Fire in the Valley (2014)
Chapter 6
Retailing the Revolution
Computer magazines built the real enthusiast’s marketplace.
David Bunnell, founder of several computer magazines
The meanings of words can change over time, complicating the job of the historian.
To the hobbyists who made up the early core market for personal computers, this personal-computer phenomenon was less an industry than a movement. This showed clearly in the style and atmosphere of the magazines, shows, and stores. Initially, these were primarily about community building. Around the magazines and stores and shows there blossomed a culture in which computers for individuals could be imagined, built, understood, and, almost incidentally, bought and sold.
Spreading the Word: The Magazines
The magazines basically defined a nationwide small town.
-Carl Helmers, the first editor of Byte magazine
Buying microcomputers by mail required a healthy measure of blind faith. Customers mailed checks to companies they had never heard of to acquire products they couldn’t be sure existed. All they knew was that they wanted a computer, so they mailed their money and waited. And waited. Fortunately for the manufacturers, the earliest buyers of microcomputers rarely demanded customer service. They were hobbyists who would tolerate almost anything—including the mirage world of mail order—to get their own computers.
Soon magazines were coming on the scene to alert the hobbyists to the new machines. But this would prove to be a mixed blessing.
Products were being announced before they were even designed, let alone built, and the magazines supported the practice. Popular Electronics had passed off an empty box as the original Altair and a mock-up as the Processor Technology Sol in a couple of its cover stories. The journalistic excesses were probably harmless, but ads used the same technique. Byte’s Carl Helmers said, “I’m not saying [the technique was] legitimate, but it’s certainly one that’s used all over the place in technology. A product may be there to show in so-called functional simulation form, and that functional simulation is one step toward making the thing actually happen.”
The “functional simulation” was the least misleading of the ads because it at least gave the buyer some idea of what the machine could do. Other ads were more fantastic than factual. “A guy who is in love with writing copy about computers can dream up any kind of system,” said Helmers. “And there were people who did that.”
The computer magazines of the time played dual, almost schizoid roles in this frenzy. Editors encouraged the frenzy by reporting advances, printing ads, and sometimes failing to alert readers to substandard items. Carl Helmers, for instance, rationalized his refusal to assess product quality on the grounds that “products that don’t fulfill [their promises] over the long haul will sort themselves out and die.” But some publications did actively sift the good from the bad. Adam Osborne, who had been selling books out of a cardboard box at Homebrew meetings, started a muckraking column that appeared in Interface Age, and later in InfoWorld, that alerted buyers to the shortcomings of certain products. Dr. Dobb’s Journal, the offshoot of the People’s Computer Company (PCC) newsletter, took a strong consumerist stance, steering readers away from purchases that they’d later regret.
Byte
Byte was one of the great success stories among microcomputer magazines, but the success grew out of conflict and perceived betrayal. Byte was launched in mid-1975, the brainchild of Wayne Green, who had published 73, a magazine for ham-radio enthusiasts. The Peterborough, New Hampshire, resident was part hobbyist and part huckster. Green enjoyed promoting those things he believed in: ham radio, microcomputers, and himself. Some viewed Green as a front-porch philosopher who was fond of contemplative argument and prone to thinking out loud. But others saw a complex individual who could be difficult to work for. His busy, impatient mind would flit from the latest software developments to psychic phenomena, but it always came back to the bottom line. Wayne liked to make money.
By 1975, Green was looking to computerize 73’s circulation department. He called the major minicomputer firms, each of which sent a representative. Every rep warned him of the dangers inherent in buying a rival’s machine. Green found all their warnings convincing. The computer investment was beginning to feel like a leap into darkness. Before paying $100,000 for a computer, Green decided he should learn something about the players in the field.
Green discovered that the computer books and magazines that were available seemed to be written in a foreign language. Only computer-club newsletters were understandable. They also were the only good sources of information about these new microcomputers. The more Green thought about it, the more he realized that he was not alone. The country was full of people who needed an introduction to computers written in plain English.
Green saw his opportunity and decided to create a magazine to ease beginners into microcomputing. He needed a name for his publication, one that was short, catchy, and evocative of the machines themselves. He decided on Byte.
Figure 46. Carl Helmers Helmers, the first editor of Byte magazine, is seen here at the National Computer Conference in the 1970s.
(Courtesy of David H. Ahl)
Green recruited Carl Helmers as editor. Helmers had been issuing a periodical called ECS (Experimenter’s Computer Systems) solo in Boston. Since January 1975, just after the Popular Electronics announcement of the Altair, Helmers had been writing 20 to 25 pages each month on his ideas for building and programming microcomputers. He then shepherded the pages through editing and photo-offset printing and had them distributed to some 300 readers. Helmers accepted Green’s offer and moved to New Hampshire. Green drew his Byte contributors and readership from the early newsletters such as ECS and from his own ham-radio-enthusiast subscribers, believing the latter to be a natural audience for Byte. When the first edition of Byte appeared on August 1, 1975, its 15,000 copies sold out immediately. This was the beginning of a new magazine genre, the personal-computer magazine.
Within a decade, the personal-computer magazine market would support scores of magazines competing for millions of dollars of advertising revenue. At the height of the PC-magazine boom, the leading magazines swelled to 400+ pages and hosted gala awards ceremonies with tuxedo-wearing journalists and CEOs arriving in stretch limos to hand out and receive gold statuettes.
But in the early days, it was considerably less pretentious.
With Wayne’s ex-wife, Virginia Green, as office manager, Helmers as editor, and much of the 73 staff filling in the personnel ranks, Green set about compiling a second issue. He estimated that 20 percent of Byte’s readership came from the 73 mailing list. To beef up the subscription list, Green took the first issue around to manufacturers, including MITS in Albuquerque, Sphere in Salt Lake City, and Southwest Tech in San Antonio. Green was greeted with enthusiasm, and the manufacturers supplied him with customer address lists. Those lists, he guessed, gave Byte another 20 to 25 percent of its subscriptions.
Byte was immediate, chatty, and enthusiastic. It caught the flavor of the computer and electronics hobbyist newsletters, and spoke directly to the people building and buying and lusting for their own microcomputers. It was the right formula, and it was wildly successful.
Wayne Green had struck a mother lode and was exhilarated. But he had one problem. He didn’t own the company. It belonged to Virginia, from whom he had been divorced for 10 years. This unusual arrangement was a result of Green’s legal difficulties: he had been convicted of tax evasion and had other pending legal issues. “The lawyers said we should set up the new magazine as a different corporation and have somebody keep the stock separate from other assets until the suits were resolved,” Green explained. He entrusted Byte to Virginia.
The trouble started almost immediately. Helmers had a good sense of what the computer hobbyists wanted, but Green had been publishing successful magazines for years and was convinced that he had the formula. Anyone should be able to pick up two or three issues and get up to speed, he was convinced. Helmers had put together something far more technical, a kind of bulletin board for a highly technical community.
Green was pushing Helmers to simplify the content to reach a broader audience, and Helmers pushed back. After the first issue hit the stands, he and Virginia forced Wayne out and took over the publication. By January 1977, Bytehad a readership of 50,000 and was the premier magazine in the subject area. In its field it had the stature of Scientific American, the in-crowd feel of The Village Voice in the beat era, and the style of a Homebrew Computer Club meeting. Helmers remained as editor and part owner of the company, which he and Virginia eventually sold to publishing giant McGraw-Hill in April 1979. Helmers stayed with the publication until September 1980.
Kilobaud
Wayne Green did not sit still for long. In August 1976, he circulated among the computer manufacturers to find out if they would support a new magazine with him at the helm. The response, he said, was unequivocally positive. Green wanted to call the publication Kilobyte, but Byte claimed it would infringe on its name. Because Green was telling people that the publication’s mission would be to “kill Byte," that was probably not an unreasonable claim; so Green christened his magazine Kilobaud.
