Peter Cobb – Apple UK General Manager – “Ultimately my job is to earn dollars for the US shareholders. There are all sorts of wrinkles to this thing: where are these things bought, how long forward, managing exchange exposures, there’s a whole sophisticated exercise going on designed to avoid the consumer having to cough up simply because the exchange stays low. That’s not good business practice in my view.”
By Martin Hayman
History, it is said, repeats itself. Subscribers to the teleological view could do worse than search the annals of the computer business if they seek evidence of this theory. The backwards and forwards surge of capital is perhaps an unlikely place to look for patterns, but really the movement is ever onwards: the next wave is always the biggest. Right now Apple is the next wave.
Apple has just had its most successful year ever, with sales of $580m. Its sales topped $200m for the last quarter of last year alone. It no longer talks about ‘if but ‘when’ it will reach the Fortune 500 – the index of the biggest-grossing companies in the US. If it does, it will be the youngest company ever to do so. It talks of spending $50m every year on research and development. This is a staggering achievement for a company which, as just about everyone must have heard by now, was started in 1976 by two young men, Steve Jobs and Steve Wozniak, working out of a garage, who raised the launch capital to build an order of 50 from the sale of a pre-owned Volkswagen van and a programmable calculator. The computer prototype took six months to design and a mere 40 hours to build.
The company’s success is the more surprising because it relies largely on that one ageing machine, the Apple II, in an industry where technical novelty appears to be paramount. Though according to Adam Osborne it isn’t. He ascribes Apple’s success not to the ingenuity of the product or indeed the dynamism of its youthful progenitors, but to the solid understanding of Apple’s backer, marketing chief and eminence grise, Mike Markkula, of the simple market expedients of outlets (lots, and one in your neighbourhood); service; and support.
“Markkula was the only one in the business in 1976/7 who understood that simple list,” reckons the Big O. Heard it before? Right: Osborne describing his own operation. But before that was another wave…
Long before there were micros, there were minis. And there was a firm known as Data General, who set the cat among the pigeons by playing rough and tough. They started in 1968, and it took them a decade to get into the Fortune 500. DG put Digital Electric Corp’s nose out of joint something rotten, but then, in their turn, doubtless DEC- world’s No.2 in computers – cost IBM more than a fleabite, even when mainframes ruled the roost and a minicomputer was something you put in a small room rather than a big one. And as for IBM, long before transistors and the like, when the acme of business software was the stack of Hollerith punched cards, and salesmen travelled on trains, you may be damn sure that John L. Watson and his team put somebody else’s nose out of joint. Then, they were the next wave; now they’re in the Fortune 500, and pretty near the top of it too.
Undoubtedly Mike Markkula is one of Apple’s biggest assets. It’s debatable whether the two Steves would have got far with their garage computer without enlisting his experience on their side. As a former marketing chief in two not exactly unknown semicomductor firms, Intel Corporation and Fairchild Semiconductor, he had already made a pile and was reputedly a dollar millionaire. He was able to introduce the Apple boys to sources of venture capital without which Apple would merely have shrivelled: firms with resonant names like Venrock Associates, Arthur Rock & Associates and Capital Management Corporation; plus, for good measure, he put in some of his own.
Markkula certainly must have understood the nature of the marketplace, volatile as it is; there is a consciousness among Apple people of their customers ‘out there’ (a favourite phrase) and the sheer availability of the kit must, in the early days before the turn of the decade, have been a strong enough argument. Because of its simple, modular construction, just about anyone could configure the system with their own boards, and soon a whole sub-industry of add-ons was going for the ambitious punter’s cash: plotters, graphics tablets, communications interfaces (one polytechnic hobbyist relates using a high-speed communications card to interface his Apple with a Prime 550 and he was by no means alone), digital music synthesisers, Z-80 softcards if you insist on CP/M, the usual add-on memory boards and A-D converters for instrument control; the Apple was even the first microcomputer to be approved for connection to British Telecom’s network, and you may imagine how arduous it was to make that stick.
And not only kit: Apple seemed to get the best software releases soonest, with the undoubted clincher being Personal Software’s VisiCalc, which arrived in this country in early 1980. This renowned piece of software had been adapted from mainframe use by Dan Bricklin and Bob Frankston, curiously working out of Massachusetts rather than California, and soon to become the world’s hottest-selling piece of software.
One reviewer of the time wrote, “We were unable to find any bugs in the program or to crash the system”. Given that it would run in a mere 32K and a couple of disks, and cost a mere £95, it made the Apple look like a potentially serious business tool rather than an obscure hobbyist’s plaything.
