^C^1EYEWITNESS NEWS

  As most people know by now, Apple has had a good last 12 months, and in early 
December was trading in excess of $40 per share.  On the last day of November 
1985, Apple was selling for $19 a share.  A good year by any standards, but 
better when compared to the averages for computer makers and other components 
of the computer industry.  As a group, computer issues have traded lower in the 
past six months by over 10%.  It must be noted that these averages are heavily 
weighted by IBM's drop.  Since IBM dropped almost 35 Dow points over this 
period, it put tremendous downward pressure on the averages. 

  Most other computer makers broke even or were slightly lower for the period. 
In all, the other components of the computer industry (semiconductors, leasing, 
software, peripherals, and supplies) the chart shows a downward trend.  If 
there is any brightness in a rather gloomy picture, it is that all the averages 
showed increases at the end of November.  There is some indication that the 
picture for 1987 will be better.  With an economy growing much the same rate as 
1986, there is room for a steady improvement in computer stocks. Interestingly, 
both IBM and Apple are in new product cycles which should spur higher sales and 
possibly higher stock prices. 

TELECOM SOFTWARE TREND CONTINUES:
---------------------------------
  Lotus Development Corp.  and MCI Communications Corp.  have combined to 
market software designed to make MCI's electronic mail service easier to use 
and more versatile.  Lotus Express for MCI Mail sells for $100, enables the PC 
owner to send and edit spreadsheets, graphics, and documents for about a dollar 
each. "This program marks the first time that an electronic mail service will 
be able to handle anything beyond plain ASCII text," said Merv Adrian, a 
communications project manager with Shearson-Lehman Bros, Inc.  It can generate 
files and deliver them in a variety of modes from hardcopy to binary.  Lotus 
expects this to compete with overnight delivery services as a less expensive 
alternative.  What Lotus is really after is a diversification of products and 
markets removed from their prime source of income: Lotus 1-2-3.  This product 
was developed at Software Arts Inc., a recent acquisition.  Lotus has spent 
heavily acquiring companies in the past few years. 

BIG BIZ TAKING MAC SERIOUSLY:
-----------------------------
  That's right, Apple's Macintosh is finding acceptance by corporate America. 
Despite the discouragement of naysayers and "experts" that bash anything non-
blue, the Mac is being accepted for the very elements that set it apart from 
IBM: being easier to use, quicker to learn, and unthreatening to non-technical 
people.  Add the simple fact that Mac does some things better than its 
competitors, and you see why it is a strong entrant in the competitive market.  
A great indication of Mac's acceptance is that it is beginning to get regular 
coverage in the pages of one of the "true blue" business computer publications, 
Computerworld.  Infoworld is also adding weekly MAC coverage. 
 
INTEL DENIES 80386 REMASKING:
-----------------------------
  Both Intel and Compaq have published lists of 80386 chip anomalies.  While 
Intel claims that the problems can be simply avoided, developers are saying 
that the problems are more serious.  Problems mentioned were multitasking 
capabilities and virtual 86 modes.  Complaints contend that the chip will not 
support the simultaneous operation of more than one 80286 or 80386 operating 
system.  This is a charge that Intel does not dispute.  Intel's list has only 
16 little items for developers to avoid.  What is causing concern is that the 
80386 is not living up to what Intel claimed it could do at its introduction a 
year ago.  Anomalies can be worked around, but the multitasking problems are 
causing big disappointment.  Intel's reaction to that is, "wait for the 80486." 

FALL COMDEX:
------------
  According to one attendee, the Fall 1986 Comdex could be called a desktop 
publishing show.  Most products except desktop seem to be waiting for the next 
round of new machines from Apple and IBM.  Most recent announcements are trying 
to knock Apple off the top of the desktop market.  Apple should feel proud that 
they have finally set a business standard.  "It's just like a Mac," was heard 
often at this show. 

WORM DISKS ON THEIR WAY:
------------------------
  Several manufacturers, including Tallgrass, are in the last stages of 
development on "Write Once Read Many-times" optical disks.  While the first 
products are certain to be expensive (in the $10,000 plus category with 
controllers), the huge storage capacity is expected to create a market.  The 
Tallgrass models are 100 and 200 megabytes respectively. 