Kilobaud was an expansion of a regular feature on computers called “I/O” that Green had run in the pages of 73. The new publication strove to achieve the Wayne Green ideal: anyone should be able to pick up the publication and after reading two or three issues understand its contents. Green lamented that Kilobaud never overtook Byte in circulation or advertising, but it was clearly a success nonetheless.
Green kept an eye on how his market developed. When he started Kilobaud, almost all his readers were hobbyists, people who had no qualms about building their own accessories or using a soldering iron to modify the apparatus. Around 1980, Green recognized a new kind of hobbyist, one who liked to use the equipment but shunned all that tinkering. Responding to this change, Green renamed the magazine to give it broader appeal. He called it Microcomputing. Around the same time, he started another journal, 80 Microcomputing (later called 80 Micro), aimed at users of the Radio Shack TRS-80 computer line. Green later launched other, even more consumer-oriented publications. Helmers and his successors at Byte held Byte to a high technical level for years.
Carl Helmers saw the early periodicals as having a threefold purpose: economic, educational, and social. The magazines defined a market, spread important news, and helped bring hobbyists together. These publications created a nationwide community of computer users. “Peterborough, where I live, is a small town, but it’s geographically constrained,” Helmers said. Like a small town where everyone knows everyone else and news of events is spread almost as soon as they happen, everyone and every event was known among the small village of microcomputer hobbyists, wherever they really lived. And, no publication had more of a small-town flavor than Wayne Green’s early Kilobaud, with its chatty editorials, industry gossip, and calendar of events.
Dr. Dobb’s Journal
To Carl Helmers’s threefold statement of purpose, Jim Warren would have added two more elements: social consciousness and a cheerful antiestablishment attitude straight out of the 1960s.
Warren was chair of the Math Department at the College of Notre Dame, a Catholic women’s academy just north of Silicon Valley. At the time, Warren liked to throw huge get-togethers at his home, with most of the revelers partying in the nude. “The parties were rather sedate by any common standards, except that people didn’t have any clothes on,” he recalled.
Figure 47. Jim Warren Warren was the first editor of Dr. Dobb’s Journal and launched the West Coast Computer Faire. (Courtesy of Jim Warren)
The media descended on Warren’s home. Playboy photographed these affairs; the BBC filmed them; and Time did an article on them. All the publicity forced the hand of the college officials, who told Warren that his conduct struck a sour note at the Catholic school and asked him to leave. Warren shrugged it off. In this enormous world, there had to be more interesting jobs than this one, he thought.
Warren was looking for something new when a friend suggested that he go into programming. “You’ll pick it up,” the friend assured him. So Warren went to work doing programming at the Stanford University Medical Center and ended up loving it. Just for the sheer fun of it, he became an avid follower of state-of-the-art developments in the field. He had become an enthusiast.
In the early 1970s, the Stanford University Medical Center was also home to the Stanford Free University, which offered an alternative, noninstitutional approach to higher education that was much to Warren’s liking. He soon became the Free University’s executive secretary and newsletter editor, while taking on a variety of consulting jobs. And it was there that he met Bob Albrecht and Dennis Allison.
Albrecht was a transplant from the Midwest who had parted ways with Control Data Corporation and was looking for ways to get kids connected with computers. Allison was a Stanford computer-science professor who was as interested in the network of hackers he was building up as he was in computer science. When the Altair appeared, followed by Gates and Allen’s BASIC, Albrecht and Allison began seeking ways to bring their expertise to the cause of spreading the word about computers. Like, say, a magazine.
Byte had debuted in September 1975 and was publishing information on hardware design, but no software magazine existed yet. Hobbyists turned to Albrecht and Allison’s People’s Computer Company newsletter to provide one. Dick Whipple and John Arnold of Tyler, Texas, sent PCC a long list of code that constituted a “Tiny BASIC,” a 2K version of the full-blown BASIC, designed for machines with limited memory. Allison decided to publish a limited-edition, three-issue magazine to get this code into hobbyists’ hands.
The response to the magazine was overwhelming. In January 1976, the publication became an ongoing project called Dr. Dobb’s Journal of Tiny BASIC Calisthenics and Orthodontia. “Dobb’s” was a contraction of “Dennis” and “Bob,” Allison and Albrecht’s first names. The rest of the title was an in-joke about “running light without overbyte.” Jim Warren was hired to run the publication. Warren thought the name was too specific and soon changed it to Dr. Dobb’s Journal of Computer Calisthenics and Orthodontia.
The magazine published, among other material, classic Tiny BASIC implementations by Li-Chen Wang, Tom Pittman (the consultant who had programmed Intel chips before Gary Kildall), and others, along with all the micro news, rumors, and scuttlebutt Warren could unearth. Dr. Dobb’s adopted an irreverent, folksy tone that reflected the influence that the 1960s had on its editor. Warren believed in contributing one’s efforts to the good of all humanity; in fact, in the early 1970s he wondered whether he should continue working with computers at all. He thought of the machines as mostly gadgets; they were playthings as stimulating as chess but by and large devoid of social utility. As he later put it, “Somewhere back there I’d been raised with a Puritan work ethic (if not all the Puritan values), a make-a-contribution-to-society ethic, which was certainly illustrated in my 10 years of teaching at destitute wages, over which I have no regrets at all.”
Nor did he have any regrets about editing Dr. Dobb’s at $350 a month when he could have been earning far more consulting. Money wasn’t of paramount importance as long as he was making a contribution to society. He liked to quote Dennis Allison’s slogan: “Let’s stand on each other’s shoulders and not on each other’s toes.”
Warren was enjoying himself and believed that others should, too. He infused Dr. Dobb’s with a sense of merriment that became one of the publication’s hallmarks. Idleness might ultimately ruffle his conscience, but pleasure was still one of the great rewards of existence. “Let’s not worry about conformity and tradition. Let’s just do whatever works and let’s have fun doing it,” he said. He was attracted to PCC partly because it was the first periodical to treat computers as objects suited to intellectual forms of recreation.
A Publishing Industry Develops
A large variety of other computer-enthusiast magazines quickly appeared, some of which spun off from existing publications. For instance, PCC spun off Recreational Computing, which addressed a broader and less technically inclined audience. Corporations produced other publications. Computer Notes came straight from MITS and focused on the company’s Altair line. Its editor, David Bunnell, later quit to run the slick-looking Personal Computingmagazine, with articles geared to beginners.
Still other magazines grew out of informal newsletters exchanged by hobbyists, while many others seemed to appear spontaneously. Hal Singer and John Craig started the Mark-8 Newsletter to provide information for fellow users of the Mark-8. (Craig later became the editor of Kilobaud.) The Southern California Computer Society produced a newsletter called Interface. After David Ahl left DEC, he started Creative Computing, which had the bright and mirthful air of its somewhat rumpled and clever editor. ROM offered regular contributions from iconoclasts such as Lee Felsenstein and Ted Nelson, and a “chipcake” centerfold of the droid R2D2.
This crop of magazines spread the word about microcomputing and enabled hobbyists in the most far-flung parts of the country to stay current on personal-computing trends. As personal computers matured into a big business in the 1980s, explaining them became a great satellite industry. The demand for information about computers seemed to grow faster than the demand for the equipment itself.
Computer books were now hot. Computer-technology sections appeared in both the chain stores and mom-and-pop bookstores, and began to eat up shelf space. At least a few writers and several publishing houses were making a lot of money on books that explained how to use software, the very same task that a user manual was designed to accomplish. In one legendary deal, a publisher paid a $1.1 million advance for The Whole Earth Software Catalog, a book that offered reviews of software products. The huge advance was thought fair even though many of the reviews would already be out of date before the book was published, recalled Stewart Brand, who coordinated the project.
