Death and Rebirth

Rod Smith says that he does want one of my VDP80s and sent a 4.6K check and that’s nice. But it feels a little like everything we do is correct and right but nothing produces the result.

–Bill Lohse, in a telex from IMSAI Europe to IMSAI San Leandro

When Millard arrived in San Leandro, he found IMSAI in terrible financial shape while stuck with a computer on the market that was blackening the company’s reputation. To turn things around, he first authorized the redesign of the VDP 80. Millard and the engineering people agreed that it was basically sound and would sell well if it worked—that is, if its reputation had not already been irreversibly damaged.

Looking for a Miracle

Another project that held some promise for success was Diane Hajicek’s IMNET, a software package that could link several IMSAI machines together. The machines could then share resources, such as disk drives and printers. Together, IMNET and the revised VDP 80 would, Millard hoped, give IMSAI a viable office product to sell. Every step was a gamble now, and time was the opponent. If IMSAI could get the VDP 80 and IMNET earning dollars soon enough, the company could make the miracle it needed. If not, well, Millard didn’t engage in negative thinking.

When Millard thought he could safely return to Europe, he left Kathy Matthews in charge. Matthews was Millard’s sister and had been an executive in the corporation for some time. But the money situation didn’t improve. Finally, in the spring of 1979, the company filed Chapter 11—a provision of federal bankruptcy law that keeps a company’s creditors at bay while the company cuts expenses back in an attempt to dig itself out of its financial hole. Despite filing for bankruptcy, Kathy Matthews still believed IMSAI could recover and prosper.

Now more than ever, IMSAI needed a miracle. Matthews was doing all she could to generate orders. When Diane Hajicek said IMNET was ready, Matthews went on the road for three days straight to show off the product. With the exception of the presentation at one of Ed Faber’s ComputerLand stores that went especially well, many of the demonstrations were embarrassing—IMNET wasn’t really ready to go public. Matthews sent IMNET back to Hajicek for more work while expressing her wish to the Luxembourg group at IMSAI Europe that they could see “how wonderful and exciting IMNET is.”

Layoffs continued, and IMSAI was consolidated into a single building. Company executives who had been living like the big-business officers they dreamed of being now faced seriously reduced circumstances. The interior walls of Building One were rearranged, and the resulting narrow hallways made employees claustrophobic. The functions of the various offices became more generalized, as did those of the company officers. One day, IMSAI vice president Steve Bishop found company president John Carter Scott lying on his back on the floor of the former marketing office assembling machines while chief engineer Joe Killian soldered wires.

IMSAI’s European operation wasn’t flourishing either. The money just wasn’t coming in fast enough. Lohse pronounced the situation grim. Back in San Leandro, at the end of July 1979 Kathy Matthews declared, “We need a great August.” Steve Bishop examined the records and found that the company had lost less money than he had feared. IMSAI could at least meet its payroll for another month.

Reading Your Own Obituary

The July issue of Interface Age carried a column by industry watchdog Adam Osborne, the former Intel employee who had written the documentation for Intel’s first microprocessors, in which Osborne called IMSAI a “financial victim.” Matthews felt as if she were reading her own obituary. But they weren’t dead yet, she insisted, and wanted “so very much to produce a miracle and create a butterfly from a caterpillar.”

Bill Millard decided the San Leandro operation was in need of his personal attention. He booked a flight back and sent telexes on July 31 to Ed Faber, Steve Bishop, and his daughter, Barbara Millard, that said,

I WOULD LIKE TO MEET WITH YOU WED. 8/2

He named the time and place. Within a week of Millard’s return, IMSAI Manufacturing suspended all sales and manufacturing operations. Steve Bishop told Lohse to advise their European dealers of the situation. Meanwhile, Millard was desperately looking for someone with money to keep IMSAI afloat.

On August 7, Steve Bishop telexed Lohse:

YOU NEED TO CONSIDER YOUR PAY. YOU WERE BEING PAID OUT OF SNLO [IMSAI San Leandro] AND ONLY ONE PERSON IS LEFT ON THE PAYROLL HERE. THE WAY WHM [Bill Millard] IS SAYING IT IS THAT WE CAN STICK AROUND AND MAY GET PAID BUT NO ASSURANCE. ALSO YOU NEED TO CONSIDER YOUR RETURN EXPENSE TO THE US NOT BEING NEGATIVE JUST WANTED YOU TO BE THINKING.

