Early Personal Computer Companies and Sales of Their Products
I was looking at the "time line" in Fire In The Valley this afternoon. What really amazed me is the fact that so many of the companies that were not only instrumental, but absolutely necessary in the development of the industry, were gone so early in the game. Processor Technology is the only one that closed its doors when it was still on top. All the others either went bankrupt or at least insolvent in less than five years. We the retailers were often too busy to really notice. I think that MITS' passing hurt their dealers far more than the passing of IMSAI, Processor Tech. or Polymorphic hurt the non-MITS dealers. We were selling Osborne, Apples, Cromemco, Vector Graphics, North Stars and Alpha Micros to the extent of our capitalization and in many cases didn't even notice or even welcomed the demise of some of the so-called big names.
The only company that I really felt bad about was Processor Tech. I was their 8th or 9th dealer, and Bob Marsh and Lee Felsenstein told me that we were their biggest dealer for almost a year and a half. And it was not so much that we sold a lot of SOL-20 computers. We sold a heck of a lot of VDM-1's, 3P+S and memory boards. I felt a personal affinity with those guys.
I remember when, at the first World Altair convention, I walked into the hospitality suite they had when MITS wouldn't let them exhibit at the convention exhibit area. Bob Marsh walked across the room and greeted me by handing me the first production version of the 3P+S card, and when our hands met at the edge of the card it went "ZAP" and blew every MOS chip on the board! So much for a working prototype of the board that was awaited impatiently. Lee and Steve Dompier had hysterics and rolled on the floor. Both Bob and I felt guilty and solely responsible for a long time, I found out years later when we talked about it.
I for one didn't care when IMSAI died. By that time they were more trouble than they were worth. Their dealer discounts were different for ComputerLand owners than for non-ComputerLand dealers, and they had raised prices into the area where it was not too profitable to sell and support them. When I became their tenth dealer I ordered 100 computers for delivery between March 1, 1976, and January 1, 1977. By agreeing to this amount of computers and paying 25% up front I got them for 25% off of their list price of $495.00 in kit form. This was for the bare bones system of cabinet, power supply, front panel, CPU board, 2K memory and a 22 slot S-100 bus mother board with 3,100 pin edge connectors. When we formed the itty bitty machine company in Chicago I ordered 100 more at the same price. IMSAI soon raised the retail price but couldn't raise ours so we made good money on them and sold them assembled for even more. I ordered add-on edge connectors for a couple of bucks apiece and sold them for IMSAI list price of $15.00 with a frequent very generous 12% discount. I had a lady that was a solderer for RCA who would solder 22 of those 100 pin suckers into a mother board for 12 bucks and she was so good at it that we didn't even have to inspect them. She assembled kits for me for about $15.00. All I had to do for her was supply a good soldering iron and a good lamp and high quality solder.
I did the same thing with cooling fans. IMSAI sold a muffin fan for $25.00 that was noisy and moved 45 cfm of air. I bought fans in lots of 25 for $4.50 each that had a capacity of 110 cfm and sold them for IMSAI list price less a 25% discount if bought with a complete system. I also sold fans and connectors to other dealers at twice my cost and saved them lots of money. Some of my best customers for these were ALTAIR dealers.
There were lots of such ways to increase margins. Well, we sold the IMSAI computers I had committed us to in about eight or nine months, during which time IMSAI raised the list price repeatedly which did not make us unhappy, of course. Then, when we were running out, IMSAI came down on us very hard. Ed Faber actually resented our margins and had developed new price and discount policies aimed at getting his "loyal" dealers under control and getting rid of the rest. We couldn't make any money under the new pricing. We had always sold only the bare necessity IMSAI product and all the rest of the systems boards from other manufacturers. Now IMSAI wouldn't sell us less than a system with all their boards in it, all of which were of awful design. To make a long story short I don't think we sold more than a half dozen IMSAI computers after that first 100 (plus most of those ordered for Chicago) were sold.
Are you really aware of what a screwball business this was back in those days? It was especially bad here in the deep Midwest. The biggest bank in Bloomington, in 1975 had assets of just a little over $100 million. They made no SBA loans because they didn't want the expense of dealing with the Feds. In order to get a business loan you must fill out a mountain of paperwork, including projections for the next six months, one year and five years. They never heard of an INVENTORY loan, and you had to document the performance of other establishments of the same or very similar business. These requirements meant that there was no bank backing to be had.
Next problem was the manufacturers themselves. Essentially, they could only get a short term loan to cover them for a production run. And almost all of the earlier products had been designed in a garage, manufactured by the designer and priced to sell directly to hobbyists at a few bucks over the actual cost. There were no dealer margins simply because the manufacturer didn't anticipate. So, at first they offered us retailers discounts like 5% or 20% off list, minimum quantity 10 or 15 boards per order, delivered COD or certified check.
My original Data Domain and the three others that I owned personally were financed entirely from my pocket. One manufacturer, Cromemco, was sympathetic to my plight and still unable to offer much, but what they did offer made me into a major Cromemco distributor of their S-100 board products for the first couple years. I received a 15% discount on the first 10 boards (mix and match) and then 15% plus 10% on the next 10 boards, 15% plus 10% plus 10% on the next 10 boards and so on until I reached 50%. Then they, when some new dealer would contact them, would steer them to me and I would give the new dealer a better price than Cromemco direct. This of course caused my volume to go up faster than if I only depended upon my retail customers, and I made more and more on my retail sales of Cromemco products.
The other screwy but great deal I had was selling used TWX teletype machines. I got used Model 33 ASR terminals complete with built-in modems and touch tone dialers at a purchase price of $450.00 each. They were in tip-top shape and the guy I bought them from accepted payment in 8K memory boards made by Seals Electronics in Knoxville, Tenn. The price he paid was the list price for those memory boards (approximately $250 each). Now, I had become acquainted with Bruce Seals when he drove up to Bloomington from Knoxville to pick up something he needed immediately for his computer. And, we discovered that the business of Seals Electronics (among other things) was the sales and service of TWX machines and he was always looking for them at a good price. He sold all he could get for $995.00. So, we made a deal. He sold me memory boards at dealer cost of 33% off list, and took payment in TWX machines at $695.00 each. We had to go to northwest Indiana to pick up the printers and deliver the memory boards to pay for them, and then drive them to Lexington, KY where Bruce Seals’ van would meet ours and we would swap printers for more memories. I'll leave the arithmetic to you, but I'll tell you this. I made a hell of a lot more money on Seals’ 8K memory boards than I ever did on anyone else’s and they very rarely failed! He got a bad shipment of chips once and had to call back a whole production run, but did right by the customers. He had us send the customer a replacement board for the bad ones and didn't demand that the bad units be in his hands before the swap. And not once did a customer burn him or us.
Oh yes, those were the days. I am sure I am missing my real point here. As simply as I can make it, the personal computer industry is unique in many ways, but to me the most important is this. Never in the history of civilization was a multibillion dollar industry created out of thin air by the retailer of the industry products, and it was an accomplished fact in less than two years. The manufacturers did not plan for a retailer of their products and would have been content with mail-order and/or local sales to friends and fellow hobbyists. Instead, the retailer opened for business and then demanded that the manufacturer give him a piece of the action and got volume sales for the manufacturer. If a manufacturer couldn't hack it, he disappeared, or stayed low volume and mail order for single piece orders. Have I made myself clear? I hope so, but I have never seen anything in print that acknowledges it.