Industry magazines were evolving right along with the products they featured. The more technically geared magazines, like Byte, spanned platforms (such as computers running the CP/M operating system, IBM PCs, and Macintosh computers) in their coverage and addressed readers interested in all kinds of computers. As the computer became more of a consumer product and the computer market settled into one of two camps, IBM-compatible or Macintosh, magazines became more platform-specific in their coverage. The change was inevitable, because an IBM owner had no use for an article about Macintosh software, and vice versa. These new publications offered elaborate product reviews that helped customers to assess the relative merits of hardware and software. Good reviews were invaluable to vendors. “Product reviews made all the difference,” said Seymour Rubinstein, founder of MicroPro International, which sold the popular WordStar software.
Among the more prolific computer publishers was David Bunnell of MITS, who launched an array of successful computer magazines, including PC Magazine, PC World, MacWorld, Publish, and New Media, and in 1996 became publisher of the computer-business magazine Upside. Bunnell had founded PC Magazine right after the IBM PC debuted, and he published it out of his San Francisco home.
The first issue in January 1982 included a review of John Draper’s EasyWriter word processor that was entitled “Not So Easy Writer.” The product never fully recovered from the review. The first issue of PC Magazine was 100 pages and chock-full of ads, including one from IBM. The second issue went to 400 pages. A year later Bunnell was looking for an outside investor or even a buyer. Both publishing giants Bill Ziff of Ziff-Davis and Pat McGovern of IDG coveted the magazine. Bunnell thought he had an agreement with McGovern, but his initial investor struck a separate deal with Ziff. Bunnell and his staff were furious and resigned en masse to start the rival PC World for IDG. Bunnell thus has the distinction of having started both of the leading magazines for PC users.
Despite its staff’s departure, PC Magazine became a fabulous success. Ziff, too, had a formula. He invested a large initial sum to stake out his territory, then let the paid circulation, product-oriented text, and flashy look and feel do the rest. The formula usually worked well, although he had some conspicuous failures, such as Corporate Computing in 1992. Eventually, Ziff grew tired of managing the company and in 1994 sold it to an investment bank that turned it over two years later to a Japanese entrepreneur for $2.1 billion.
Bunnell’s PC World also thrived, and by the late 1990s both PC World and PC Magazine boasted million-plus circulations that brought in a great tide of ad revenues. Both magazines routinely published issues as thick as phone books. “Getting ads was so easy,” said Bunnell. “All you had to do was answer the phone.”
The computer magazines single-handedly resurrected mail-order computer sales. As customers became more product savvy, they no longer shied away from buying products sight unseen, especially if a magazine had covered the gear in one of its articles. “Mail-order advertising occurred overnight,” said Bunnell. This trend contributed to the rise of Dell Computer and other firms whose businesses were based on direct sales to customers. Mail order also contributed to the downfall of some retail chains. In retrospect, mail order was a harbinger of events to come with the explosive growth of the Internet.
Computer magazines were changing, but remained an important vehicle for promoting and communicating new products and ideas. Another effective method over the years for getting the message across was the computer show.
Word of Mouth: The Clubs and Shows
The First Computer Faire was definitely a torn-T-shirt, computer-junkie crowd. It was a gas. We didn’t know what the hell we were doing. The exhibitors didn’t know what they were doing. The attendees didn’t know what to expect. But we pulled it off.
-Jim Warren, computer-industry pioneer
Computer clubs and shows were the public forums of the early micro world. They not only offered hobbyists an entree into an interesting social club, but also supplied otherwise-unobtainable news about product releases and industry innovations. The clubs provided ongoing support for hobbyists and featured free and wide-ranging discussions about products, which often led to the publication of another newsletter. The fairs were technology spectacles, and their carnival atmosphere ignited each attendee’s enthusiasm for the growing field. They also gave hobbyists the opportunity to try out the latest novelties with their own hands.
Clubs
Homebrew Computer Club, with Lee Felsenstein presiding and other microcomputer pioneers in attendance, served as the prototype of the computer-enthusiast club. The group’s candid assessments of market offerings had an impact that reached far beyond the four walls of the club’s meeting room. Its influence reached user groups all over the country. When the magazines emerged, they sent reporters to cover the Homebrew meetings, spreading the club’s influence even farther. The Homebrew Computer Club’s opinion could be critical to a company’s success. Processor Technology, Apple, and Cromemco all profited from Homebrew endorsements. Many other corporations received less flattering appraisals, which were felt in their sales figures.
The first Homebrewers realized early on that they could affect the image and the future of the computer industry itself. Prior to 1975, computers were associated with technicians in lab coats—the “high priests” of the big machines—who would retire to an air-conditioned environment with a problem to solve and emerge sometime later with a printout. The Homebrew Computer Club helped replace that vision with one of rugged, if not ragged, individualism in which solo mental efforts could lead to multimillion-dollar companies. The Homebrewers felt that they had a duty to chart a road map of the future. The first edition of the club’s newsletter, issued in March 1975, predicted that home computers would perform tasks ranging from editing text and storing information to controlling household appliances and doing the housework (robotically) to instructing users and providing pleasant diversions.
Like Homebrew, the Amateur Computer Group of New Jersey (ACGNJ) became an arbiter and conduit for the new technology. For instance, the founders of Technical Design Labs of Trenton, New Jersey, started their company by selling used computer terminals at the ACGNJ meetings.
One early club that was run more like a professional organization than an informal group of hobbyists was the Boston Computer Society (BCS), even though its founder, Jonathan Rotenberg, was 13 when he started it. Rotenberg eventually developed BCS into a 7,000-member organization with 22 different committees, a resource center, and a lengthy list of industry and corporate sponsors. Rotenberg would later insist that BCS was a “users’ group, not a club.” BCS and the other users’ groups were computer clubs that had developed into something more. They served as informal think tanks, social groups, and arenas for the exchange of information. The clubs fostered a spirit of voluntarism and adherence to consumer advocacy that was carried over into the users’ groups. These groups worked to protect computer buyers to an extent that was unprecedented for any American industry. Committees worked diligently against shoddiness in manufacturing and deception in advertising. The clubs were responsible for directing the efforts of the free-spirited microcomputer manufacturers of the day. Without the feedback from the clubs, the early hobbyist-oriented microcomputers might never have developed into useful personal computers.
Shows
For the hobbyist shopping for hardware, nothing substituted for a hands-on demonstration of a new product. For that reason, and for that taste of “the future is now” that sends the imagination into orbit, hobbyists flocked to the computer shows.
Figure 48. West Coast Computer Faire Right from the start, the computer shows tapped the pent-up demand for personal computers and information about them. (Courtesy of David H. Ahl)
The first microcomputer fair to attract a sizable crowd was a single-company event. Early in 1976, David Bunnell of MITS began promoting the World Altair Computer Convention in Albuquerque in the MITS news organ Computer Notes. By the time the event took place in March, several hundred people turned out.
Among the speakers was Computer Lib author Ted Nelson, who delivered a scandalous and wildly entertaining speech on what he called “psycho-acoustic dildonics.” Lee Felsenstein (of Homebrew Computer Club, Community Memory project, and Processor Technology fame) was surprised some audience members didn’t drag Nelson off the stage during his carefully detailed explication of computer technology’s potential contribution to sex toys. After this off-the-wall presentation, Nelson talked to several people about setting up a computer store in the Chicago area. Nelson was a provocateur, but he understood that these computers were going to be big business.
MITS chief Ed Roberts planned the conference as a showcase for MITS and only MITS. He refused to give booth space to competitors such as Processor Technology. Proc Tech’s Lee Felsenstein and Bob Marsh were undaunted. Felsenstein suggested to Marsh that the two of them set up shop in a hotel room during the conference. "Great idea,” Marsh answered. They nabbed the penthouse suite and posted signs around the conference floor inviting people to drop by. They demonstrated Steve Dompier’s Target using the television set as their video display monitor. Because the Sol wasn’t ready, they had an Altair on hand. When Ed Roberts stopped by, it was the first time that he and Felsenstein had spoken since Lee criticized the Altair in Dr. Dobb’s Journal.