Things weren’t working out for Lohse. He had seized the European job in part to escape the problems looming at IMSAI, but there was no avoiding the company’s imminent collapse. Lohse had two choices: abandon ship or ride out the storm. Somehow, after all he had experienced, quitting didn’t make sense now. But if he stayed, Lohse had to wait for further developments in San Leandro. IMSAI’s future was up to Bill Millard. If Millard could find an investor, the sparkle would return to all their lives. Most of the items on Lohse’s to-do list said, “Wait for further info.” But Lohse wasn’t very good at waiting around.

A week later, on August 14, Kathy Matthews and Bill Lohse exchanged terse telex messages.

Lohse:

ANY NEWS?

Matthews:

NOT A THING.

Lohse:

RATS.

Lohse assessed IMSAI Europe’s financial position. It was dismal. No matter how he figured it, the European office could not guarantee payment of its September bills. Lohse would have to sell off essential equipment just to keep a legal minimum balance in the company’s bank account. Lohse informed his staff that there was no money left to pay them. He had worked closely with these people for six months, and it pained him to give them the news.

Lohse then sent a telex to Matthews:

Lohse:

WE ARE WAITING.

She replied:

WELL, WE HAVE ANOTHER DAY.

Lohse waited a bit, then answered,

WELL, OURS IS ABOUT OVER.

Perhaps he was referring to the time difference, or perhaps to something else.

On August 21, Lohse put in a request to return home. Bill Millard telexed back his permission, and asked Lohse to bring along the Norelco shaver Millard had left behind on a previous trip.

On September 4, 1979, Millard called a meeting in San Leandro. The building where they met, at one time the base for more than 50 people and several divisions of the company, was now vacant except for that small group of people sitting around a table. There wasn’t much to say. The VDP 80 redesign was complete and it was solid, but the machine on which the company pinned its hopes came too late. IMSAI had been dying for a long time, and the final miracle hadn’t come through. When the meeting ended, everyone got up and walked out in silence. A short while later, a police officer arrived and padlocked the front door.

But strangely enough, IMSAI wasn’t dead yet.

A Surprising Rebirth

Before the lockout, Todd Fischer had arrived to pick up some equipment. He had formed an independent repair company with Nancy Freitas after leaving IMSAI, and they were doing most of the IMSAI repairs when the company filed for Chapter 11 reorganization. Recovery from Chapter 11 almost requires a miracle, and IMSAI hadn’t been able to make one.

It was largely due to Fischer and Freitas that a new company was born out of the ashes of IMSAI. While IMSAI was foundering, Fischer-Freitas was showing a profit. John Carter Scott didn’t want his customers’ equipment tied up in judicial wrangling, so he asked Fischer to take all of it, along with whatever tools Fischer needed to keep his operation going. Plenty of IMSAI computers remained in the field, and they would all need service someday. Scott couldn’t think of a better person to repair them than Todd Fischer.

After a month, Fischer bought most of the remaining IMSAI inventory at a low-key auction. Later, after he found out the company name was also available, Fischer bought that, too. He and Nancy Freitas, now husband and wife, brought in an old music-industry buddy of Fischer’s and incorporated as IMSAI Manufacturing. Operating out of a few hundred square feet in the warehouse district of Oakland, California, they began to build IMSAI computers once more.

The IMSAI that Fischer and Freitas founded was a small company with little resemblance to the frenetic original. The new IMSAI focused more on customer support than on sales and made an effort to get to know its actual customers. Its one brush with fame came when one of its machines was featured in the early computer-cracker movie War Games in 1983.

The old IMSAI had been remarkably successful with the IMSAI 8080, selling thousands of units over its three-year existence. Although the success was short-lived, it was a triumph, and a significant accomplishment in an age when corporate executives were still communicating by telex. IMSAI’s brief triumph, and no doubt its ultimate failure, stemmed in large part from the managerial philosophy of Bill Millard. His tenure as IMSAI chief was marked by outsize goals, a complete intolerance of failure, an exceptionally aggressive sales force, a stubborn refusal to acknowledge nagging problems, an unwillingness to relinquish any control, and a perhaps-fatal scorn for the entire hobbyist community. Many wags in the industry used a term to describe such a business style—est, after the movement that Millard so thoroughly embraced. Adam Osborne put it simply: “est killed IMSAI.” But it might be better just to say that IMSAI’s management failed to take seriously the limitations of the technology of the day and tried to push microcomputers into business markets they were not ready for.

But although the IMSAI decision makers failed to understand the hobbyist culture of their market, they nevertheless fanned the fires of the revolution by giving hobbyists a better Altair. At the same time, IMSAI’s attempt to make the industry into something it wasn’t helped to define what that newborn industry actually was—a grassroots movement of hobbyists fully conscious that they were ushering in not just a technological revolution, but a social one as well.

That revolutionary spirit was nowhere more evident than at the Homebrew Computer Club.