Peter Cobb – Apple UK General Manager
For the fact is that in the US the Apple was seen principally as a ‘home’ computer. Called on to describe the difference between a hobbyist and a home user, Apple UK General Manager, Peter Cobb, responds drily, “about a year”. VisiCalc further elided the distinction between the home user and the business-person and, at least in the UK, Apple rapidly became the first cheap business microcomputer: it could be used for ‘serious’ office-type work without the user really needing to bend his brain with concepts of computing for which he had no time and which certainly held no charms for him.
Cobb, looking very like Denis Healey, says bluntly: “The great Mr. Prospect now is a perfectly straight-forward businessman like me who doesn’t want to play technical games with the machines, doesn’t particularly want to know how it works, but just wants it to do a job”. In this respect he makes a distinction between the user, typically one such as himself, and the ingenious insiders who saw the retail potential of micros – people like the Brewer Brothers.
Crock of Gold
The Apple III and newly-announced IIe are supported by a new range of both floppy and hard disk systems
The Brewer Brothers’ story has a ‘room at the top’ feel. As the first distributors of Apple products they were living proof that there was a crock of gold to be made in micros. Theirs is not a rags to riches story, but there is something of the fairy tale about the way they took the business by the scruff of the neck. Their sell-out price to Apple, when the US company decided it needed to control the burgeoning UK market, has never been disclosed but it was undoubtedly worth several million – far more than any comparable business might have been expected to produce in such a short time.
Their business was already well established when the word went out that a new firm in California had a product intended as a low-cost hobbyist’s computer, but which might have some use in business. In fact the Brothers Brewer had been supplying items to the computer trade since 1964 – mostly furniture and supplies, by mail order.
Curiously, though, the first computers which they started to import from across the water were Commodore PETs which, Stephen Brewer says, they bought for around £500 and resold at around £750, yielding a margin of ‘around 30% off retail’ (sic).
Data Efficiency, as the Hemel Hempstead-based firm was called, was not the only dealer to want in on micros. It was in competition with Keen and Personal Computers to pick the winner. DE ordered 60 ITT 2020s, which were made to Apple’s design under licence by ITT Consumer Products, who had approached Apple as early as mid-1977 and been granted a Europe-only agreement. Some arrived; some worked. “It was not a particularly auspicious start,” says Brewer, who was looking to feed a newly set-up chain of 10 dealers in north-west London and the West Country. ITT’s partnership with Apple ended after a copyright lawsuit about the design of disk operating system was settled out of court.
A trip to NCC in 1977 has yielded some contracts for distributorships of printers, monitors and boards, but it was not until two years later, also at NCC, that the Brewer Brothers made their big connection: Andre Souson of Eurapple, then the sole European control centre for Apple, appointed Microsense as the UK distributor for Apple. It was a coup which failed to please Data Efficiency’s rivals: “Personal and Keen went up the wall,” recalls Brewer. From then on Microsense, which had been formed as a splinter company from DE to market Apples, went from strength to strength.
Stephen Brewer was Marketing Director, while his elder brother, Mike was Managing Director.To Stephen fell the lot of organising the dealers, and marketing and advertising the product. One of his wheezes was to hook Freddie Laker in to promote the computer (Sir Freddie was then flying high as a sort of popular hero), though there is some doubt as to whether he ever actually used the Apple installed behind his desk.
Brewer is aware that Microsense was perhaps not too, uh, popular among some of the people who were buying from him but contends that it was necessary to be tough. As Peter Cobb remarks, many of the people who took on micro dealerships in those early days quickly found that it was not, perhaps, the right business for them.
Some were just enthusiasts operating out of their front rooms, and had very little idea of business practice. Brewer decided to use the contentious technique of credit factoring – that is to say, he sold his debts to a collection agency who would invoice the dealers and deal with other routine debt-collection. But the beauty of credit factoring, from Microsense’s point of view, was that the collection agency would investigate the credit-worthiness of would-be dealers and assign each one a credit ceiling. This avoided Microsense the headache of attempting to assess the story of anyone who came banging at their door asking for stock on credit.
Microsense itself was among the entrepreneurial merchandisers who made good. In turn the Brewer Brothers reported to Eurapple, an independent organisation which was bought out and run by Apple’s own-employee ‘commando’ of which Peter Cobb was one of the first members. As former financial controller or, as he cheerfully puts it, ‘chief bean-counter’ for Intel in Brussels, Cobb followed a little later by Keith Hall, recruited from Commodore to take charge of sales, marked Apple’s tightening grip on world ‘local’ markets.