More shows soon followed in other places around the country. In May 1976, Sol Libes of ACGNJ put together the Trenton (New Jersey) Computer Festival, something of a hardware swap meet and discussion session. The fair pioneered the idea of an open computer conference that wasn’t tied to a single manufacturer. It also showed Californians that the microcomputer revolution was not confined to the West Coast. Featured speakers included premier hobbyist Hal Chamberlin from North Carolina, and David Ahl and Dr. Bob Suding of Denver. Ahl and Suding’s Digital Group had just received advance copies of the Z80 chip from Federico Faggin’s new semiconductor company, Zilog, and were raving about what could be done with this hot chip.
What started on the coasts soon spread across the country. In June 1976, a loosely organized group of hobbyists staged the first Midwest Area Computer Club conference. The inaugural event drew nearly 4,000 people. Midwest dealer Ray Borrill shared a booth with Processor Technology, which displayed its new Sol-20 computer. Borrill and Proc Tech sold thousands of dollars’ worth of parts and supplies, and because they hadn’t thought to bring along a cash box, money was stacked in piles on the table. By the end of the show, people were snapping up whatever was left in the booth, just to buy something. The computer-hobbyist fever was running high.
Then in August 1976, in Atlantic City, New Jersey, hobbyist John Dilks staged the Personal Computing Festival. This show was significant for being the first national computer show. This event helped popularize the term personal computing. Before that festival most people spoke in terms of hobby computing or microcomputing. Wayne Green’s Kilobaud magazine booth at the festival took in more than a thousand subscriptions. Peter Jennings bought the KIM-1 computer that he would later use to write Microchess. Other such shows were held in 1976, including events in Denver and Detroit.
But not in California. Dr. Dobb’s Journal editor Jim Warren had both an appreciation of these festive get-togethers and a gnawing sense that something was out of whack. “My myopic contention was that all of this good stuff was happening on the wrong coast,” he said. A week or two before the Atlantic City show, Warren commenced planning a show for the San Francisco Bay Area. He decided to call it a computer faire after the medieval summer spectacles in Elizabethan England. It was an apt name, he thought. A Renaissance faire celebrates the past; the computer faire would celebrate the future. In April 1977, Jim Warren staged the first West Coast Computer Faire.
When David Bunnell got wind of Warren’s plans, he contacted him on behalf of MITS. Bunnell said MITS was also planning a West Coast show, and suggested that the two merge their efforts and stage a conference sponsored by Personal Computing magazine. Warren would get 10 percent of the gate and profit further from his partner’s greater experience and professional acumen. Warren wasn’t at all comfortable with this proposal. He didn’t consider it appropriate that he, as editor of Dr. Dobb’s, be involved in a show sponsored by Personal Computing or any other magazine. He was also uneasy about the emphasis on money. “I wasn’t thinking about doing a big-bucks thing at all,” he recalled. “I just wanted to stage this event. I’d done the be-ins in the ’60s. I just wanted this [computer fair] stuff happening out here.”
Warren tried to reserve some space at Stanford University for his event but couldn’t get the dates he wanted. He then looked into the San Francisco Civic Auditorium. It would be a great spot for the event, he thought. It had excellent conference facilities and a splendid exhibition room. He asked how much it would cost. Rental was $1,200 per day. He was stunned.
Later that day, Warren got a bite to eat with Bob Albrecht at a restaurant called Pete’s Harbor. They did some figuring on a table napkin. If they could get at least 60 exhibitors, charge them around $300 each, and draw maybe six or seven thousand people, they could break even. What the hell, Warren thought, they could actually make money on the event. That’s the precise moment when he founded his company Computer Faire.
Figure 49. West Coast Computer Faire exhibitor An exhibitor getting ready for the first West Coast Computer Faire in 1977 (Courtesy of David H. Ahl)
As it turned out, Warren greatly underestimated the attendance figures. He had hoped to draw 7,000 to 10,000 people between Saturday and Sunday. Instead, almost 13,000 showed up. For several hours on Saturday morning, two lines of attendees stretched around one side of the auditorium and three lines stretched around the other side to the back of the building. It was a clear and windy day, and fairgoers stood in line chatting with each other. It took an hour to get through the door, but no one seemed to care. The fair had begun outside during the discussions among individuals who were equally rabid about computers.
Once inside, attendees found themselves in computer heaven. Rows and rows of festively decorated booths touted the latest advances in personal computing. An inquiring hobbyist could find him- or herself chatting up the very person who had designed some innovative product. Company presidents in T-shirts and blue jeans staffed a number of booths. The Apple II was unveiled in a large and rather attractive booth staffed by Steve Jobs, Mike Scott, and other Apple executives. Gordon Eubanks demonstrated his BASIC-E in a booth he shared with Gary Kildall. The Commodore PET was also introduced at the event.
Sphere had failed to rent booth space, but still made its presence known. The Sphere folks parked the Spheremobile, a 20-foot motor home modeled after MITS’s Blue Goose, out front and sent an employee to walk through the fair wearing a placard saying, “Come see the Sphere.” The excitement could be felt everywhere. “It was like a toy store at Christmas. It was mobbed,” said attendee Lyall Morrill. Among the many cosponsors were the Homebrew Computer Club, the Southern California Computer Society, PCC, and the Stanford Electrical Engineering Department. Science-fiction writer Frederick Pohl spoke, as did Ted Nelson, Lee Felsenstein, Carl Helmers, and David Ahl. Everyone agreed it was a gas.
Figure 50. Lyall Morrill and Bill Baker Early software entrepreneurs Lyall Morrill (left) and Bill Baker talk with a customer at the second West Coast Computer Faire. (Courtesy of Paul Terrell)
Jim Warren spent most of the weekend in a whirlwind, racing around to smooth out little snafus. At subsequent faires, he saved time by dashing around the convention halls on roller skates. Even while attending to the administrative duties, Warren was as thrilled to be there as everyone else. “It was the excitement of turning all those people on,” he recalled. He felt proud of his accomplishment. The first West Coast Computer Faire was three to four times larger than any previous computer show. It also led to the first published proceedings of a personal-computer conference. Warren had made his contribution to the industry by staging this watershed event.
Before the first West Coast Computer Faire even opened, Warren had decided to stage a second one. It took place in March 1978, in San Jose, California. Exhibit space was sold out a month in advance. Lyall Morrill once again was on hand, but this time he represented his own software company, Computer Headware. “Either by the luck of the draw or the strange humor of Jim Warren, my booth was positioned next to the IBM booth,” he noted. The contrast between the two booths was striking. IBM had mounted a slick chrome booth staffed by men in business suits and polished dress shoes. The booth featured the IBM 5110, a relatively expensive desktop minicomputer that didn’t particularly impress the attendees.
Morrill, wearing a propeller-topped beanie, was showing off his software package, a simple database-management program called WHATSIT, a loose acronym for Wow! How’d All That Stuff Get In There? He had created his signs the night before with a felt-tip pen. Jim Warren enjoyed the IBM-Computer Headware juxtaposition so much that he had photos taken of Morrill socializing with the IBM staff.
IBM and Computer Headware’s sales results by the close of the faire were as far apart as their corporate style. IBM got just a few orders, whereas Morrill was besieged with them. Customers queued up at his booth, credit cards in hand, to buy his program.
The second West Coast Computer Faire was such a great success that Warren decided to do one every year. If, as Carl Helmers said, the magazines defined the microcomputer community, shows such as Warren’s gave the community a meeting place.
Hand-Holding: The First Retailers
We didn’t want to sell Altairs. We wanted to solve problems.
-Dick Heiser, computer retailer
The first personal-computer store appeared not long after the Altair announcement. Its origin had very little to do with the usual motives or starting a retail business.
