I am in the process of writing a series of essays about the history of today’s smart phone which was the result of the convergence of many different independent developments, including Personal Digital Assistance, mobile phones, two way pagers, digital cameras, music players and GPS devices. I am going to start with Personal Digital Assistants since I had some involvement with that.
While conducting research for my book, The Flight of a Wild Duck, I read or reread about fifty books about the computer industry. One was Jerry Kaplan’s Startup, written in 1995. Jerry founded GO Corporation in 1987 to develop a pen-based personal computer. It was more like a tablet than a device that could fit in a pocket or purse. Kaplan’s book still has value for those starting technology-based companies. It is rich in detail since Jerry kept many notes and recordings during the more than six years of GO’s existence (1987 to 1994). Reading it made me wish that I had been better at documenting my own experiences. That would have made writing my book much easier and more accurate!
Jerry’s book brought back memories of that period. It was in 1988 when I moved from Intel’s Oregon facilities to it main campus in Santa Clara, California. Previously, I had been responsible for the business and marketing activities of a joint venture between Intel and Siemens called Gemini. Now, I was leading the overall business development activities for Intel’s System Group, which included managing Mergers and Acquisitions as well as early-stage investments. It was this work that laid the foundation for Intel Capital which I founded in 1991, together with Les Vadasz.
Many companies formed in the late 1980s and early 1990s to develop products around the Personal Digital Assistant (PDA) concept. As early as the 70s, products called digital organizers were developed. Satyan “Sam” Pitroda, an Indian electronics engineer is given credit for the development of the first organizer , the Electronic Diary, in 1975. Such products had fixed functions. Around this time, pocket calculators were also developed. Pocket calculators were very successful. It is hard to imagine but 1986, such devices represent more than 40% of the world computing power.
Personal Digital Assistant (PDA), a term first used by John Sculley, Apple’s CEO, in 1992 were thought to be an extension of general purpose computers. Importantly, applications could be created to service specific markets. An example was sales force support. A sales person could connect to his PDA and to check inventory and place customers orders. A doctor might enter information about a patient.
The PDA was a logical extension of the computer industry’s evolution. First came mainframes, which were computers used by many people at once and required staff to maintain and operate them. Next came minicomputers, usually used only by one person at a time and did not require staff to keep them operational. Both mainframes and minicomputers had fixed locations, though sometimes users could be located remotely (time-sharing) using a terminal. With the personal computer, individuals could, for the first time, own and control their computers. However, until the development of portable or notebook computers, these, too, had fixed locations. So we went from having computers that stood on floors to computers sitting desktops to computers laying on laps. The next logical stage would be a handheld computer. And do I dare speculate, eventually a computer embedded in our brain?
The dream of a computer that could fit inside a briefcase or, even better, inside a pocket or purse had been around for many years. A great deal of excitement formed around this concept. At first, I though it had potential. But then came to realize that too early. There were too many obstacles ahead. However, I did spend time in discussion with all the key companies in this space. It was not to 1999 after I left Intel, that I became convinced that there would be an intelligent device that would people would carry with them. I called it TIP (the thing in your pocket). But it would still take many years before that was realized.
PDAs required small size, ease of interactivity, and connecting to more traditional, more powerful computer systems. In addition, they needed to be able to run on battery. Because size was such a significant consideration, a traditional, typewriter-style keyboard would not fit. The solution was to have users interact with such devices via pen, a stylus, or fingers. Several companies developed user interfaces that combined handwriting, drawing, and gestures, including GO, Apple (with the Newton), and Microsoft (with WinPad), to name a few of the more prominent examples. General Magic wisely realized that accurate handwriting recognition would not be possible with the available technology, providing a screen keyboard that could be tapped via a stylus. There were also many attempts to add handwriting capabilities to traditional desktop computers.
The companies founded between 1987 and 1997 to exploit this perceived opportunity were spectacular failures. Nevertheless, they raised staggering amounts of money. People involved spent years of their lives following a dream they never realized. Some were and are the most talented people in the computer industry. Many gained significantly through their experience of being pioneers. Palm, formed in 1996, was the first to develop a successful product, the Palm Pilot. By 2000, they had almost a 70% market share.
Why did so many invest so much money and time into the development of PDAs? It’s a fascinating question. Besides the critical notion of portability, computers were challenging to use, which restricted the size of the market. The PDA was meant to be as easy to use as paper but as powerful as a desktop computer; humans would interact with the device through a pen on a small screen. Using handwriting was also considered by some as a more natural way to interact, given that few in the target market knew how to type.