Eurapple handled the marketing and re-engineering, if needed, of all Apple computers sold outside the US with the exception of Japan. In late 1979, in an interview with Yorkshire Apple dealer, David Hebditch of Microtrend, Eurapple chief Andre Souson claimed that he was about to start up in Japan, showing Apple’s determination from comparatively early – Eurapple was set up as a world-wide marketing operation in June 1977 – to expand and compete with Commodore, who had excellent worldwide distribution for its PET, sold alongside its range of successful calculators, and Radio Shack, whose TRS-80 sold through that company’s coast-to-coast chain of electrical hardware retailers.
In fact Apple even alluded to its competitors Commodore and Radio Shack in its prospectus for the first public sale of shares in 1980, in which it admitted that ‘the company might be at a competitive disadvantage because it purchases integrated circuits and other components from outside vendors, while certain of its competitors manufacture such parts’.
It owned modestly that it might have to expand its distribution channels, or establish additional marketing arrangements such as a direct sales force. Well, Apple shifted the 4.5 million of its 52.4 million outstanding shares for the right price in December 1980 and a further 2.3 million in May 1981 and they were in business.
Andre Souson, when asked in autumn 1979 about the definition of, and prospects for a home computer, replying on behalf of the company (for whom he was at the time entitled to speak, since he did work closely with Apple Corp) said that the day of the home computer had not arrived and that he had seen no evidence that it would. Rightly, he distinguishes the ‘personal’ from the ‘home’ computer and remarks that what makes a personal computer personal is that one person uses it. He also shows that Apple grasped the nettle of service and back-up early, and sought to implement a policy of 24-hour turnaround to the end user anywhere in the world.
It is intriguing to study the prices of mid-1979. Then, the price to the UK customer of a 16K Apple II was £750 (current price of the 48K Apple II Plus, £675), that is, around $1600 at the prevailing exchange rate, compared with a US price of $1200. Import duties for manufactured computers, then as now, stood at 16% (working from end-user price in the UK, nearly $300) and the PAL or SECAM conversion cost was around $80. Then, as now, Apple had to defend its products against accusations of over-pricing on export markets, but it is a fair indication of how well Apple has contained its costs that the stated price to the UK customer is little different now. But then neither, I daresay, is that of the Commodore PET, which Souson identified as the principal competitor to Apple, and for whom he had previously worked as chief calculator design engineer.
LISA – an important step in re-establishing Apple’s credibility as an innovator.
Apple still has to defend the price of its product: at the Barbican launch of the 1983 model year range, some were disappointed that Apple had not taken the opportunity to cut the price of its easy-build Apple IIe, despite the fall of the pound against the dollar. This is tricky, because Apple UK buys its computers in dollar prices from the Cork factory in Eire. “Ultimately my job is to earn dollars for the US shareholders,” says Cobb candidly. “There’re all sorts of wrinkles to this thing: where are the things bought, how long forward, managing exchange exposures, there’s a whole sophisticated exercise going on designed to avoid the consumer having to cough up simply because the exchange rate is low. That’s not good business practice in my view.”
Looking at Apple’s technical strategy, Souson let slip some intriguing speculations in 1979, among them the assertion that “Pascal is the language that all our future machines are going to support primarily… It is the sort of language that a lot of people believe is going to be the basis of all the languages of the future”. Whether or not this is a Good Thing, if indeed it was an a priori decision in 1979, is debatable. Vile rumour has it that the Microsoft BASIC in Lisa actually runs slower than that in the VIC-20, because it has to be interpreted into p-code and thence into its native code.
Furthermore, Souson asserted, “The real question is, do we want to build a machine with a register architecture or not? And I think the answer is no.” He then alluded darkly to a machine that was 5% completed but would be ready for delivery in late 1980. “I think it will be a very nice machine for the user.” And that’s the point: most of the people who use Lisa will not be interested in running BASIC.
As it turned out, this revolutionary product appears to have been Lisa. Now we know how it came to take two person-centuries of research and development to get it out on the market. It seems surprising that the ground-work for the astonishing Lisa was then already in progress; that Steven Jobs and software engineer, John Crouch, had already toured Xerox in Palo Alto to look at Smalltalk and were ready to recruit their tour guide (followed later by another 15). Was the design for Lisa laid down that long ago? Souson says the architecture for a ‘totally innovative’ machine was ready in autumn 1979. Maybe he’d already seen it at work in Palo Alto.
