AT&T Makes Bow in Computer Industry, Unveils Six Models Covering Wide Range

AT&T Makes Bow in Computer Industry, Unveils Six Models Covering Wide Range

By Claudia Ricci and John Marcom Jr., Staff Reporters
The Wall Street Journal

March 28, 1984

New York -- American Telephone & Telegraph Co. announced its debut in the computer business, introducing a broad range of machines and two products to link computers in a network.

The company, as expected, unveiled a family of six computers ranging from a high-powered minicomputer, called the 3B20, to a desktop microcomputer, the 3B2, which will support as many as 18 terminals. Prices range from $340,000 for the high-end 3B20 model to $9,950 for the 3B2 desktop.

While AT&T has long been expected to enter the highly competitive computer industry, some analysts noted that the company's wide range of products represented a strong and strategically sound first step.

"It represents a broader thrust in the computer industry than I had expected," said Stephen T. McClellan, computer industry analyst for Salomon Brothers. AT&T, he added, "is now a factor (in the industry) and they weren't yesterday. I think this is a watershed."

However, several others questioned AT&T's ability to execute its strategic plans in an industry that demands fiercely competitive pricing and sharp sales and marketing capabilities.

"I wasn't impressed," said Stephen P. Cohen, vice president of Gartner Group, a research firm in Stamford, Conn. He called the AT&T announcement "a tentative first step." Mr. Cohen noted specifically that AT&T priced its 3B20 and 3B5 models comparable to Digital Equipment Corp.'s models 11/780 and 11/750 respectively. "But I don't think being comparable is where they have to be," he said, adding that to be an aggressive new entrant in the market, AT&T should be pricing its computers 20% to 30% below the price leader in each category.

AT&T officials, however, say some of their computer products look more price-competitive if one considers the reliability of the systems. Also, AT&T's computers don't require installation of costly air conditioning or raised floors to accommodate them. "In a life-cycle way, we're quite superior," said Jack M. Scanlon, vice president, computer systems.

AT&T said that initially, it would seek to distribute its computer line through so-called value-added remarketers, the distributors who resell computers with specific software and hardware added, and original-equipment manufacturers who could market AT&T equipment under their own names.

Also, AT&T said that it is targeting large data-processing users capable of supplying their own application software for the 3B computers, all of which run on AT&T's UNIX 5 operating system. UNIX refers to the basic set of instructions that run a computer while application software is the specific instructions that carry out a function, such as word-processing.

"We plan to move as fast as we can to make our computers available to all customers," said James E. Olson, vice chairman.

Mr. Scanlon said that AT&T has been making the 3B line of computers for use internally and in the Bell telephone companies. That, he said, gives the company a head start in serving the outside market. "We're ready to go," Mr. Scanlon said. "We've got the volume."

The computers will be produced by AT&T's manufacturing division, formerly known as Western Electric. Mr. Scanlon said there won't be any need to add employees to handle the production. AT&T has sufficient capacity to handle the manufacturing and final assembly of the computers, he said. The company is expanding its semiconductor manufacturing capability by adding a third facility in Orlando, Fla. Two others, in Allentown, Pa., and Kansas City, Mo., are already producing semiconductors, he added.

Mr. Scanlon said that the regional Bell operating companies may become customers for AT&T's computers because the Regionals are setting up subsidiaries to sell computer equipment.

The lack of specifics on production volume drew some criticism. "This is becoming a very bad habit of AT&T's," said Kenneth Bosomworth, president of International Resource Development Inc., Norwalk, Conn. "They announced something that people suspect the company really isn't ready to deliver," he added. Mr. Bosomworth said AT&T had production delays with its System 85 PBX, a telephone-switching device, and its ESS-5 telephone switch. AT&T denied there were any such delays.

To sell its new computer products, AT&T said it already has trained about 1200 sales representatives and technical consultants, and will have a sales force of 6,000 by year-end. But David Terrie, a senior analyst with The Yankee Group, a consulting firm, said "This sales force hasn't been selling these products" for an extended period. "I find it hard to believe," Mr. Terrie said, "that they are going to come up with 6,000 salesmen that can handle this line."

One of AT&T's new products, which links the 3B2 with International Business Machines Corp.'s Personal Computer and compatible models from other manufacturers, represents tacit acknowledgement of IBM's supremacy in the office desktop market. AT&T's "PC Interface", say some analysts, will give AT&T a way of gaining a foothold with IBM's large customer base.

In general, AT&T's computer line is strong in minicomputers, an area where IBM, the dominant force in the world's computer business, is least dominant. In addition, AT&T is ahead of IBM in introducing its 3B local area network, a system that links computers with other office equipment via a coaxial cable. IBM, meanwhile, has yet to announce a local area network, giving AT&T an edge in the office-automation market.

AT&T, of course, faces plenty of competition besides IBM in the minicomputer market, too, including Digital Equipment, Data General Corp., Wang Laboratories Inc. and Hewlett-Packard Corp. Some of them are further along than either IBM or AT&T in offering comprehensive systems for corporate customers.

Yesterday, in composite trading on the New York Stock Exchange, AT&T common closed at $15.75 a share, off 12.5 cents; IBM common closed at $113.875, up $1.625; Digital Equipment, which gave up almost three points on Monday, rebounded $3.75 yesterday to close at $91.25; Hewlett-Packard common closed at $34.75, up 25 cents, and Data General closed at $44.75, up $1.75. On the American Stock Exchange, Wang Labs Class B closed yesterday at $27.50, down 12.5 cents.

IBM declined to discuss the specifics of AT&T's announcement. However, a spokesman said that it "wasn't unexpected." He added: "As we've said before, the integration of data-processing and telecommunications is coming about very rapidly, and we think it's only natural that AT&T would be interested in the market."

A Digital Equipment spokesman said he couldn't comment directly on AT&T's products because he hadn't seen the specifics. He added, however, that Digital "respects the telephone company's expertise, and Bell Labs. It certainly will make an already-competitive market even more interesting." The spokesman said Digital Equipment believes its VAX line of computers can hold their own against potential competition.

At Data General, in Westboro, Mass., Robert C. Miller, senior vice president, said: "Undefined products always pose more of a problem than when they actually appear. I feel more comfortable having them out in the open, rather than having them hide out in the ether somewhere." Mr. Miller added that AT&T's product appears to compete against Digital Equipment's VAX line, which is seven or eight years old. "This is a new product?" he asked.

For its European distribution, AT&T said it would rely on Ing. S. Olivetti & Co., which recently signed a joint venture marketing agreement with AT&T.

AT&T NEW PRODUCTS

Terminals Price Typical Application

3B20S Super 100+ $230,000 Data centers Minicomputer manufacturing locations

3B20A Consists of NA 330,000 Data centers 3B20S plus manufacturing second processing locations unit

3B20D Super NA 340,000 Banking, minicomputer financial w/ Continuous services operation

3B5/100 Mid-range NA 57,000 Office, business super mini information Small-to-medium communications capacity

3B5/200 Mid-range Up to 60 73,000 Office, business super mini information Medium-to-large communications capacity

3B2/300 Desktop Up to 18 9,950 Office, lab, supermicro plant

PC Combination of hardware and software Interface Connects 3B2 microcomputer with personal computer. No price set yet.

3B Net High speed local data network moves information via coaxial cable No price set yet

Source: AT&T.