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.
Let’s see, in 83 I was still a DEC customer. I didn’t join them until 87 and left in 96 when it was apparent that they were not going to survive. Ironically, the pc did to DEC, what DEC did to the mainframe business, with the exception of IBM. I still remember the comment from Ken Olsen saying he couldn’t see why anyone would want a computer at home.
Avram, what do you think DEC could have brought to the table for Franklin to want to buy them?
The PC industry destroyed the existing computer industry including IBM who was responsible for its creation. Existing computer companies could not make the transition to a new course structure resulting from semiconductor technology. Changes in application software and consumer behavior also draw this evolution.
The code you referred to is not accurate. When can made it he was referring to mainframes in minicomputers and did not believe anybody knew needed that in their home. Having worked closely with Ken, I can tell you that he was a big supporter of personal computing. In many ways, Steve Jobs reminded me of Ken. However, Ken never understood the role of software which was a great limitation.
Acquiring Digital Equipment Corporation would’ve probably been a fatal mistake is it true now to be with respect to Compaq computer. However, I might’ve been able to pull it off because I had a much deeper understanding of the assets of Digital then the management of compact or even the CEO of Digital, Palmer. The company had to be broken up. It would have been much better for some financial firm to buy it. They could have spun out a number of successful businesses and closed down the rest including Digital’s manufacturing business. Compaq bought Digital for its sales force and service organisation but never figured out how to use it effectively. I cover all this in my book.