AMIGA HANDBOOK DONE ON MAC:
---------------------------
  It is getting to be quite common to see newsletters and booklets that have 
been done on the Apple Macintosh with Pagemaker software.  The most interesting 
one of late, is the "Amiga programmer's handbook." The author has let it be 
known that both text and layout were done on a Macintosh and printed with a 
LaserWriter.  The executives at Commodore can't be too happy about this news 
being made public. 

IBM RUSHES NEW PRODUCTS TO MARKET:
----------------------------------
  At one time, the announcement of new IBM PCs was not expected until early 
spring.  Now, persistent rumors say that the announcement is likely to take 
place as soon as the second week of January.  The reason for this is simple: 
money.  IBM is being pressed by sales of current clones, surprisingly good 
sales of recently introduced 80386s by competitors, and Apple's continued 
cutting of slices from the MS-DOS monolith.  Compaq reported that sales of 
their new 386 were much better than forecast.  With a new contender for the 386 
market nearly every week, IBM is beginning to fear that their machines may not 
control the market.  If they do intend to change the standard, and take too 
much more time to bring the products to market, they may incur resistance to 
the change and ultimately lose important sales. 

  IBM's 80386 model is said to be the PC XI.  It will run at 16 MHz, and be 
built around five proprietary chips, only one of which is built by IBM 
directly.  Microsoft is said to be the source of two chips devoted to graphics 
handling, mouse control, and windowing.  It is logical to believe this 
description because it would help IBM fend off the clone challenge.  Still 
there are a number of rumors that the IBM/Intel deal for 80386 development 
involves a version of that chip that is different from the ones Intel is 
selling to the clone makers.  While this involves a lot of speculation, and a 
great deal of development money, the five proprietary chips combined with a 
improved version of the 80386 would give the new PCs the zing needed for IBM to 
clearly regain control of a good share of the personal computer market. 

  Masked by the turmoil caused by the 80386 introduction, software crossover 
has received relatively little press.  Software that was the exclusive province 
of MS-DOS computers is being rewritten for Apples.  Recently, Orange Micro 
announced DOS Boot, a system that will allow IBM PC software to run on the 
Apple IIGS and probably on the Mac as soon as a model with slots is available.  
The package is said to be priced over $500 for the software and board which 
includes an 8088 processor.  An IBM disk drive is extra, but the package will 
come with software that allows the user to reconfigure a standard Apple drive 
to read and write IBM disks.  The crossover is not one-way though, Microsoft 
announced that Excel would soon be available in an MS-DOS version.  By now 
everyone knows that the leading desktop software publisher, Aldus, has recently 
brought out a PageMaker for IBM machines.  Former MS-DOS only shops see a new 
market in the growing number of Apples used by businesses, just as other 
software producers do not want to be limited to Apple computers. 

ON THE LEGAL FRONT:
-------------------
  There seems to be a radical difference in approach to the problem of clones 
taken by IBM and Apple.  In IBM's case, they have chosen to ignore the clone 
makers, but this may be coming to an end.  It is estimated that two-thirds of 
the 4.3 million personal computers sold this year will be IBM clones.  On the 
other hand, Apple has taken action to protect copyrights and patents.  They sue 
anyone even suspected of infringement.  Consequently, there are only two Apple 
clone makers, Franklin and Video Technology Computers, Inc.  (importers of the 
Hong Kong made Laser 128), who represent a total of only 3% of the Apple 
market.  Interestingly, while IBM clone makers admit to being after Big Blue's 
market, both of the Apple clone makers say that they are targeting the 
Commodore and Atari "low end" market with the inexpensive Apple II clones. 

