Xref: utzoo comp.misc:1758 misc.headlines:2280 misc.jobs.misc:894 sci.electronics:1965 talk.rumors:1014 Path: utzoo!utgpu!water!watmath!clyde!rutgers!sri-spam!ames!lll-lcc!lll-winken!csustan!polyslo!jbass From: jbass@polyslo.UUCP (John L Bass) Newsgroups: comp.misc,misc.headlines,misc.jobs.misc,sci.electronics,talk.rumors Subject: Massive computer industry failures and layoff's coming soon!!!! Keywords: markets layoffs futures Message-ID: <1105@polyslo.UUCP> Date: 29 Jan 88 04:43:29 GMT Organization: Cal Poly State Univ,CSC Dept,San Luis Obispo,CA 93407 Lines: 141 The following are my opinions and best crystal ball readings ... I welcome any sound arguments which make the following predictions without merit. For the last 6 months I have been talking to people in the industry tring to find an area to develop a new product. To my surprise it seems that another 1982/1983 style PC market adjustment is about to happen. I.E. the rapid market growth can not be supported by the total market size. I use PC to mean Personal Computers of all types -- Apple, IBM, and clones. How soon? Maybe by this summer. Maybe as late as fall 1989. How massive? Maybe as little as 15% of the computer industry labor force. Maybe as much as 75%. In many areas -- manufacuring, retail sales, and supporting industries -- chips, drives, printers, etc. Only the service industries will continue strong -- repair, training, support. It is unclear how the software markets will fair. Who will be affected? Nearly everyone in the industry. Why and how? The short answer is that the personal computer market will dry up quickly, since the market place is nearly saturated. This follows the 1986 & 1987 frenzy to replace typewriters with PC's of all types. Surprized by this? Consider the US has a total population of about 200 million people, of which, less than 60 million are working adults who may have some exposure to using a computer in the work place ... many of those access a mainframe with a terminal. Maybe 1 in 3 (about 20 million) actually has or needs access to a PC (on their desk or shared use). The real number is probably much smaller -- look around you for the next week and take your own sample of how many people in the general population have/need access to a PC for any reason. Estimates of current PC shipments range between 0.7 million PC's/month to 1.7 million PC's/month. Many of these are PC/XT/AT clones targeted for word processing and little else. IBM is shipping about 0.25 million PC's a month alone! Apple, Atari, and the other M680X0 systems are included as PC's. None of this includes the numbers and impact of the multiuser and mainframe markets. Thus, the market is either already saturated or will saturate in the next 24 months ... my best quess is within 3-9 months. This posting may cause it to happen now. What can be expected during after the market crash? Many things both good and bad -- mostly very bad. Consider the following: 1) The US computer retail industry will suffer significantly. A number of shops closed before/after christmas because the volumes were slowing with margins sharply down. This trend will continue for the next year with perhaps as many as 75% of the current computer stores closing by mid 1989. 2) A significant shakeout will occur between US manufacturers and importers resulting in a fatal round of price cutting and bankruptcy filings. As in the 1982/1983 crash, discontinued goods will be found on the market and in auctions for between 10% and 35% of cost. Plenty of opportunities for small buyers to make a quick dollar on surplus inventories. 3) A significant shakeout will occur in the support markets for the same reasons. Expect tough times in chips, drives, and printers. It is going to be doubly hard on the Japanese, Tiwan, and Korean economies as well ... the rapid dollar shift was only the begining. 4) Unlike the 1982/1983 crash, the market will not recover into a strong growth period ... the crash will mark the end of the PC boom years. A small first time buyer and replacement market will remain. The result will be a large labor force out of work and requiring significant retraining since no other large domestic industry exists today which requires the same talents. 5) It takes about 5 years for a new market to mature. There is no promising computer product on the horizon to force early retirement of the current installed base of systems. An upgrade market will exist ... but with small volumes and margins. 6) The mid range multiuser systems and workstations will be significantly affected by the price wars in the 386 product lines. Many of the current workstation players will go down as well with UNIX is becoming more common on 386 desktops with high res graphics. 7) As with the 1982/1983 crash I expect buyers will start buying and paying more for products from stable companies ... it is difficult to trust your business to a computer that will be orphaned when the maker/retailer/VAR goes out of business. 8) There will be a strong service and support market for orphaned computers and software. 9) There will be a sharply lower demand for computer engineers, computer sales and support staff. New college grads are going to face tough employment prospects. Particularly if the next congress and president continue to provide minimum $$$ support for research and development in technical areas like SDI, NASA, and other military and civilian aerospace. 10) Without the revenues from computer product sales, little domestic funds will be available to develop next generation technology. It takes PROFITS to invest in the future. The US electronics and computer industry faces some grave problems. 11) It is doubtful that 1Mbit and 4Mbit memory chips will reach expected volumes and price levels. Other advanced silicon will likely suffer the same fate given a sharply contracted market. 12) The price of housing will drop sharply in Silicon Valley again. A few other places will see the same. 13) In this election year it would be wise to vote for canidates that are more conservative financially and support US technical industries. Congress will have to carefully examine our technical industry and make sure that supports are in place via research funds and contracts for products to keep our options open for the future. 14) Domestic exports of computer equipment will meet price cutting and expanded competition from frustrated asian manufacturers. Bounce the above senerio off your management, then start looking ahead for how YOU and YOUR company will survive the next few years. Ask your management what their SHORT and LONG TERM business plan looks like. Have they thought this far ahead? If not, better find a new LONG-TERM job before the layoffs start. So you still think that this will not happen? ... consider that the VCR market just saturated this last fall following record volumes and is headed down rapidly ... just as the cassette player and walkman markets did a few years ago. Mean while, we continue to look for consulting/contract work ... Have any? We specialize in design/product reviews, cost sensitive product development, SCSI products, and UNIX systems, hardware, systems software, and applications. Have Fun ... John L. Bass DMS Design (805)541-1575 The above is copyright 1988 by John L. Bass, and may be distributed freely without any change or modification provided this notice is included in all copies.