The First Personal-Computer Store
On June 15, 1975, 125 hobbyists and computer novices gathered in the recreation room of the Laurel Tree Apartments in Miraleste, California. Digital engineer Don Tarbell and computer neophyte Judge Pearce Young had brought them together to form the Southern California Computer Society. The participants engaged in a lively debate over the structure and purpose of the club. At one point, someone asked for a showing of hands of those who either owned or had ordered an Altair. A forest of hands popped up from the crowd.
Dick Heiser, a systems analyst who was among the assembled, was struck by the response. He realized that these Altair customers were going to have a lot of questions about assembling their kits. He thought that maybe he could be of help. Heiser had recently spent $14,000 building a video word processor for a low-cost minicomputer. With the introduction of the Altair, he realized that he could write a similar program for it for about $4,000. He was familiar with the innards of a computer and was eager to work on an Altair.
Heiser then had a brainstorm: why not set up a small storefront to market the Altair kits and provide advice and support for buyers? Heiser had little business experience and never imagined working as a salesman, but he knew that he’d have fun putting his technical skills to use. He wondered whether it could be profitable. He sat down and devised a cash-flow plan. If he paid $200 in rent per month and sold around 10 to 20 assembled computers at $439 each, he could stay in the black. It seemed to be worth a try.
In June 1975, Heiser flew to Albuquerque to talk to the people at MITS. The MITS execs weren’t sure what to make of Dick Heiser. Ed Roberts thought he was a “nice guy” but lacked the aggressiveness that marked a born entrepreneur. Roberts also worried about Heiser’s profit margin. MITS was selling the Altair kits for $395 ($439 assembled), which left skimpy profits. MITS couldn’t afford to discount its prices for anyone. Roberts hadn’t built any room for discounts into the Altair’s asking price. Heiser could buy the kits, assemble them, and sell them at the assembled price, for a pitiful 10 percent margin. Despite all this, Roberts took Heiser seriously. Others had approached MITS with the retailing idea, but Heiser was the first to come with a spreadsheet. “They thought I was a little weird,” Heiser recalled, “but they told me it sounded like a good idea, and we signed a contract.”
Heiser leased a small space for $225 a month in a low-rent area of West Los Angeles and launched the world’s first computer store. In mid-July, he opened for business. In large letters across the front of his store he advertised the outlet’s official name, Arrow Head Computer Company. In smaller letters, below the name, he added the tag line “The Computer Store” because he thought it sounded “funky” and interesting. Soon everyone was calling the outlet The Computer Store.
It was a strange kind of store. Heiser, an imposing figure with his beard and cowboy hat, would be engaged in a serious technical discussion with a hobbyist one minute, and the next minute be assuring a skeptic that the Altair, despite its low price, was truly a computer. When not attending to customers, he’d hole up in the back room where he repaired equipment and worked on his own computer, which he was still in the process of soldering together.
Heiser quickly discovered that his spreadsheet was seriously in error. He had anticipated getting a small but steady stream of individual computer purchases at $439 each, the price of an assembled Altair. Instead, he found that someone who was buying a computer could easily spend another $4,000 on accessories—extra memory, video terminals, disk drives, and such. It was his first small excursion into retailing and Heiser was amazed that so many people were willing to spend real money on these machines. In his first month, he took in between $5,000 and $10,000, and in his first five months in excess of $100,000. By the end of 1975, he was ringing up more than $30,000 in sales per month.
Heiser did little advertising other than posting flyers at large engineering firms such as System Development Corporation, Rand, and TRW. As a result, most of his early customers were engineers, who were typically computer enthusiasts who had moved to California to work in high technology. This being Southern California, he also got his share of celebrities: Herbie Hancock, Bob Newhart, and Carl Sagan visited The Computer Store. But the clientele consisted mainly of hobbyists.
Heiser’s Challenges
A customer base consisting exclusively of hobbyists was probably just as well, because the process of assembling an Altair generated each and every problem Heiser anticipated. “It was really tough in those days,” he recalled. “You had to know electronics as well as software. You had to bring up the raw machine, and you had to use the toggle switches to put in the bootstrap loader,” he said, describing the various steps required to get an Altair up and working. Buyers who stumbled at various points en route to setting up their Altairs came running back to Heiser, who patiently instructed them about careful assembly, repaired any malfunctions, and lent a sympathetic ear to complaints about the MITS memory boards.
Although Heiser was selling enough computers to make a healthy profit, a careful accounting of his and his employees’ time would have shown that most of their time was spent explaining the technology, repairing machines, setting up systems, and reassuring customers. Hand-holding, community building, proselytizing. It worked, but it sure wasn’t the business-school model of retail sales.
The Computer Store was not without some local competition. In late November 1975, John French opened his Computer Mart in a small rented office suite. French offered the IMSAI, which was simply a better piece of computer hardware than the Altair. On the other hand, Heiser, with Gates and Allen’s BASIC computer language, had the superior software offering. Software was the more important ingredient of the two, but because BASIC could run on French’s machines, French thrived along with Heiser. Eventually, French sold his interest in Computer Mart and invested in his friend Dick Wilcox’s computer company Alpha Micro.
Heiser also faced competition from a group of devout Indian Sikhs in Pasadena. Although American by birth and upbringing, they embraced the culture of their Indian ancestors. They also embraced cutting-edge technology. “For them, it wasn’t, ‘Let’s sit by the river and meditate,’” Heiser observed. Dressed in their turbans and white coats, the Sikhs sold computers manufactured by Processor Technology, and later sold Apple products. Heiser respected them immensely. Like him, they cared more about solving a customer’s problems than moving more inventory.
In May 1976, Heiser moved The Computer Store to Santa Monica to a facility four times the size of the one in West Los Angeles. He now had several employees and was making $50,000 to $60,000 a month. He installed carpets and desks that made the store look like the offices of a bank executive. Customers would sit across the desk from a salesperson to discuss system requirements and how best to meet them. Heiser saw himself as more of a counselor than an entrepreneur. The problem-solving approach also gave him personal satisfaction. “I’m a computer enthusiast and a compulsive explainer,” he said.
One problem that he simply couldn’t solve nagged at Heiser. MITS was pressuring him into making questionable deals with his customers. MITS bound the purchase of Gates and Allen’s BASIC to the purchase of the notoriously defective MITS memory boards. Heiser understood the value of the BASIC, but he realized that no one wanted to buy memory boards that didn’t work and he simply didn’t want to carry them.
“We went through a lot of grief trying to make a viable computer system and a viable computer business when we didn’t have any memory devices,” he said. Then MITS decreed that Altair outlets would sell only its products and no one else’s. MITS was worried that if its retailers also offered competitors’ wares, customers would buy the MITS software but reject its hardware. As it turned out, the company’s worries were unfounded given that most of the early computer stores quickly sold out of whatever they got their hands on. Heiser complained to Ed Roberts, but Roberts was adamant and, according to Heiser, threatened to shut down dealers who disobeyed his edict. This policy of exclusivity cost MITS many dealers, but Heiser remained loyal and reluctantly abided by the rules until Roberts sold MITS to Pertec.
Heiser concluded that if MITS was out of touch, Pertec must be roaming the ether. Thinking it could inject MITS with much-needed capital and a proper business orientation, Pertec called a meeting of MITS’s 40 dealers. Heiser listened to the Pertec representatives’ marketing ideas but didn’t think much of them. Pertec figured that if it could sell one computer to General Motors, for instance, the automotive giant would return to Pertec for its next 600 computers. Retailers would soon be filling 600-item orders left and right. The company would rocket into the Fortune 500.
Heiser was amazed at Pertec’s naivete. It was clear to him that the company was oblivious to the problems it had acquired with MITS. At the end of the meeting, Heiser stood up and said that Pertec would have to deal with the immediate problems if it ever hoped to succeed financially with MITS. At that point, Heiser began making plans to go his own way and started stocking other computers, including the Apple II and the PET.
Dick Heiser watched the computer retailing scene change dramatically over the coming years. Discounters entered the market. They employed salespeople with no technical backgrounds who sold machines “with the staples still in the box,” Heiser said. “They may as well have been selling canned peaches.” It was becoming increasingly difficult for Heiser to maintain his standards of excellence. In March 1982, he left the store for good.
