The following article was originally published in the disk magazine, Grapevine, in 1993.
Most people would claim to know quite a lot about Commodore. There’s a lot of myths, a lot of bullshit, and a lot of lies. And now, as Commodore enters a new (final?) era of it’s existence, it’s probably a good time to take a good look at where the company came from.
Commodore, like so many of the modern computing giants, didn’t start out in computing at all. Commodore originally wasn’t even in the electrical retail market, like Sinclair or Amstrad, but in typewriters.
It all started when a young soldier at the USA Fort Dix showed a talent for unjamming typewriters. Whilst his piers were busy pretending to shoot each other and playing war games, Jack Tramiel was sorting out more basic problems with the army Hermes’s. Not a talent to build an empire on, but when Tramiel left the army, he set up his own typewriter repair business in the Bronx. To supplement his income, he also moonlighted as a cab driver.
Business went slowly but steadily, until Tramiel pulled off a deal with Czechoslovakia to assemble typewriters in Canada. The family upped it’s roots and moved to Toronto, whilst Tramiel laid the founding stones of Commodore International.
Shortly afterward, it occurred to Tramiel that he may as well sell his own typewriters as someone else. It cut out the middle man – more profit, less effort. So he took over a typewriter manufacturing concern in Berlin, and added to the growing empire that was Commodore. At that time, the business world of the States and Europe was being flooded by cheap mechanical adding machines from Japan. Showing off his talent for listening to his customers, Tramiel moved into the delights of adding machines.
In 1962, the company was successful enough to go public. Entitled Commodore Business Machines, Canada, Tramiel was the president, and the chairman and banker was the president of Atlantic Acceptance Corporation, C. Powell Morgan.
Three years later, C. Powell Morgan was publicly condemned by a Canadian Royal Commission for “his defiance of all accepted business principles” and acts of “rapacious and unprincipled manipulation”. Whether this was justified is a matter of opinion, but the failure to meet payments on a $5 million short-term loan didn’t help his case. Unfortunately (or fortunately, depending on how you view the story), Morgan died of leukaemia before he could be tried in court. The Commission also took a good long look at Commodore and Tramiel. It wasn’t entirely convinced of his innocence in the Morgan’s affairs, but decided not to indict him. The bad publicity didn’t help Commodore’s position in the market, however. Money was becoming tight, and the outlook was becoming bleak for Tramiel.
A lifeline came when a Canadian investor, Irving Gould, agreed to buy a substantial stake in Commodore, in return for the position of Chairman. The new team of Gould and Tramiel set to work on building commodore’s position.
The adding machine business was becoming a dead duck. The Japanese had the market almost sewn up. As a last-ditch attempt, Gould suggested that Tramiel take a trip to Japan, and get a little first-hand experience of the market. Whilst over there, Tramiel saw, for the first time, the new electronic desk-top calculator.
Recognising the potential in the calculators, he foresaw the end of volume sales for mechanical adding machines. As soon as he returned, commodore’s strategy was shifted away from adding machines, and onto electronic calculators.
For the first time in months, fortune smiled on Commodore. It was Tramiel’s company who took the first electronic pocket calculator onto the market, using a Bowmar LED display, and a Texas Instruments integrated chip. Only Clive Sinclair could improve on the design years later, by significantly reducing the power consumption and miniaturising the whole package.
Suddenly, everyone went calculator crazy. Machines, equivalent in power to those that are now given away free with gallons of petrol and insurance quotes, were sold for $100+, then a perfectly reasonable price. Commodore, by now used to running into problems, ran into a big one. Texas Instruments, Commodore’s chief supplier of the main chips in the calculators, took a leaf out of Tramiel’s book. “Cutting out the middle man”, they launched their own range of calculators. Of course, they used their own chips at a fraction of the cost, and this had a disastrous effect on Commodore.
Chips prices dropped from $12 to a buck each. Commodore had warehouses full of calculators built containing chips at the old price. After years of steadily increasing profits, 1975 showed Commodore making a $5 million loss on sales of nearly $50 million. It taught Tramiel and Gould a lesson: relying on outside suppliers for key components was risky. Tramiel commented later: “From there on, I felt the only way to continue in the electronics business was to control our own destiny.”
Easier said than done, at those times; the calculator and semi-conductor markets were risky and unpredictable. Gould, once again, came to Commodore’s rescue by personally guaranteeing a $3 million loan, giving Commodore enough buying power to take over MOS Technology in November 1976.
MOS, a struggling manufacturer of calculator and other semiconductors, was only one of a series of acquisitions: Frontier, a Los Angeles manufacturer of CMOS chips, and MDSA, a LCD maker, were snapped up as well. This give Commodore more experience in key technologies than firms many times Commodore’s size. But the important acquisition was MOS Technology, which became known as MosTek. With the company came an unknown engineer, Chuck Peddle.
A year before being taken over, the MosTek team had worked out an improvement to Motorola’s 6800. They called it the 6502.
Legend has it that Tramiel was accosted in the corridor, one day, by Chuck Peddle. Peddle told Jack to, basically, forget about hand-held calculators. What about a desktop computer?
“Build it,” said Tramiel, and the PET was born, using MosTek’s 6502.
The announcement that Commodore were working on a computer was greeted by a resounding silence. At that time, early 1976, the US (micro)computer market was made up of hobbyists; small-time engineers, working on the kitchen table with soldering irons and home-made displays.
This didn’t discourage Tramiel. Working by his own idiom, “they [the public] don’t yet know what they need”.
It’s worth pointing out, at this point, that Tramiel could have easily called the new machine the Personal Electronic Transactor. But, by naming it the PET, it tamed a device which was sure to bring out the technophobes in even the most worldy of America’s hobbyists.
The 8K PET was first shown at the Chicago Consumer Electronics Show in 1977. It met an enthusiastic reception, but not without a behind-the-scenes rush to get the PET ready for the show.
Chuck Peddle, responsible for building the prototype, was under huge pressure to get the machine ready and working in time for the show. This is a classic instance of the marketing boys driving the R&D unit. Peddle crated up the still-unfinished PET and transported it to the show. After working for 3 solid days, without sleep, he managed to get the prototype working well enough to display.
However well the machine itself worked, the word was out. Within a few months, Commodore was receiving 50 calls a day from dealers, all wanting to sell the PET. This demand for the machine allowed Commodore to dictate terms to dealers. Rather than allowing just anyone to sell the machine, dealers had to demonstrate an excellent credit history, pay a cash deposit on orders, and show they had a service engineer and a retail outlet. Tramiel also concentrated on selling the PET to the US and Europe educational market. Demand continued to grow, and Tramiel remembered his marketing maxim about the middle man. “Why bother with dealers?” he asked himself.
Tramiel approached the big retails chain stores, and within a few weeks, the right to sell Commodore products, which the dealers had fought so hard to obtain, was practically meaningless. The dealers were in direct competition with the household names.