  While we have no true inside information from IBM, it stands to reason that 
they will try to limit clone makers with proprietary technology the way Apple 
has.  John Akers, IBM's chairman, has called repeatedly for greater government 
protection of US software and hardware makers.  He sees what he calls, "Modern 
claim jumpers" as weakening the US computer industry.  Most discouragingly, 
much technology copying is done with the help of foreign governments.  IBM is 
not waiting for the government to fight their battles; they are now stepping up 
their own legal actions.  Most recently, a suit was filed in Australia against 
an Asian clone maker alleged to have copied IBM's machine too closely. 

  The latest in the IBM/Apple battles is the announcement that Apple has 
licensed the Macintosh visual copyright and interface to Microsoft.  The new 
version of Microsoft Windows, probably for the IBM 80386, will be very Mac-
like.  This move gives Apple some control over Microsoft and the appearance of 
the new products, and a way to get back at these people if they violate the 
agreement.  For IBM, it may be just another step in creating a new, harder to 
duplicate machine; for onlookers it is just confusing.  It reminds us of Celtic 
decorative art: One beast biting another, but so complex you can't tell which 
beast is biting which tail. 
 
1987 OPENS DOOR TO NEW TECHNOLOGY:
----------------------------------
  Motorola's 68030 and Intel's 80386 processors represent another step forward 
in microprocessor development.  From 1969, when Intel built the 4004, its first 
microprocessor, to the present, the goal has been to pack more elements into an 
ever decreasing amount of space and thus create smaller, faster, more powerful 
processors.  How far along is the development of microprocessors, and how far 
can it go? To answer these questions we will have to know a little about what 
is happening in the science of making chips. 

  Chips are made from silicon, normally not a conductor of electricity. 
However, under some circumstances, it can be made to conduct, a property that 
makes semiconductors so valuable.  When silicon is grown as a crystal, the 
lattice that gives the crystal its shape holds the molecules of silicon in 
place.  The particular type and amount of impurity added introduces a 
controlled amount of free electrons to conduct a set electrical charge across 
the fixed lattice.  The crystalline properties of silicon not only make the 
chips possible, but are also a major limiting factor in their development. 

  Both the Intel 80386 and the Motorola 68030 sandwich together layers of 
elements in the range of 1.3 microns thick.  This is just the latest step in 
the continuing process of miniaturizaton, but most scientists believe that 
there is a limit to just how tiny present technology can go.  Below one micron 
(about 50 atoms thick) unintended impurities in the silicon crystal, and even 
background solar radiation will make these chips unreliable.  Research projects 
are being pursued to defeat the limitations of silicon-based chips.  Among them 
are: new crystal materials such as gallium arsenide, as well as new way of 
growing pure crystals, and new chip designs with three-dimensional concepts.  
Current chips have one level of sandwiched material on a base (the mesa and 
valley architecture), but a three-dimensional chip would have an appearance 
more like Swiss cheese and many more circuits.  Even some "Science Fiction" 
concepts such as bio-chips are being seriously considered. 

  Even before the one-micron limit is reached, vast sums of money are required
to improve current technology.  To produce the 80386, Intel had to build a new
plant to house machines costing $700,000 apiece, in an environment populated
more and more by contamination-free robots.  Even with space-suited workers and
air-scrubbing systems that remove particles down to .02 microns, particle
contamination is one of the greatest problems in manufacture.  It is so critical
that the dust created by a single pencil mark can ruin a whole batch of chips.
In addition, new techniques for etching smaller elements and growing crystals
free from impurities must be developed before the limit is reached.  It is
estimated that the cost of development and manufacture of the next generation
of chips will be three to ten times greater than the $100 million price tag for
the 80386.

  This all represents a tremendous investment for chip makers.  If the new
generation is not as successful as predicted, it may slow the pace of
development, or at the very least, transfer much of it outside the United
States.  Still, the prospect of selling tens of millions of chips at $299 each
(the selling price for the 80386) is quite an incentive.  The new chips have
only a three- to four-year window to be successful before the next generation
comes along.  Scientists predict that the one-micron limit will be reached
somewhere after the mid-1990s, with perhaps three generations of new chips in
the intervening ten years.  All this makes for intense competition between the
chip makers with a $100 million dollar development minimum price tag just to
enter the game.