Like many of the personal-computer pioneers, Heiser had broken new ground through his unflagging enthusiasm for the technology. Even in retailing, the hobbyist ideal led the way. But unlike computer design, which can be done for love or for money, retailing is necessarily a commercial venture. Computer retailing quickly attracted individuals more aggressive than Heiser, including Paul Terrell.
Byte Shop
Paul Terrell’s friends warned him that retailing computers would never work. Some people, Terrell mused, also said it never snowed in Silicon Valley. Terrell recalled his friends’ warnings as he watched snow drifting down on December 8, 1975—the day he opened his Mountain View Altair dealership, Byte Shop, in the heart of Silicon Valley. Like all the other Altair dealers, Terrell soon ran headlong into the MITS exclusivity policy, except that Terrell chose to ignore it. He was selling all the Altairs he could get, between 10 and 50 a month, plus anything else he could get from IMSAI and Proc Tech. The MITS edict, Terrell concluded, was not only pointless but, if he followed it, financially harmful as well.
Figure 51. Byte Shop The original Mountain View Byte Shop (Courtesy of Paul Terrell)
It wasn’t long before David Bunnell, then MITS vice president of marketing, called to cancel Byte Shop’s Altair dealership. Terrell argued that MITS should regard Byte Shop as something like a stereo store that carried many different brands and could turn a profit for them all. Bunnell waffled. It was Roberts’s decision, he said. At the World Altair Computer Convention in March 1976, Terrell approached Roberts directly about his being dropped from the roster of MITS dealers. Roberts stood firm. Terrell was out.
Figure 52. Inside Byte Shop Paul Terrell opened Byte Shop in 1975 in Mountain View, CA. (Courtesy of Paul Terrell)
At the time, Terrell was selling twice as many IMSAIs as Altairs, and he consoled himself with the fact that MITS’s policy of excommunicating the unfaithful would ultimately hurt Roberts more than his dealers. Terrell was still selling whatever he could stock. As Terrell saw it, he and John French, Dick Heiser’s Computer Mart competitor in Orange County, were responsible for most of IMSAI’s early business. They used to do battle for the product. Terrell would rent a van and drive to the loading dock at IMSAI’s manufacturing site in Hayward to collect his and French’s orders. Check in hand, Terrell would ask, “You want cash on the barrelhead, boys?” It was hardware war.
Terrell had opened Byte Shop in December 1975. By January, people who wanted to open their own stores were approaching him. He signed dealership agreements with them in which he would take a percentage of their profits in exchange for the name and business guidance. Other Byte Shops soon appeared in Santa Clara, San Jose, Palo Alto, and Portland. In March 1976, Terrell incorporated as Byte, Inc.
Terrell was part of the hobbyist community. He named his store after the leading hobbyist magazine, and he insisted that Byte Shop managers in the Northern California area attend meetings of the Homebrew Computer Club.
A single Homebrew meeting might have a half-dozen Byte Shop managers in attendance. “If I had a store manager that didn’t attend the club meetings, he wasn’t going to be my store manager for long. It was that important,” Terrell said. At one Homebrew meeting, a longhaired youth approached him and asked Terrell if he might be interested in a computer that a friend named Steve Wozniak had designed while working out of a garage. Steve Jobs was trying to convince Terrell to carry the Apple I. Terrell told Steve Jobs he had a deal.
Terrell discovered, as Dick Heiser had before him, that customers needed help assembling the machines and obtaining the proper accessories. He got the idea to offer his customers “kit insurance.” For an extra $50, he would guarantee to solve any problems that arose in the course of putting the computers together. Terrell understood that he was doing true specialty retailing and so he had to provide essential information and a certain amount of hand-holding. Terrell likened computer stores to the stereo stores of a decade or two earlier, when clerks routinely had to explain woofers, tweeters, and watts of power to puzzled customers.
Byte Shop’s cachet soared after the July 1976 issue of Business Week described the chain of stores and suggested that it offered significant opportunity to investors. “We had something like five thousand inquiries come in,” Terrell said. He found himself talking to people such as the president of the Federal Reserve Bank. The chairman of Telex Corporation called to ask if Oklahoma was available for franchising. “The credentials [of the callers] were staggering,” Terrell said.
The chain was adding eight stores a month, and Terrell had negotiated a price for an 8080 chip below what IBM was paying. (IBM was not yet building a microcomputer.) By the time Terrell sold Byte Shop operation in November 1977, he had 74 stores operating in 15 states and Japan. He valued the chain at $4 million.
Figure 53. Stan Veit Veit founded Computer Mart in New York, one of the first computer stores.
(Courtesy of Paul Freiberger)
Other computer stores were popping up in many parts of the country, many starting out as Altair dealers then defecting to carry other brands. Dick Brown opened a shop also called The Computer Store on Route 128 in Burlington, Massachusetts. On Long Island, Stan Veit didn’t like the MITS deal from the start and launched his store selling anything he could get his hands on.
In the Midwest, Ray Borrill opened Data Domain in early 1976, with the aim of “out-Terrelling” Paul Terrell. Borrill quickly spun off nearly a dozen affiliated stores from his first outlet in Bloomington, Indiana. He also helped start the Chicago-based Itty-Bitty Machine Company, an ill-fated venture that was conceived during conversations with Ted Nelson at the World Altair Computer Convention.
With computer stores opening across the country, countertop sales had clearly started to elbow aside mail order. At computer-club meetings, Terrell reminded the assembled over and over again, “You don’t have to buy through mail order any more.” Relief from the potential hazards of buying through mail order was one of the best selling points the new retailers could offer.
While running Byte Shop, Terrell began marketing his own brand of computer. Called the Byte 8, it was a private-label product with a profit margin close to 50 percent, twice the average retailer’s 25 percent margin. It proved to be an easy commercial success. “All of a sudden, I realized the power of distribution that Tandy/Radio Shack had. Guaranteed sales.” Tandy, a huge electronics distributor, much bigger than Terrell’s chain, had not yet ventured into computers, although some microcomputer retailers feared Tandy in the way that microcomputer makers feared Texas Instruments. Neither group had cause to worry—for the moment.
Franchising
IMSAI was a manufacturing company run by a sales force. The San Leandro, California, manufacturer of the 80 Micro computer cared little if its products featured the latest technological breakthroughs. IMSAI thrived for a time on its vigorous sales effort and ultimately failed through sheer neglect of its production and customer-service side. It is fitting that IMSAI’s most lasting contribution to the personal-computer field was a sales enterprise—a chain of retail stores, a computer franchise—ComputerLand, started by Ed Faber in 1976.
Faber was an old hand at start-up operations. In 1957, he joined IBM as a sales representative. In 1966, IBM tapped Faber to help develop a department called New Business Marketing, which was designed to ease IBM into the small-business area. Faber helped create a business plan that would include a newly assembled sales force and a fresh marketing concept for the company. This was his first start-up operation, and he relished the challenge. He identified problems, devised solutions for them, and then, as corporate start-up strategies inevitably go, he had to deal with a set of new problems created by the solutions. By 1967, Faber decided he wanted his career to revolve around start-ups, an unusual choice at IBM at the time.
In 1969, after 12 years with IBM, Faber left to join Memorex. At Memorex, and later at a minicomputer company, Faber was hired to build the internal marketing organization. A pattern was developing. After he had created and launched a program, he wanted to move on.
In 1975, Bill Millard invited Faber to join him at start-up IMSAI. Millard described the IMSAI opportunity in lavish terms, which Faber automatically suspected was overstatement. The idea of selling kit computers through the mail for buyers to assemble at home seemed preposterous to Faber, the IBM man. But Faber couldn’t argue with the market’s response to kit computers. IMSAI was knee-deep in orders. At the end of December 1975, he joined IMSAI as its director of sales.
