The Big Players

Not a kit, the TRS-80 comes completely wired and tested, ready to plug in and use.

–A Tandy Corporation press release

Ed Roberts had seen the well-heeled established electronics companies come crashing into the calculator business, cutting margins to the bone and driving out the little guys. He and the other “little guys” who had created this nascent microcomputer industry dreaded the day when the big guys would enter their world.

In 1977, it looked like it was about to happen, and the company that was going to change the nature of the game was a retailer, the leading electronics distributor, with stores in nearly every town in the country. Tandy/Radio Shack was going to make and sell its own microcomputer.

Tandy

Computer retailing at the time, even when it was profitable, was still more about building community than pushing products. Ray Borrill’s store in Bloomington, Indiana, was typical: in 1977 the store employed repair technicians and programmers, but no salespeople. Borrill himself was the closest thing the store had to a salesperson, but his conversations with customers ranged from broad discussions of the power of microcomputers to risky promises of what Borrill’s team could put together for the customer, promises based mostly on how much “fun” Borrill thought the project would be: that is, how challenging it was.

The specter of Radio Shack loomed over Borrill and the other retailers as much as over the computer companies. None of them could compete with this powerhouse. Or so it seemed.

The Tandy Corporation began as a wholesale leather business. In 1927, Dave Tandy and his friend Norton Hinckley founded the Hinckley-Tandy Leather Company, which soon established a solid reputation around Fort Worth. In 1950, Tandy’s son Charles, a graduate of Harvard Business School, conceived of expanding the business into a chain of leathercraft stores that would sell goods partly by retail and partly by mail order. Cofounder Hinckley balked at the idea and left the Tandy Leather Company.

Charles Tandy had an engaging, magnetic personality and a dry sense of humor, and he seemed to have an influence on everyone around him. He was an inveterate instructor who was engrossed in the daily operations of the company. When he had nothing else to do on a Friday afternoon, he would phone his retail outlets to ask how business was doing.

Tandy quickly set about building a national retail chain. By 1961, he had 125 stores in 105 cities in the United States and Canada. In 1962, Tandy bought a company that fundamentally changed the nature of the corporation. Tandy got wind of a small, nearly bankrupt chain of nine mail-order electronics stores called Radio Shack. He took control of the Boston-based company in 1963 and at once began reconstructing it, adding hundreds of retail stores throughout the country. Before Tandy took over, Radio Shack had been losing $4 million annually. Within two years after Tandy bought the chain, it was turning a profit. By 1973, when Radio Shack purchased its closest competitor, Allied Radio of Chicago, Radio Shack so dominated the market that the Justice Department brought an antitrust suit against it and compelled Tandy to divest itself of the corporation.

Tandy had begun manufacturing some of its own wares in 1966, but resisted making microcomputers when they arrived on the scene, even though some Tandy employees were caught up in the computer hobbyist movement. The behemoth chain was pushed into microcomputer manufacturing chiefly by one man: Don French.

French was a buyer for Radio Shack in 1975 when the Altair was released. He bought one as soon as he could and thoroughly studied it. Concluding that microcomputing had potential, French began to concoct his own machine. Although forbidden to develop his computer on company time, French eventually managed to convince John Roach, then vice president of marketing at Radio Shack, to take a look at his project. As French recalls, Roach was not particularly impressed with French’s efforts. Nonetheless, Radio Shack offered Steve Leininger of National Semiconductor payment to examine French’s design. Leininger needed no arm-twisting, and by June 1976 he and French were working together on the project, using equipment and software of their own design.

The TRS-80

French and Leininger received the official go-ahead to develop a Radio Shack computer in December 1976, even though the firm was only casually committed to their project. Radio Shack told French to “get it done as cheaply as possible.” This was a more encouraging statement than the one he had heard a few months earlier when a Radio Shack executive had telexed French saying, “Don’t waste my time. We can’t sell computers.”

Tandy was, however, protecting its turf. When Bill Millard and Ed Faber launched ComputerLand in 1976, it was under the name Computer Shack. That was too close for Tandy’s comfort, and the company notified Faber that it intended to protect its trademark. Faber stood firm, seeking a court judgment in California. Tandy immediately sued in New Jersey. Faber got the message: Tandy was going to sue him state-by-state, keeping him tied up in court forever. He quietly changed the name of his franchise to ComputerLand.

In January 1977, just a month after they began work on the project, French and Leininger had a working model. They demonstrated their new machine for Charles Tandy in the Radio Shack conference room. The keyboard and display sat on the table, but the computer itself lay hidden beneath it. The two engineers had devised a simple tax-accounting program, H & R Shack, and asked the magnate to try it out. Tandy typed in a salary of $150,000 for himself and promptly crashed the program. After French and Leininger explained the limits of integer arithmetic in BASIC, Tandy gracefully entered a much smaller figure, but French made a mental note that the machine needed better math capabilities.

Serious work began on the machine a few months later. The company projected a retail price of $199 and sales of 1,000 units per year. French thought that the 1,000-unit figure was absurd. MITS had sold more than 10,000 Altairs in a year without the overwhelming advantage of Radio Shack’s retail network. French wasn’t too sure the $199 price was right, either.

Soon after that, Tandy and Roach met with computer-division personnel to discuss what to do with the little computer if it failed to sell. Could they at least use it for internal Radio Shack accounting? After all, French was doing some simple record keeping on his handmade version. If nothing else, the company’s own stores could serve as a backup customer base and absorb the first year’s projected production.

