17-05-2007 // The Color Computers - 1979 to 1980
With the PET under its wing, Commodore came to a fork in the road as far as the course of the company was concerned. Certain forces, centered around top engineer Chuck Peddle, were pushing for the development of a powerful, high-end computer geared towards the business market. But founder Jack Tramiel was not having it. This excerpt of On the Edge is about Jack's decision to focus on low-end, affordable hardware geared towards the consumer market and his ideologies in regard to beating the Japanese at their own game.
The Roundabout in London
In April 1980, Jack held an international meeting in London. "Jack brought a bunch of us to Europe to set up a dual planning session," recalls Peddle. Before the meeting, Jack surveyed the computer scene in Britain and was surprised to see his old calculator competitor, Sinclair, in the computer market. Jack knew low-cost computers were beginning to appear on the computer scene and he was familiar with the Atari 400, released the previous year for only $600. What he saw in Britain was a revelation.
The remarkable Clive Sinclair filled the roles of both Jack Tramiel and Chuck Peddle in one person. He ran the company and designed their products, while carrying on high-profile relationships with an ever-changing line of beautiful women. Sinclair developed a computer similar to the KIM-1 called the MK-14, with modest success, and in February 1980 released the ZX-80, which was designed for economy. It lacked color and even sound, but the sub-£100 price made it a success.
"The Sinclair was directly responsible for Commodore doing the VIC-20," explains Peddle. He saw that it was taking off. "Fundamentally, Jack always was into the market, and the market was buying the Sinclair machine."
On the first day in London, Jack held several private meetings with top Commodore executives. "He and Irving had a meeting in downtown London," recalls Peddle. "Dick [Sanford] and I went to dinner with Irving and Jack, and we had this nice conversation, and everything went fine. It was a very pleasant meeting."
After the dinner meeting, Jack had a small run-in with the London police. "We had a little too much to drink and he got busted on the way home," recalls Peddle. "He went the wrong way around a roundabout, which is the reason the cops busted him, but the cops were nice enough to let him go home."
Jack rented a beautiful English country club called Burnham Beeches to host the conference with waiters in tuxedoes. "We drive back to Burnham Beeches, which is out in the woods somewhere," says Peddle.
The next day, the major players within Commodore convened in a meeting room at Burnham Beeches. Sitting at the table were Harald Speyer of Commodore Germany, Kit Spencer and Bob Gleadow of Commodore U.K., Tony Tokai of Commodore Japan, Yashi Terakura, Chuck Peddle's Japanese counterpart, Jim Dionne of Commodore Switzerland. The top executives of Commodore US also attended, including Chris Fish, Dick Sanford, Dick Powers, Chuck Peddle, Jerone Guinn and Jack Tramiel's personal assistant, Michael Tomczyk.
"Jack's late for the meeting the next day, so we start the session off," recalls Peddle. "All of the team had agreed that we really need to have a really good business product as a follow-on product [to the PET]."
The executives felt comfortable starting the meeting without Jack. After all, Jack was not really a part of the computer business.
Peddle began his briefing on the business computer. Later in the morning, Jack finally appeared. "Jack walks into the room after having studied the Sinclair thing," says Peddle. "In that moment, he decided that he was going to take back control of the company from those of us that were off doing the business stuff. Here was his chance to go back into the consumer electronics business, which he felt he could do better than everybody in the room."
Some time after CES, Jack quite correctly surmised that his head engineer was no longer listening to him. When calculators fizzled, all the power at Commodore was with computer products. Jack was in danger of losing relevance in his own company. When Jack asked for an Apple killer, Peddle did not deliver it. It seemed like Peddle was making his own decisions rather than listening to Jack. Even worse, the rebellion was spreading among his own executives. Jack knew he would have to do something to get his rogue engineers under control.
Predictably, Jack had no enthusiasm for Chuck Peddle's business computer proposal. "We had a business plan and the whole management team had put it together," says Peddle. "Jack walks in and says, 'Forget it. This is where the company is going.'"
The new plan was the low-end market. "He blocked out that we were going to do something and compete against the Sinclair," says Peddle, who found it ironic that just months before at the January CES, Jack had turned down Bill Seiler's low cost computer angrily. "He expected us to then have the follow-on Apple product as soon as we could get it. That was his discussion in that room."
The executives had mixed reactions to this announcement. Executives thought a low-cost computer would undercut sales of Commodore's keystone computer, the PET. Others questioned whether it would be possible to make a profit on something that sold for so little. Jack was not worried. He saw the same thing happen with calculators and believed the same would inevitably happen with computers. Commodore now had impressive vertical integration and he was confident this would give him an advantage over the competition.