Almost immediately, Faber was in contact with John French, Dick Heiser’s competitor in Southern California. French had approached IMSAI with the idea of buying kits in quantity and retailing them through a computer store. Again, Faber was dumbfounded. Sell computers to customers right off the street? The idea was ludicrous, he thought. On the other hand, Heiser’s retail operation was more than solvent, and IMSAI had little to lose. Faber sold French 10 computer kits at a 10 percent discount, not much for a retailer to work with. French quickly moved the 10 units out the door and was asking for another 15. More orders followed. Other retailers were contacting Faber seeking similar deals. By March 1976, IMSAI had raised its price in order to give retailers a 25 percent margin.
Faber had an excellent reason for courting the dealers. Selling computers to retailers in batches of 10 or 15 was much easier than selling single units to individuals over the telephone. Furthermore, the retail market was wide open. The MITS exclusivity policy was forcing dealers over to IMSAI. Not only were Altair dealers required to carry the MITS line and nothing else, but late arrivals were geographically subservient to early ones, who had established “territory.” Enterprising dealers such as Paul Terrell chafed at the restrictions and ended up bolting to freedom.
The MITS retailing strategy amazed Faber. Ed Roberts sought to dominate his dealers and compel their loyalty. Given the entrepreneurial spirit of the time, Faber predicted that dealers would eventually balk at attempts to control them, and Roberts’s marketing tactics would backfire on him. Defiantly, Faber took a stance in complete opposition to Roberts’s. He encouraged nonexclusivity in the kinds of products dealers could sell, and the freedom to open outlets wherever they pleased. If two dealers wanted to open stores a block away from each other, it was fine with Faber if they competed for sales. IMSAI products would vie with any others on the dealers’ shelves.
By the end of June 1976, some 235 independent stores in the United States and Canada were carrying IMSAI products.
Faber kept an eye on the competing dealers, making note of their relative strengths and weaknesses. Most of them, he realized, were hobbyists with scant experience running a business. Their inexperience was reason enough to fail, he thought; however, they weren’t failing. They were buying more and more merchandise from IMSAI and selling it almost as soon as it came in. In addition, the number of retailers was growing steadily.
Bill Millard got together with Ed Faber to discuss the phenomenon. They wondered what would happen if someone with a well-recognized name started providing comprehensive services, including product purchasing, continuing education, and accounting systems for a network of small, retail storeowners. They were both thinking franchise. They couldn’t find one reason not to start a franchise operation. Faber talked to John Martin, a former associate of Dick Brown’s who was knowledgeable about that kind of business, and Faber attended a seminar on franchising offered through Pepperdine University. When Faber sat down with Millard to talk about launching the operation, Millard asked Faber what he would choose to do. Faber sensed the est in this question and replied that he wanted to be in charge of the franchising operation.
ComputerLand incorporated on September 21, 1976, with Faber as president and Millard as board chairman, and opened its pilot store in Hayward, California, on November 10 of that year. This store served not only as a retail outlet, but also as a training facility for franchise owners. Gordon French, who had helped start the Homebrew Computer Club, worked for ComputerLand early on, helping to evaluate products and establish the pilot store before moving on to do consulting work. ComputerLand eventually sold the flagship outlet and became a pure franchise operation owning no stores at all. The first ComputerLand franchise store opened on February 18, 1977, in Morristown, New Jersey. The second store appeared soon thereafter in West Los Angeles. The stores initially offered products manufactured by IMSAI, Proc Tech, PolyMorphic, Southwest Tech, and Cromemco, the last being one of the first manufacturers to support the new enterprise. Cromemco’s Roger Melen and Harry Garland told Faber they thought the franchise was a terrific idea and gave him one of the best discounts then available.
ComputerLand went on to achieve spectacular success as the nation’s largest chain of computer stores. At the close of 1977, it had 24 stores; by June 1983, 458 ComputerLand stores were operating. ComputerLand outdistanced the Byte Shop chain, and its fiercely competitive practices helped bury the Data Domain chain in the Midwest. In the early 1980s, Faber could reasonably claim that, as far as the general public was concerned, the place to buy computers was ComputerLand.
In 1982, the chain launched plans for a string of software stores called ComputerLand Satellites. ComputerLand intended to license the new software stores to existing franchise owners in its chain. By 1983, Ed Faber conceived a five-year plan that had him semiretired and living in some bucolic setting. He loved to fish and hunt game fowl and was looking forward to a little relaxation. But for the moment, he was busy squelching the competition. To spur the performance of his franchise, whenever he could he opened a ComputerLand outlet near a store belonging to his biggest rival, the new Radio Shack Computer Centers chain.
The Big Players
Not a kit, the TRS-80 comes completely wired and tested, ready to plug in and use.
-A Tandy Corporation press release
Ed Roberts had seen the well-heeled established electronics companies come crashing into the calculator business, cutting margins to the bone and driving out the little guys. He and the other “little guys” who had created this nascent microcomputer industry dreaded the day when the big guys would enter their world.
In 1977, it looked like it was about to happen, and the company that was going to change the nature of the game was a retailer, the leading electronics distributor, with stores in nearly every town in the country. Tandy/Radio Shack was going to make and sell its own microcomputer.
Tandy
Computer retailing at the time, even when it was profitable, was still more about building community than pushing products. Ray Borrill’s store in Bloomington, Indiana, was typical: in 1977 the store employed repair technicians and programmers, but no salespeople. Borrill himself was the closest thing the store had to a salesperson, but his conversations with customers ranged from broad discussions of the power of microcomputers to risky promises of what Borrill’s team could put together for the customer, promises based mostly on how much “fun” Borrill thought the project would be: that is, how challenging it was.
The specter of Radio Shack loomed over Borrill and the other retailers as much as over the computer companies. None of them could compete with this powerhouse. Or so it seemed.
The Tandy Corporation began as a wholesale leather business. In 1927, Dave Tandy and his friend Norton Hinckley founded the Hinckley-Tandy Leather Company, which soon established a solid reputation around Fort Worth. In 1950, Tandy’s son Charles, a graduate of Harvard Business School, conceived of expanding the business into a chain of leathercraft stores that would sell goods partly by retail and partly by mail order. Cofounder Hinckley balked at the idea and left the Tandy Leather Company.
Charles Tandy had an engaging, magnetic personality and a dry sense of humor, and he seemed to have an influence on everyone around him. He was an inveterate instructor who was engrossed in the daily operations of the company. When he had nothing else to do on a Friday afternoon, he would phone his retail outlets to ask how business was doing.
Tandy quickly set about building a national retail chain. By 1961, he had 125 stores in 105 cities in the United States and Canada. In 1962, Tandy bought a company that fundamentally changed the nature of the corporation. Tandy got wind of a small, nearly bankrupt chain of nine mail-order electronics stores called Radio Shack. He took control of the Boston-based company in 1963 and at once began reconstructing it, adding hundreds of retail stores throughout the country. Before Tandy took over, Radio Shack had been losing $4 million annually. Within two years after Tandy bought the chain, it was turning a profit. By 1973, when Radio Shack purchased its closest competitor, Allied Radio of Chicago, Radio Shack so dominated the market that the Justice Department brought an antitrust suit against it and compelled Tandy to divest itself of the corporation.
Tandy had begun manufacturing some of its own wares in 1966, but resisted making microcomputers when they arrived on the scene, even though some Tandy employees were caught up in the computer hobbyist movement. The behemoth chain was pushed into microcomputer manufacturing chiefly by one man: Don French.
French was a buyer for Radio Shack in 1975 when the Altair was released. He bought one as soon as he could and thoroughly studied it. Concluding that microcomputing had potential, French began to concoct his own machine. Although forbidden to develop his computer on company time, French eventually managed to convince John Roach, then vice president of marketing at Radio Shack, to take a look at his project. As French recalls, Roach was not particularly impressed with French’s efforts. Nonetheless, Radio Shack offered Steve Leininger of National Semiconductor payment to examine French’s design. Leininger needed no arm-twisting, and by June 1976 he and French were working together on the project, using equipment and software of their own design.
