih says the NC is a nonstarter. People don't want to have their
love-letters stored by Big Brother: That went out with main-frames in the 1980s.
And without the big servers, Mr. Shih says, the NC isn't worth $500.
"Off-line, their machine is dead," he says. He isn't the only one who thinks so.
Last month, Forrester Research Inc., in Cambridge, Mass., published a report
predicting that consumers will shun Internet appliances in favor of cheaper
full-feature PCs, used PCs and "modular PCs -- simpler, cheaper PCs."
This goes doubly in developing Asia, where incomes are low and Internet
connections unreliable, Mr. Shih says. And that is where Acer sees the biggest
market for the AcerBasic, which may be smart since PC sales in the region grew
43% last year, compared with just 21% in the U.S., according to market
research firm IDC Asia/Pacific. Acer doesn't even plan to sell its new machine in
Europe and the U.S. right away. Instead it will focus on the great unwired in
Indonesia, India and, most importantly, China.
"There's no reason we aren't number one," Mr. Shih says of China's PC market.
According to Brian Kornegay, senior market analyst at IDC in Hong Kong,
Acer ranks far behind Compaq Computer Corp., AST Research Inc. and
Hewlett Packard Co. with a slender 2.4% market share. Mr. Shih wants Acer
to be in the top three by 1998 and on top in China by 2000.
Trouble is, China's tariffs will put the AcerBasic well above $500. And Mr.
Kornegay says the best-selling PC in China last year was Compaq's Presario,
which, with its Pentium chip and eight megabytes of RAM, costs about $2,100,
according to IDC.
This may mean that China's consumers aren't about to trade in performance.
Sean Maloney, general manager for Intel's Asian-Pacific operations, says the
belief in cut-rate computers is premised on two fallacies: first, that emerging
markets want or need older technology and, second, that people put price
before features. In reality, he says, "emerging markets will leapfrog the West, or
at least pull level." And as for price, "the thing that drives PC sales is generally
the latest and coolest feature. Right now, for example, it is almost impossible to
sell a PC without a Pentium processor, a modem and a fast CD-ROM."
Daniel Wong, general manager for AST's Greater China operations, agrees. "I
also firmly believe that users won't be satisfied without performance." All PC
makers are cutting prices and if customers want to scrimp on performance, he
says, they can get a better deal in the used PC market.
Detroit's Big Three automakers laughed when in 1954 Volkswagen AG
introduced its small, ungainly Beetle to Americans weaned on V8 horsepower
and features such as tail fins. Acer's detractors may not have bargained on Asia's
silent majority, people Mr. Shih hopes will make the AcerBasic their first PC.
Adding an attractive price to a respected brand name may give Acer a winning
formula, Mr. Kornegay says. "What more could you need?" |