Two things went wrong with this concept. First, handwriting recognition is a challenging computational problem, and it was just not yet a feasible technology with the portable computing power available at that time. It might seem astonishing that so many great minds did not recognize this, but I have seen this pattern repeatedly. Second, people do not want to use handwriting on their computers, as I think we can now clearly see now. Computers are more than capable of recognizing handwriting but few people use this method to communicate with their computers.Although we now have the computational capability to recognize writing on portable devices, almost no one writes on such devices. Instead, we are happy to type on glass, as proven by today’s smartphones.
Why did so many venture capitalists and corporations invest so much in PDAs? Well, I want to let you in on a secret; venture capitalist are not very strategic. I’ve often joked that VCs approach market research by counting the number of entrepreneurs coming into their offices with virtually the same business plan. If so many intelligent people want to start companies to do the same thing, VCs figure that there must be something to it. Once a few VCs begin to invest in a particular area, other VCs jump in as followers. They have a herd mentality. Then VCs need to find others to support the next financing rounds. Getting large corporations to invest is especially helpful, as they are generally less sensitive to valuation. Unfortunately, a few large corporations succumb to the idea that the thesis must make sense if many VCs have invested. Other large corporations, fearing they’ll be left out in the cold, then decide to start internal projects, which eventually fail. Seeking an alternative, the corporations buy the startups instead. If the timing works out right, the VCs and a startup’s employees can earn significant returns before the business fails. Still, if it starts to fail before it sells, only the early-stage VC investors usually make any money, and the entrepreneurs get nothing tangible for their efforts. I am very supportive of early stage companies. I think they in the whole they are a very important part of economic development. Venture Capitalist do play an important role but the system over compensates them for their contributions.
GO never got going
Turning back to GO, it turns out that Intel was an early investor. In an unusual move, Andy Grove had initiated the investment. The legendary John Doerr, a former Intel employee, and senior partner at Kleiner Perkins, brought Jerry Kaplan to meet with Andy Grove about investing in GO soon after that company’s formation. Jerry’s book describes those discussions. For Intel, the key was for GO to commit to move their product from the Intel 286 to the Intel 386 processor and to agree always to port GO’s operating system (PenPoint) first to the Intel Architecture. By the way, this never happened. Though Kaplan was unhappy about these requirements, he needed Intel’s money and blessing to help GO close a big round of financing. Actually, Grove thinking was sound in theory. While it was unlikely that GO would become a major force in the computer industry, a small investment on Intel’s part could help insure that Intel’s microprocessor would be part of that opportunity should it actually emerge.
Soon after, I relocated to Santa Clara and started my new role as Vice President Corperate Development, GO started having some problems which required me to get directly involved. I went to their offices in a large building in Foster City, San Mateo. There I met with the founder, Jerry Kaplan, and his team members, including the legendary Bill Campbell, who recently joined as CEO. I had met Bill many years earlier when he ran Claris, then the software arm of Apple. He and I later developed a friendship. Bill was a fantastic man who sadly died a few years ago. After GO failed, Bill went on to a very successful career as CEO of Intuit, board member of Apple, and advisor to many prominent Silicon Valley companies. He “coached” Steve Jobs, Larry Page, and Sergey Brin (the founders of Google). Bill and I both lived in Palo Alto when I worked at Intel. We had become friends and would often meet for coffee. After I left Intel in 1999, he and I continued our friendship. So for me, the best thing that came out of Intel’s investment in GO was becoming friends with Bill Campbell. Sadly, he passed away in 2016 at the age of 75.
When GO started, it had a hardware group and planned to offer a complete product. Later, it decided to focus on its pen-based operating system, spinning out the hardware group into a separate company called EO. EO got a significant investment from AT&T. Eventually, GO, and EO both merged back together. AT&T invested enough to become the majority owner of the new entity. Part of that investment went to fund the combined company, but it bought shares from existing investors, including Kleiner Perkins and Intel. The effect of this was that the company became a subsidiary of AT&T. According to Jerry, Kleiner Perkins got their money back and more. I believe Intel did as well.
In contrast, the founders and employees of GO got nothing in the end. Kleiner Perkins was always very good at ensuring they did well even when their portfolio companies did not, but that is another story. AT&T’s had an excellent talent for screwing up companies. I discuss one of the more prominent examples, @Home, in my book.
In addition to Jerry Kaplan and Bill Campbell, GO had many successful alumni: Stratton Sclavos later founded Verisign ( a company in which Intel invested. Randy Komisar became CEO of LucasArts and later a partner at Kleiner Perkins. Mike Homer was VP of Marketing at Netscape when it made its very significant IPO.
At the end of the book, Jerry rightly wonders not why GO failed but why it lasted so long and could raise so much money. But this is a story that is often repeated. Just look at Theranos for a great example.