The TRS-80
French and Leininger received the official go-ahead to develop a Radio Shack computer in December 1976, even though the firm was only casually committed to their project. Radio Shack told French to “get it done as cheaply as possible.” This was a more encouraging statement than the one he had heard a few months earlier when a Radio Shack executive had telexed French saying, “Don’t waste my time. We can’t sell computers.”
Tandy was, however, protecting its turf. When Bill Millard and Ed Faber launched ComputerLand in 1976, it was under the name Computer Shack. That was too close for Tandy’s comfort, and the company notified Faber that it intended to protect its trademark. Faber stood firm, seeking a court judgment in California. Tandy immediately sued in New Jersey. Faber got the message: Tandy was going to sue him state-by-state, keeping him tied up in court forever. He quietly changed the name of his franchise to ComputerLand.
In January 1977, just a month after they began work on the project, French and Leininger had a working model. They demonstrated their new machine for Charles Tandy in the Radio Shack conference room. The keyboard and display sat on the table, but the computer itself lay hidden beneath it. The two engineers had devised a simple tax-accounting program, H & R Shack, and asked the magnate to try it out. Tandy typed in a salary of $150,000 for himself and promptly crashed the program. After French and Leininger explained the limits of integer arithmetic in BASIC, Tandy gracefully entered a much smaller figure, but French made a mental note that the machine needed better math capabilities.
Serious work began on the machine a few months later. The company projected a retail price of $199 and sales of 1,000 units per year. French thought that the 1,000-unit figure was absurd. MITS had sold more than 10,000 Altairs in a year without the overwhelming advantage of Radio Shack’s retail network. French wasn’t too sure the $199 price was right, either.
Soon after that, Tandy and Roach met with computer-division personnel to discuss what to do with the little computer if it failed to sell. Could they at least use it for internal Radio Shack accounting? After all, French was doing some simple record keeping on his handmade version. If nothing else, the company’s own stores could serve as a backup customer base and absorb the first year’s projected production.
Radio Shack announced its new TRS-80 in August at New York City’s Warwick Hotel. The $199 price hadn’t survived; the machine would retail for $399 and come complete and ready to use in a black-and-gray plastic case. By September 1977, with projected sales at 3,000 units annually, Radio Shack stores had already sold 10,000 TRS-80s.
Back in June 1977, Radio Shack gave French the task of establishing retail outlets for the TRS-80. The computer was the orphan of the Radio Shack family. The company wasn’t sure how successful it would be, and didn’t take it that seriously. When the TRS-80 was introduced, Radio Shack outlets didn’t even stock it—customers needed to special-order the company’s own product.
Tandy management’s hesitation about selling computers was in part based on the accurate assessment that computer sales weren’t like calculator or answering machine sales. There was a reason why existing computer stores operated as they did: customers needed a lot of support and hand-holding. Computer retailing really was still about community building and support more than about moving products. This was not the Radio Shack model.
Tandy/Radio Shack ventured out a bit into the computer retailing business when it opened its first all-computer store in Fort Worth in October 1977. The outlet carried not only the TRS-80, but also IMSAIs and other companies’ products. It was regarded as an experiment. But that venture succeeded, too, and resistance to microcomputers began fading away within the Tandy Corporation ranks. Radio Shack outlets began stocking the TRS-80s, and Radio Shack Computer Centers were appearing all over the country, staffed by individuals who knew more about computers than the average electronics salesperson. The backlog of orders was tremendous: in June 1978, Radio Shack president Lewis Kornfeld admitted that only about one-third of the stores had TRS-80s in stock, though over half had sold some.
Charles Tandy celebrated his sixtieth birthday in style, making an entrance to his birthday party astride an elephant. A few months later, on a Saturday afternoon in November 1978, Tandy died in his sleep. The following Monday, the value of the Tandy Corporation stock dropped 10 percent on Wall Street. But the Tandy Corporation was not a one-man show. Charles Tandy had surrounded himself with capable executives, and after his death the company retained a solid financial footing.
The original TRS-80 was fairly limited in what it could do. It had only 4K of memory, a Z80 processor running at slightly under half its rated speed, a sketchy BASIC, and very slow tape cassettes for data storage. Most of these limitations stemmed from the company’s cut-rate approach to manufacturing. The first TRS-80 lacked the capability to type lowercase letters. This was not an oversight. French and Leininger had deliberately omitted them to save $1.50 on parts, which translated to $5 on the purchase price.
Tandy quickly supplemented the TRS-80 with a better BASIC and add-on memory kits, and soon after that offered a combination disk drive and printer. These enhancements were a prelude to Tandy’s announcement, on May 30, 1979, of the TRS-80 Model II, a respectable business system that overcame many of the drawbacks of the original model. The Model II showed that Tandy had learned from its mistakes with the first TRS-80 and was capable of creating a state-of-the-art business machine. This surprised some, given Tandy’s underpowered entry into the personal-computer field.
Between 1978 and 1980, personal computers and related equipment rose from 1.8 to 12.7 percent of Radio Shack’s North American sales. In 1980, Radio Shack introduced a spate of new machines. Its Pocket Computer, slightly larger than an advanced calculator with four times the memory of the original Altair, sold for $229. Its Color Computer, at $399, offered graphics in eight colors and up to 16K of memory. And the TRS-80 Model II was an upgrade of the Model I.
The TRS-80 Model I was a price breakthrough, and people who knew nothing about computers began buying Model Is. Far from driving the little guys out, this actually expanded the market and helped to legitimize microcomputers in the eyes of the general public. Tandy’s toylike machines and reputation as a hobbyist’s company didn’t do much for the idea of the microcomputer as a business tool, although some businesses did experiment with TRS-80s. But the home/hobby computer market began to expand rapidly.
Commodore
Tandy was not the only company driving prices down, thereby opening the market for home computers. Nolan Bushnell’s Atari, which initially produced only video-game machines, began putting out low-priced devices that could legitimately be called computers. Texas Instruments, the company that so many microcomputer manufacturers feared would announce a bargain-basement computer, did just that with its TI-99/4. And in Britain, a daring and brilliant entrepreneur named Clive Sinclair introduced a tiny computer called the ZX80, which was distributed by Timex and sold for under $50.
But Commodore, with its strong distribution channels for its electronics equipment and its own semiconductor design capabilities, was perceived as the greatest threat.
Commodore International was a Canadian electronics-products firm founded and run by Jack Tramiel, an Auschwitz survivor and a hard-driving businessman. In the early 1970s it had been heavily focused on selling pocket calculators using TI chips. When TI jumped into the industry itself, Commodore went from $60 million in annual sales to a $5 million loss.
Tramiel’s reaction was to move the company to Palo Alto, purchase chip company MOS Technology, and hire its lead designer, Chuck Peddle. Peddle had shaken up the market with his 6502 microprocessor, a chip that could sell for $25, about a sixth the going price for such chips.
Peddle had also designed a computer of his own, and had tried unsuccessfully to sell it to Tandy. When the Commodore PET debuted in early 1977, it was a worthy competitor to Radio Shack’s TRS-80 and another new computer that was getting a lot of attention, the Apple II. Tramiel immediately took it worldwide, dominating the early European market.
But Peddle was just getting warmed up. After a brief move to Apple, Peddle returned to Commodore and developed a line of computers that led to the spectacularly successful Commodore 64. By 1983, it was the best-selling computer in the world, and Tramiel had made it difficult for competitors to gain any ground against Commodore by cutting its price to $200.
But while Commodore, TI, and other well-financed companies were getting into the game, in the early 1980s the toughest competition Tandy faced came from a Silicon Valley firm financed by the sale of two calculators and a Volkswagen bus.
Copyright © 2014, The Pragmatic Bookshelf.