This long gestation for the new model is reassuring. If a great many people have hammered away at it for a couple of years before the customer gets his hands on the product, it is likely to have shaped up. This point is still being made about Apple’s bread and butter computer, the Apple II which is sometimes referred to as outmoded. So, too, was the Volkswagen Beetle. And the Apple II, like the Volkswagen, is subject to continual improvement to its subcutaneous performance: the new IIe is the thirteenth revision to the garage computer, and now it is a different and more powerful machine, which nevertheless remains capable of running programs developed ages ago.
People do not like to junk major time investment in intellectual tools, and Apple still understands well that the individual favours continuity. It is becoming more generally recognized in the corporate environment, too: when the US Defense Department proposed to buy a hundred or so new mainframes, it required the contestants, Sperry-Univac and Burroughs, to enter into the lists in a computing tournament to adapt the Department’s software to run on the machines they were pitching to sell. But that’s an altogether different story…
For all that the Apple II has scarcely shown any signs of flagging in the cheap 8-bit personal computer market, it is just as well that Apple has the Revolution slogan (for Lisa) to add to Evolution, for much more flattering interface with his computer, they would have been out of luck. The Apple III has been troublesome for the company and in the UK at least led to ill-feeling among dealers who thought that a two-tier operation was coming into force, with only some of the existing Apple II stockists being permitted to handle the III. In the event they might have been relieved – because on its launch two years ago Apple III was something of a turkey, and 14,000 were recalled, for what Newsweek delicately describes as ‘retooling’.
How revolutionary is Apple’s strategy? Will Lisa be so easy to learn and use that everyone who deserves one will have a clear desk-top? As an onlooker one can only applaud Apple’s determination to improve the computer’s model of the human brain engaged in so-called ‘mindwork’. The intellectual tools used by the human brain for this sort of work are sophisticated, so any computer which comes nearer to an extension of the human brain, in the same way as a hammer and chisel, a quill – or even, dare I say, a typewriter – is good news. Especially when it costs as little as $12,000 – or is it $9,995 (the latter figure is Newsweek’s).
Truth to tell, an office worker might feel a bit of a Charlie pushing a streamlined dinky toy around the desktop and peering into a screen displaying ‘icons’ of the familiar equipment now banished from the office – the filing cabinets and folders, the wastepaper bin and calculator, and the ready-reckoner. Secretly he might prefer to invite one of the girls to go and retrieve such-and-such a file, but hell, that’s progress.
Clerks of a century ago, used to pens and ledgers, undoubtedly thought the office typewriter a bizarre mode to employ, so who’s to deny the mouse? It sounds better than sitting at your office computer talking to it in precisely modulated tones, as Texas Instruments seems to be inviting us to do with its new voice input Professional Computer. That invokes an altogether different muse, a new Thespian slant to computer salesmanship.
Lisa had better work. Volkswagen came back from the dead when the Beetle finally waned and was banished to local assembly sites, and it took them time to find the right follow-up, but they did. Although Apple Corp’s performance is impressive, it has to make sure that Lisa sells well to recoup costs. Its market share in the US has declined from 29% to 24% since the introduction of the IBM PC in August 1981, and the PC will be able to run VisiOn rather more cheaply than the Lisa package. Certainly IBM are gunning for Apple, who must be kicking themselves for not using Personal Computer; after all, say Apple, “We invented the Personal Computer” – one of the big sales slogans in dealer motivation pep-talks. Stewart Lakey of Personal Computers, London, reckons that even if he had a hundred Lisas in stock right now, it would take him more than a year to sell them: as well as being an Apple dealer, Personal handle both DEC and IBM.
Definitely on the stocks for the future, and enjoying the wholehearted attentions of Steve Jobs as project leader, is the economy Lisa, which may well also be based on the Motorola 68000 and is aimed to sell at around $2,000. Why MacKintosh? I hope it’s not an acrostic, but is it anything to do with outgoing Apple President Michael Scott who, it is reported, refused to let young Jobs run the Lisa team because he was too inexperienced? Come what may, Jobs will have to keep his nerve, because IBM is said to be ready, with its own ‘Popcorn’ executive workstation aimed to compete with Lisa, and a 16-bit ‘Peanut’ machine designed to undersell even the Apple IIe. But none of this blue sky has been seen yet. It will be interesting to see whether, as some people predicted, the era of the garage microcomputer is over, now that the punks have shown the big boys how the market for personal computers works. Apple should be in the Fortune 500 this year, and that’s good going in six years.
First published in Microcomputer Printout magazine, April 1983