^C^1Ranndom Events 
^Cby
^CRichard and Lavona Rann

EYEWITNESS NEWS:
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  Apple will announce several new Macintosh and LaserWriter models.  At least 
one of the new Macs will look physically more like the IIGS than the old Macs 
and will have several new monitors available, including color.  A major goal for
Apple next year is to improve its connectibility with MS-DOS systems, and with 
Digital's VAX systems. Apple will also push towards acceptance of Apple 
products in the "work station" environment. Watch for the term "Intelligent 
documents" to make its way around next year. John Sculley used the term 
repeatedly in an address at MacWorld. 

  For the mainstream makers of MS-DOS computers, the future is less well 
defined. IBM has made the MS-DOS portion of the micro industry grind nearly to 
a halt while it awaits IBM's long touted and overdue move. Logic dictates that 
IBM must do something to regain its market share, but no one knows just what. 
IBM is getting to the point where, whatever move they make, it must be decisive,
and the new products well received; if not, IBM will lose a large part of its 
role as a micro industry leader.  It may already be past the point where a new 
product can dominate the market simply because of the IBM name. 

THAT WAS THE YEAR THAT WAS:
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  This past year has seen many changes in the microcomputer industry. For many 
companies the slump has continued; for others this was a year of turnaround. At 
the same time, a number of otherwise profitable companies encountered 
difficulties.  Like the national economy which is determined to move at its own 
pace regardless of what the experts say, the micro industry continues along its 
own path, surprising the experts. The home computer market failed to die as 
predicted, with even Atari and Commodore showing profits. Apple outlived reports
of its own demise with a very profitable year. As more people have begun to ask 
questions about the emperor's clothes, IBM, which started the year as the 
Emperor of Micros, now seems to be cast more as King Lear than as Napoleon. 

  APPLE -- The turnaround started during the fall of 1985 and continued 
throughout 1986. According to Jean Louis Gassee, in a speech given last 
September, the introduction of the Mac Plus in the spring almost doubled Mac 
sales. The sales boom continued through the fall months, promoting high 
estimates for Apple's first quarter sales. These results give Apple an 
estimated five year earnings growth of 15%, and that includes the poor results 
of a couple of years ago. Apple has made inroads into Big Business while 
maintaining its dominance in the education, home, and small business markets, 
even though the new Apple IIgs proved to be less technologically astounding 
than expected. 

  IBM -- For the most part, IBM has been plagued by problems of its own huge 
success. It has saturated its market with PCs, which drew in clone 
manufacturers seeking easy profits by cleaning up the scraps from IBM's feast.  
The clone makers are now feasting, and IBM's market share has been hurt by the 
shift.  IBM has also defied the experts.  Early last year everyone was saying 
that the PC II was coming. It would, so the press indicated, redefine the 
microcomputer. No machine was introduced. Now encyclopedic volumes are being 
filled with glowing words about the 80386, and no IBM product using it is in 
sight. All this naturally gives rise to the question of whether the IBM 80386 
is not a ghost machine like the PC II. In I986, IBM dominated the microcomputer 
press without releasing a major new product. More interestingly, the upgrades 
of existing products have not generally been well received. The 80286-based 
machines are considered underpowered, slow, and very expensive. Concurrently, 
IBM is attempting to cut expenses. Most recently, it has announced an early 
retirement program covering about 10,000 employees. A clear indication of IBM's 
problems is its stock price. It ended the year 30 points below the starting 
price.  During the same period, the Dow averages gained nearly 300 points. 
IBM's profits are down; its stock price remains flat; it is cutting expenses 
and is pursuing a vigorous capital improvement policy. All in all, IBM's 1986 
was not a good financial year.

  SOFTWARE -- By far the best group performance of last year was from the 
software companies. As a group their stock price nearly doubled with some 
individual companies coming close to a 200% increase. While people were not 
installing as many new systems as previous years, they were expanding the range 
and power of their existing systems through new software. Among the big winners 
were well known names such as Lotus, Ashton-Tate, and Microsoft. If there was a 
single negative event in this group, it was the failure of Microsoft to deliver 
an operating system for either the 80286 or the 80386. This single fact could 
have considerable impact on the type of software available in the coming year. 

ON THE LEGAL FRONT:
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  US Robotics has added Hayes to its anti-trust and patent infringement suit 
after Hayes tried to enforce patents it holds by demanding royalties from US 
Robotics. The confusing matter sounds perfect for the legal mind, and may 
outlive the patents themselves. In another matter, the Florida contractor's 
suit against Lotus was dropped. John Cummings' attorney would not comment on 
the dropping of the suit, but Lotus' attorneys claimed that it was dropped 
because Cummings faced a lengthy litigation with little hope of success. The 
underlying question still remains: how much implied guarantee responsibility 
does a software publisher have? It is certain that the matter will come up 
again. 

  Lotus is involved in another case. On December 19th, it filed a suit in the 
Supreme Court of British Columbia against Softsave Information Services Inc. 
of Vancouver, BC. Joining Lotus are Ashton Tate, Microsoft, Lifetree, 
Activision, and Infocom. They charge that Softsave illegally reproduces copies 
of leading software products then rents the copies to customers in a form of 
"try before you buy" plan. This will be an especially complex case as Canadian 
Copyright Laws are considered less well defined than U.S. laws.
