Newsgroups: comp.sys.next.advocacy
Subject: NeXT: Economist Article
Date: Sat, 02 Jan 1993 20:41:06 -0500

Here's the article on NeXT in the December 12 issue of the Economist:

Next Computer
Jobs's lot

The word in Silicon Valley is that Steve Jobs is a dangerous man: unlike
almost everyone else in the computer business, he is not in it for the money.
Just as well. Since being ousted in 1985 from Apple Computer, the company he
co-founded, Mr ]obs has been struggling to make a success of NeXT Computer,
his new venture. It has yet to turn a profit.

NeXT ought to be prospering. Its sultry black workstations (high-powered
desktop computers) are the only ones on the market with an object-oriented
operating system. Object oriented software does away with the tedious business
of line-by-line programming, replacing it with building blocks made up of
ready-written chunks of computer code. Computer nerds love this, because they
can design customized software applications in a fraction of the time it takes
on a conventional system.

NeXT software tends to make instant converts of even the most hardened
skeptics. When Mr Jobs first showed it to John Akers, I BMs chairman, Mr
Akers was so impressed he did a $10m license deal with NeXT on the spot. (True
to form, I BM has as yet done nothing with the technology.) So why has NeXT
languished?

------------------------------
Inset: Pie chart

Eclipsed
Worldwide workstation sales, 1991
Total: 446,000 units

Sun 38.4%
Hewlett-Packard 17.7%
DEC 14.3%
NeXT 5.6%
IBM 5.1%
Sony 3.6%
Others 15.3%
--------------

The firms biggest errors have been in marketing. Like Apple in its early
years, NeXT concentrated much of its initial sales effort on universities. By
1990 it relied on higher education customers for half its sales just when that
bit of the market was running out of cash. The firm changed tack only when
would-be corporate customers came hammering on its door. NeXT now makes over
80% of its sales to government agencies and companies especially financial
firms that need to put powerful, easy-to-use workstations on every option
traders desk. Right bullet, wrong target, says Mr Jobs about NeXTs old
strategy.

The transition has been painful, especially in Europe, where NeXT has now
replaced much of it.s managcrncnt. It has scrapped its old distribution system
 after a high percentage of the computcrs it thought had been sold" in Europe
in 1991 were returned in 1992; most had been stuffing the distribution
network. The company is now building its own direct sales force. It has also
hired Peter van Cuylenburg, formerly chief executive of Britains Mercury
Communications, as presidident and chief operating officer. Mr van Cuylenburg
is now responsible for the day-to day running of the company, leaving Mr
Jobsfree to have big ideas.

The changes are proving costly. Japan's Canon -- the biggest shareholder in
NeX'I', which is not publicly quoted this year added another $55m to the $100m
it chipped in to help launch the firm. R&D is consuming  around 10% of NeXTs
s annual revenues. Much of that is going towards what NeXT hopes will be a
blockbuster product, NeXTstep 486, due to go on sale in July 1993. Unlike
NeXTs existing software, the $995 package will run on most of todays fast
PCs. It could creatc a bigger market for object-oriented software. Although
NeX'I' started by selling computers, if NeXTstep 486 succeeds, it will be well
on the way to becoming a software firm. That pleases Mr lobs, who estimates
that software already occupies 90% of his time: profits on operating-system
software arc vast.

NeXT could use them. This year its sales will hit just over $140m, up from
$128 in 1991. Mr Jobs claims that sales in the second half of 1992 are 40% up
on a year ago and that sales to corporate customers are three times their
level a year ago. "Our losses are behind us," he says. But at the rate NeXT is
investing in R&D, it is unlikely to see much in the way of profits this year
or next. The firms long-awaited stockmarkct flotation will alrnost
certainlybe delayed until 1994.

NeXTs biggest headache is that, whereas it is eager to compete on technology,
its rivals are increasingly competing on price. Last year NeXTs share of the
workstation market was just 5.6% by unit sales, way be hind Sun Microsystems,
Hewlett Packard and DEC, and even lower in value terms. In a year that has
seen the three market leaders discounting furiously, NeXT is unlikely to have
increased its share significantly.

Mr Jobs is betting NeXTs survival on its software which, he claims, is five
years ahead of Suns; he also reckons NeXTs manufacturing costs are way below
its rivals. That should cushion his firm in a price war. Nonetheless, NeXT is
clearly having to discoun to win sales, which means that profitability may be
even further off than Mr Jobs hopes. And Sun is on the way to closing the
software gap: earlier this year Bud Tribble, a co-founder of NeXT and head of
its software engineering unit, quit to join NeXTs larger rival. Sun wants to
kill us, laments Mr lobs. It may succeed.




 
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