Recognizing the exceptional rewards of being first, Silicon Valley companies continue to pump record amounts of money into research and development. Those investments should pay off in the long run, but last year they reduced profits. Quantum, for example, lost money in the fiscal year ending March 1996 while it reorganized the divisions that make disk drives for workstations and servers. The makers of consumer products suffered most from intense competition last year. Companies that make products used by businesses generally fared better, as firms continued investing in new ways to collect and manage information.
Some analysts expect that trend to continue.
The company still markets its products to individuals. But it plans to make most of its money from business software that allows employees to work together across vast computer networks. All this competition is good for consumers, because it makes more powerful computers with a wider range of features available for less money. It's also good for the broader economy. The shrinking price of computing power helps dampen inflation, even as the economy continues its long expansion.