Slugging It Out in the Schoolyard

By Philip Elmer

Manufacturers are scrambling to get to the head of the class

It looked like an old-fashioned college protest right out of the '60s. This demonstration, however, had a contemporary twist: more than 100 angry students at California Polytechnic State University in San Luis Obispo had marched into the president's office to demand a chance to buy Apple's Macintosh computer at a discount. The California manufacturer had been offering selected colleges its new machine, which retails for $2,495, for resale to students at a price of just over $1,000. Two dozen universities, including Harvard, Yale and Stanford, accepted Apple's terms, ordering more than 50,000 computers. But Cal Poly, citing a conflict with the state's competitive-bidding requirements, had balked, eventually losing out on the limited-time proposal.

Apple's bargain-basement Macintosh offer was by no means .an isolated instance in the sales campaign that computer manufacturers have been waging at educational institutions. Salesmen offering incentives and deep discounts are swarming around wealthy school districts. "We are bombarded daily with catalogues of software, letters and phone calls," says Torance Vandygriff, principal of the Preston Hollow Elementary School in North Dallas, which last year raised $24,000 to buy classroom computers. Atari, in a joint venture with Post Cereals, will even swap equipment for proof-of-purchase coupons clipped from breakfast-cereal boxes. The exchange rate: one $300 Atari 800XL computer for every 3,125 boxes of Alpha-Bits.

Behind the company promotions is some simple arithmetic. According to Market Data Retrieval, a Connecticut research firm, the average grade school in the U.S. now owns 3.6 computers, while the average high school has ten. But those figures are likely to double annually for the next several years. At universities, computers are expected to become as common in dorms as stereos.

More is at stake than merely a place in the schoolroom. By installing their computers in classes or on campus, manufacturers hope to ensure after-school success. "The education market is not all that profitable, but it is highly strategic," says Clive Smith, an analyst at Boston's Yankee Group, a market-research organization. "School use turns out to be absolutely key to establishing brand loyalty." Moreover, school sales can generate home purchases. Students working on Apple, Commodore or Radio Shack computers in school often lobby parents to get the same brand of machine at home.

To capture youngsters, manufacturers frequently seed schools or universities, giving discounts on computers in order to get their machines in the door. Such practices date back to the mid-1950s, when IBM gave colleges a 60% markdown on its giant Model 650 computer. The venture paid off when students trained on IBM equipment went on to head data-processing departments in industry.

Nobody has pursued the school market more assiduously than Apple. In 1982 the company launched a giveaway program coyly named "The Kids Can't Wait." Chairman Steven Jobs offered a free computer to every elementary and secondary school in the U.S., 103,000 machines in all, if Congress would subsidize the gifts with increased tax credits. Legislation granting computer companies those tax breaks has been stalled in committee for two years, in part because of the efforts of Ohio Democrat Howard Metzenbaum, who labeled the bill a "rip-off."

California lawmakers, however, have given Apple the requested tax benefit, and last summer the company donated nearly 10,000 Apple IIe computers and software (total value: $21 million) to schools in the state.

Not to be outdone, Tandy, one of Apple's chief competitors, supported federal legislation tailored to promote its Radio Shack line of computers. Tandy gave books, slides, even special Superman computer comics to schools and made available free instruction to each of America's 2.4 million schoolteachers. "It's good business for us," says Bill Gattis, director of Tandy's education division.

Other firms are joining in. Data General, Digital Equipment, Hewlett-Packard and Zenith are granting college administrators computer discounts of up to 75%. Hewlett-Packard offered to donate ten machines to each of 14 California high school districts, and last month Digital announced it would be giving $1.1 million worth of equipment to 46 schools in New England.

The toughest competitor in the schoolyard is likely to be the biggest, IBM. Two years after introducing its first personal computer, the company has surpassed Apple, Tandy and Commodore in the business market. But thus far IBM's progress in educational sales has been far less spectacular. In primary and secondary schools, Apple still has nearly 50% of the business, compared with 3.9% for IBM.

IBM is trying hard to catch up. Last spring it organized a computer teacher-training program in cooperation with the Educational Testing Service, which produces the Scholastic Aptitude Tests. Last summer the company gave 1,500 of its PC machines to IBM-trained teachers in 88 schools, and last month it announced plans to donate an additional 2,000 computers. Now IBM has launched a $40 million sales and advertising campaign for its less-expensive PCjr directed at both the home and the school markets. "The PC itself was simply too sophisticated and too expensive for the classroom," says Stephen Cohen, an IBM analyst with the Gartner Group. "But now, with PCjr's introduction, it is clear that IBM will be in this field in a big way."

As schools buy more computers, they are becoming technologically more sophisticated. Many are insisting that manufacturers provide quality software and such extras as guaranteed service, training and back-up support. Says Leroy Finkel, a computer specialist for the San Mateo, Calif., school system: "From now on, the companies will have to fight and scratch to sell their machines." --By Philip Elmer-DeWitt Reported by Michael Moritz/San Francisco and Adam Zagorin/New York

With reporting by Michael Moritz, Adam Zagorin