Only a handful of people supported the idea: Tony Tokai, Yashi Terakura, Kit Spencer, and Jack's personal assistant, Michael Tomczyk. Some executives who initially supported Peddle's business computer now abandoned him as soon as they realized Jack did not support it. "Spencer was the consummate politician, so he was pushing it until Jack walked in and Jack said something else, then he was immediately on Jack's side," says Peddle. "Of course, all of the local managers jumped in and told him what a great idea it was."
Jack instructed his managers to discuss the idea further and departed. He would return the next day to review their plans.
Chuck Peddle was devastated. He was a purist when it came to computers and he wanted elegance and power in computing. Now he was supposed to get behind a computer less powerful than what Atari, Apple and NEC currently produced.
Once Jack left the room, he began formulating a counter-proposal. "I had the whole European sales staff on my side, because they had built their reputation on business computers," says Peddle. "Our response, which was put together the same day, was, 'Jack, we accept that that's where you want to go, but the company is big enough to handle both. You go off and drive that and let us go build the business computer business.'"
That night, as Jack slept, his idea for a low-cost computer crystallized. When he awoke, he had a clear goal for Commodore. Jack returned to the meeting and asked the executives to discuss the strategies they came up with the previous day. Instead, Dick Sanford suggested the idea to create a new division, and Peddle championed the idea.
Jack felt Peddle's suggestion was open rebellion. "There is no question that he viewed that as a direct insult to his idea that we are going to go back into the consumer electronic business," says Peddle. "He put all of us on a short leash that day."
The counter-proposal landed many of Commodore's top executives in Jack's cross hairs. "He was unhappy with Chris [Fish]; that's why he screwed around with Chris. He was unhappy with Dick Sanford; that's why he ultimately forced Sanford out. He was unhappy with Mitchell. He was unhappy with all of them, because he perceived that we didn't see his vision," says Peddle.
According to Peddle, they were more than happy to carry out Jack's plan. "The problem was, we did see his vision," says Peddle. "We knew what he needed to have done, and we could see how he could get between here and there. But we had a different vision. We had a vision of what ultimately became the PC business and he didn't share that vision."
The discussions eventually deteriorated into small groups of executives talking together. Jack allowed the discussions to continue for a while, then stood up and banged his palm on the table. Conversations stopped and everyone faced Jack. With all eyes on him, Jack announced "The Japanese are coming, so we will become the Japanese." The statement had everyone pondering the meaning of his words.
Jack identified the Japanese as his main competition early on, just like other companies such as Apple. In the early eighties, Japan was firmly on the minds of many North Americans. Since the late sixties, Japan had taken over American industries one at a time: small electronics, household appliances, televisions, radios, stereos, and automobiles. Now they had their sights set on the personal computer market.
Jack knew their primary advantage was their ability to deliver low-cost products. To become the Japanese, Jack wanted to undercut their prices. "I think he originally set some price goals that left them aghast," recalls Robert Russell.
As a master tactician, Jack took the battle to his enemy. "Jack wanted to fight the Japanese in their home market with a low-cost machine rather than the Japanese coming over with a low-cost machine and fight us in the US," says Russell. Jack had seen calculator prices drop dramatically and almost put him out of business. Now he wanted to be the one driving prices down.
Although Jack had previously introduced his new products to the North American market, he decided to release the low-cost computer to Japan first. North America would follow. "It wasn't exclusive to Japan, but Jack wanted to scare the Japanese right on their own home ground and sell it there," says Russell.
Tramiel discussed the Japanese in a March 1986 interview with German magazine Data World. "The Japanese can only be successful in the computer industry if there are no longer people like me," said Tramiel. "The Japanese think on a long-term basis and need a three-year plan. They are not innovative and can only be successful if innovative people disappear from the industry."
Ironically, Jack was more like the Japanese than he was to his contemporary North Americans. The Japanese lived and breathed the philosophy of Sun-Tsu's Art of War. To Jack, business was war.
Jack's announcement meant Commodore would not wait around for the Japanese to take over yet another industry pioneered in the western world. One of Tramiel's most famous quotes is, "The minute you're through changing, you're through." Now Jack was going to change Commodore. Appropriately, the 1979 hit song, Turning Japanese by the Vapors summed up the new philosophy for Commodore's employees.
Commodore would now radically change direction and produce a fun computer. Jack had diverted Commodore on tangents before, producing everything from watches, thermostats, Pong machines, and office furniture. Now he was putting major resources into a new product and effectively halting further advances on the business computer.
Jerone Guinn, the tall, quiet Texan who now ran MOS Technology, volunteered his engineers to build the low-cost computer. Having the prototype built on the East Coast was Jack's way of showing Chuck he was not entirely dependent on him. If Chuck would not support his idea, other engineers would.
Chuck could not help but feel resentment as he watched Tramiel chip away at his lead engineer role. He knew the fundamentals of computers and wanted nothing more than to design the next great machine. Now he was supposed to sit back quietly while Jack decided Commodore's next generation of computers.