This is another outtake from my book, The Flight of a Wild Duck.
In April 1983, I left Digital Equipment Corporation, where I headed the development of that company’s Professional Series Computers to join Franklin Computer as Chief Operating Officer. However, in reality, I function a the CEO. I had considered starting my own company, but Franklin, which was less than a year old, growing faster than Compaq Computer, and about to go public, provided me, I thought, with a platform to build a major computer company.
Franklin’s founders had realized there was a lot of unmet demand for the Apple II. Many computer resellers were desperate to sell Apple IIs, but Apple had very restrictive policies on distribution. Franklin’s computer, the ACE 1000, ran all the Apple II software and had a better design than the Apple II. Franklin had more than $80 million in sales in its first year of operation; if not for the Apple v. Franklin lawsuit that declared a BIOS effectively subject to copyright, I might have achieved my ambition. We were already developing a clone of the IBM PC. One product under development was able to run both IBM PC and Apple II software natively. I worked on an ad that said, “Franklin can give you what neither IBM nor Apple can, each other.”
Apple had sued Franklin for copyright infringement. Franklin had indeed copied the BIOS (the firmware between the hardware and the operating system). The lawsuit that followed has been discussed a great deal because it resulted in a finding that firmware can be copyrighted.
Apple never won the case against Franklin. The appellate court instructed the lower court to rehear the case based on “matters of law” (firmware could be copyrighted). But everyone thought we had lost. Our IPO was pulled, of course. Our bank revoked our line of credit. It was a mess and one for which I was prepared.
We wanted to settle with Apple and suggested that we could pay them a significant license fee. In addition, we argued that our activities would grow the market for Apple. John Sculley, Apple’s CEO, appeared interested, but Steve Jobs would have none of it. Jobs wanted to maintain control over all aspects of Apple’s products. A year later, Jobs was pushed out of Apple. But that time, Franklin was no longer a factor in the Apple market.
Apple continues to this day to have a proprietary computer system. Holding about 16% market share when IBM introduced the PC, Apple’s share dropped to about 2% by 2004. While the closed, proprietary approach was unsuccessful in the personal computer market, it worked out very well later with the iPhone.
Had Apple licensed to Franklin, how would the PC market have turned out? I think IBM and its clones would have still led the market, mainly because of IBM’s substantial sales force. Perhaps Apple would have dominated the home market while IBM kept the business market. IBM had one secret weapon against Apple that significantly impacted the development of the consumer market. In the early days, the software could not be protected, so many people were familiar with PCs at work. When it came time for them to buy a computer for their homes, they purchased an IBM-compatible PC and brought home their software from work to copy without paying for it.
Even if Apple had licensed its Apple II and later Macintosh operating systems, the IBM PC architecture would likely still have dominated. But Franklin could have become the dominant IBM PC Clone company beating Compaq. In 1998, Compaq Computer acquired Digital Equipment Corporation. I could not help at the time to imagine that if Franklin had prevailed a the appellate court, it could have been Franklin, not Compaq, that acquired Digital Equipment, and I might have found myself the CEO of the combined company.