That magic moment
General Magic, spun off from Apple in 1990, was perhaps the most impactful independent PDA company—impactful, that is, in the sense that it was such a conspicuous failure but also formed the breeding grounds for many successful entrepreneurs. As a result, some have described General Magic as the most significant company that you have never heard about.
Marc Porat, Andy Hertzfeld, and Bill Atkinson cofounded General Magic which was initially started at Apple. Andy and Bill were the two people most critical to the development of the Macintosh. Marc, strangely enough, produced a film commissioned by Digital Equipment Corporation to celebrate that company’s 25th anniversary, a movie in which I played the “leading role.” He then went on to found a satellite communications company, Private Satellite Company which Apple acquired. Marc joined Apple and worked closely with John Sculley, the CEO.
I knew Marc very well, professionally and personally. He was a masterful storyteller, which, combined with the pedigree of the other founders, made a very compelling pitch, especially to corporate partners. General Magic raised $200 million from 16 strategic partners, including Sony and AT&T. Then, they also raised $96 million in an IPO. The valuation was $834M in 1995 and was a fantastic amount of money for the time. The stock price doubled on its first day of trading. The professional investors who could buy stock in the IPO sold off their shares, and the price dropped back to close at the offering price. That was the company’s high point. Its PDA product was not at all successful. Marc Porat was replaced a year after the IPO, and most of the team left. The company staggered along for another eight years before the bankruptcy.
General Magic’s device was more or less an intelligent terminal. They had a very sophisticated networked computing model, with various computational tasks assigned to computers across the network. I was very impressed with the general architecture. However, the communication network, Personal Link, depended on AT&T. It was a closed network and did not interface with the emerging internet. AT&T terminated Personal Link just a few years after launching it. General Magic products used a stylus to avoid the difficulties of handwriting recognition, displaying a keyboard on the screen that one could tap using the pen.
I was impressed with some of their concepts, especially their networking model, which created a distributed system. However, while I had several meetings with General Magic, I decide not to invest. By that time, I had had enough of revolutionary products.
Even though General Magic came out of Apple, Apple only owned 10% of the company. John Sculley, Apple’s CEO (Steve Jobs had already been forced out), started an internal, competitive PDA project called Newton. Newton was a dagger put into the body of General Magic. Many in General Magic felt that Apple stole ideas from their company. Newton had poor connectivity and relied on handwriting recognition, which was not very accurate, but it completely sucked the air out of the market for General Magic. The first Newton units shipped in 1993, and the product was not successful. The last Newton was sold in 1998, and its failure helped turn the market against the idea of PDAs.
The alumni of General Magic are very impressive. Besides the founders, Ton Fadell later co-invented the iPod and iPhone and later founded Nest. Megan Smith later became the CTO of the United States under President Obama. Andy Rubin founded Android, Pierre Omidyar founded eBay, and Steve Perlman cofounded Web TV, among many more companies. Recently, a documentary on General Magic was released on Netflix chronicling this amazing story.
Besides Apple with the Newton, many corporations had PDA projects. WinPad, a Microsoft/Intel led project, was one of those. In 1992, Andy Grove asked me to take the lead in coordinating with Microsoft to help fulfill their interest in a consumer product. While Intel had no interest at that time in the consumer market, Microsoft did. My job was primarily to keep Bill Gates happy and make sure they did not turn to our biggest competitor, AMD. My counterpart at Microsoft was Rob Glaser. He left, towards the end of 1992, to found Real Networks. I then worked with Craig Mundie, who eventually became Microsoft’s CTO.
Rob and I had identified three major consumer projects. The first project, which never really got started, was a game console. The second was an intelligent set-top box, which eventually led me to have Intel develop one of the first cable modems. WinPad, a PDA, was the third project.
I established a team to work with Microsoft to prototype the WinPad and help develop partnerships that could take the product to market. I thought the WinPad had a chance because it used the Microsoft code base and would appeal to corporations and OEMs. I did not believe it would become a consumer product but thought it had potential to serve the corporate market. Companies like Compaq, Dell, and even IBM started projects based on the WinPad. However, the project ended sometime in 1993, probably because it could not meet its cost goals and the development was running was running very late. As a result, much of Microsoft’s software development end up in other of their products.
Much can be learned from studying the history of the PDA. Billion dollars were spent by investors and by corporations pursuing an idea that was well before its time. It was an example of the right idea done wrong and done at the wrong time. Brilliant entrepreneurs spent many of their most precious years chasing the dream of the PDA. Some of the most successful venture capitalists invested hundreds of millions of dollars in early-stage PDA companies. Significant firms in the computer and communications industries spent hundreds of millions of dollars either in investments into early-stage companies or on their internal projects. PDA companies taken public later failed. However, by 1997, with the introduction of the Palm Pilot, the first successful PDA emerge. Later, Blackberry took the leadership in this field.