Radio Shack announced its new TRS-80 in August at New York City’s Warwick Hotel. The $199 price hadn’t survived; the machine would retail for $399 and come complete and ready to use in a black-and-gray plastic case. By September 1977, with projected sales at 3,000 units annually, Radio Shack stores had already sold 10,000 TRS-80s.

Back in June 1977, Radio Shack gave French the task of establishing retail outlets for the TRS-80. The computer was the orphan of the Radio Shack family. The company wasn’t sure how successful it would be, and didn’t take it that seriously. When the TRS-80 was introduced, Radio Shack outlets didn’t even stock it—customers needed to special-order the company’s own product.

Tandy management’s hesitation about selling computers was in part based on the accurate assessment that computer sales weren’t like calculator or answering machine sales. There was a reason why existing computer stores operated as they did: customers needed a lot of support and hand-holding. Computer retailing really was still about community building and support more than about moving products. This was not the Radio Shack model.

Tandy/Radio Shack ventured out a bit into the computer retailing business when it opened its first all-computer store in Fort Worth in October 1977. The outlet carried not only the TRS-80, but also IMSAIs and other companies’ products. It was regarded as an experiment. But that venture succeeded, too, and resistance to microcomputers began fading away within the Tandy Corporation ranks. Radio Shack outlets began stocking the TRS-80s, and Radio Shack Computer Centers were appearing all over the country, staffed by individuals who knew more about computers than the average electronics salesperson. The backlog of orders was tremendous: in June 1978, Radio Shack president Lewis Kornfeld admitted that only about one-third of the stores had TRS-80s in stock, though over half had sold some.

Charles Tandy celebrated his sixtieth birthday in style, making an entrance to his birthday party astride an elephant. A few months later, on a Saturday afternoon in November 1978, Tandy died in his sleep. The following Monday, the value of the Tandy Corporation stock dropped 10 percent on Wall Street. But the Tandy Corporation was not a one-man show. Charles Tandy had surrounded himself with capable executives, and after his death the company retained a solid financial footing.

The original TRS-80 was fairly limited in what it could do. It had only 4K of memory, a Z80 processor running at slightly under half its rated speed, a sketchy BASIC, and very slow tape cassettes for data storage. Most of these limitations stemmed from the company’s cut-rate approach to manufacturing. The first TRS-80 lacked the capability to type lowercase letters. This was not an oversight. French and Leininger had deliberately omitted them to save $1.50 on parts, which translated to $5 on the purchase price.

Tandy quickly supplemented the TRS-80 with a better BASIC and add-on memory kits, and soon after that offered a combination disk drive and printer. These enhancements were a prelude to Tandy’s announcement, on May 30, 1979, of the TRS-80 Model II, a respectable business system that overcame many of the drawbacks of the original model. The Model II showed that Tandy had learned from its mistakes with the first TRS-80 and was capable of creating a state-of-the-art business machine. This surprised some, given Tandy’s underpowered entry into the personal-computer field.

Between 1978 and 1980, personal computers and related equipment rose from 1.8 to 12.7 percent of Radio Shack’s North American sales. In 1980, Radio Shack introduced a spate of new machines. Its Pocket Computer, slightly larger than an advanced calculator with four times the memory of the original Altair, sold for $229. Its Color Computer, at $399, offered graphics in eight colors and up to 16K of memory. And the TRS-80 Model II was an upgrade of the Model I.

The TRS-80 Model I was a price breakthrough, and people who knew nothing about computers began buying Model Is. Far from driving the little guys out, this actually expanded the market and helped to legitimize microcomputers in the eyes of the general public. Tandy’s toylike machines and reputation as a hobbyist’s company didn’t do much for the idea of the microcomputer as a business tool, although some businesses did experiment with TRS-80s. But the home/hobby computer market began to expand rapidly.

Commodore

Tandy was not the only company driving prices down, thereby opening the market for home computers. Nolan Bushnell’s Atari, which initially produced only video-game machines, began putting out low-priced devices that could legitimately be called computers. Texas Instruments, the company that so many microcomputer manufacturers feared would announce a bargain-basement computer, did just that with its TI-99/4. And in Britain, a daring and brilliant entrepreneur named Clive Sinclair introduced a tiny computer called the ZX80, which was distributed by Timex and sold for under $50.

But Commodore, with its strong distribution channels for its electronics equipment and its own semiconductor design capabilities, was perceived as the greatest threat.

Commodore International was a Canadian electronics-products firm founded and run by Jack Tramiel, an Auschwitz survivor and a hard-driving businessman. In the early 1970s it had been heavily focused on selling pocket calculators using TI chips. When TI jumped into the industry itself, Commodore went from $60 million in annual sales to a $5 million loss.

Tramiel’s reaction was to move the company to Palo Alto, purchase chip company MOS Technology, and hire its lead designer, Chuck Peddle. Peddle had shaken up the market with his 6502 microprocessor, a chip that could sell for $25, about a sixth the going price for such chips.

Peddle had also designed a computer of his own, and had tried unsuccessfully to sell it to Tandy. When the Commodore PET debuted in early 1977, it was a worthy competitor to Radio Shack’s TRS-80 and another new computer that was getting a lot of attention, the Apple II. Tramiel immediately took it worldwide, dominating the early European market.

But Peddle was just getting warmed up. After a brief move to Apple, Peddle returned to Commodore and developed a line of computers that led to the spectacularly successful Commodore 64. By 1983, it was the best-selling computer in the world, and Tramiel had made it difficult for competitors to gain any ground against Commodore by cutting its price to $200.

But while Commodore, TI, and other well-financed companies were getting into the game, in the early 1980s the toughest competition Tandy faced came from a Silicon Valley firm financed by the sale of two calculators and a Volkswagen bus.