Classic Computer Magazine Archive COMPUTE! ISSUE 1 / FALL 1979 / PAGE 71

A Commodore Perspective

Commodore's new marketing moves (whether "reactive" or planned) are exciting old time PET owners and dealers alike. In example, their recent service seminars have been provided at no charge to dealers (with the exception of personal expenses) … and Commodore is providing breakfast, lunch, materials & service manuals at no cost! A welcome start … our plandits to whoever's responsible at Commodore. In this article, Bob Crowell provides an interesting overview/perspective.

Robert J. Crowell
New England Electronics Co., Inc.
679 Highland Avenue
Needham, MA 02194

The history of the Commodore PET computer is a very interesting and mostly unknown story. For the benefit of the vast group of Commodore PET owners, here is a brief history, from the author's experience, on the evolution of the Commodore PET.

The story of the Commodore PET computer began in 1974. MOS Technology, a semiconductor research and manufacturing company in Norristown, PA., was partially purchased by Commodore. This purchase gave Commodore a new technological ‘pool’ to draw from. In 1975, the founders of MOS Technology, some of whom were from the Motorola 6800 (microprocessor) design group, felt that they could improve on the 6800 microprocessor. The resultant research and development led to the announcement of a whole new series of integrated circuits, the 6500 series. The 6502 CPU "Computer on a chip" microprocessor and future CPU of the PET was born. The announcement of this family of chips did not arouse much excitement except in engineering circles. As the product data sheets on this new family of chips were circulated, engineers spent many hours discussing the future applications of the 6502 CPU, PIAs, VIAs, and other esoteric technological marvels.

At this time, during early 1976, the microcomputer industry consisted of a relatively small number of engineering type hobbyists happily assembling a few microcomputers (the first microcomputers were produced in kit form). Soon various articles began appearing that heralded the availability of microcomputers for everyone.

How many of these "computers on a board" would sell? No one at that time could estimate the market for technologically new product like microcomputers. As advertisements on this new product continued circulating, the infant "hobbyist" market began clamoring for attention by ordering thousands of these units, mostly on a cash prepaid basis. Send in your funds and wait three to six months for your unit to arrive!

During this period the engineers MOS Technology, having recently been acquainted with this new industry, announced that they would introduce a new computer on a board called the KIM-1. The KIM-1, with the 6502 as the CPU/brain, became a success before the first unit came off the assembly line. The ‘father unit’ of the PET was born.

Thousands upon thousands of KIM's were subsequently sold as the hobbyist, industrial, and educational markets adopted the KIM-1 with open arms. Remember, the KIM-1 was designed for easy use. All you had to do was hook up your own power supply, hook up a cassette, and away you went happily programming in hexadecimal format! Even at this early stage it was evident to some people that the KIM's days were numbered. Sooner or later the various markets demanding the KIM-1 would become semi-saturated.

During the introduction of the KIM, a vague shape began forming in the mind of a senior engineer at MOS. Why not design a KIM-like unit that would contain a power supply, an interpretive language (basic) to allow non-technical people to program it, a CRT video display, and a keyboard? Could a product like that be sold? Who would buy it? How would the unit be marketed?

As the KIM-1 enjoyed a vast amount of success, MOS Technology was selling integrated circuits for use in calculators and other products. (All you Apple owners can thank MOS Technology for the 6502 Microprocessor!) Enter Commodore in a big way! Commodore, a customer and partial stockholder of MOS, was one of the earliest manufacturers of handheld calculators. MOS Technology had the chip development and manufacturing capabilities to produce chips in large quantities but did not have a consumer-oritned marketing staff. Commodore did not have any large chip manufacturing capability but was essentially a marketing firm with offshore calculator manufacturing capabilities. The match was obvious and a very quick "takeover" was arranged. The result was that Commodore became a vertically integrated company, designing and manufacturing chips on one end and selling the finished product on the other end. This vertical integration, in conjunction with the overseas arms of Commodore, laid the foundation that allowed Commodore to announce that an entirely new product was coming. By December of 1976, Commodore's stock had jumped from 4½ to 7.

Who would buy the unit? At what price? What do we call it? As this new unit would probably be sold directly to users in the home, an acceptable name had to be created. Remember, in 1977, very few people had a firm understanding of this new market, and the general consensus was that the lion's share of the market would be people utilizing the unit for ‘personal’ transactions. Since computers were ‘scary’ to the average person (they fill entire rooms and cost millions of dollars, don't they?), a nice, comfortable product name had to be created. The name Personal Electronic Transactor was quite a mouthful, but as was originally planned, the acronym P.E.T. became the accepted name.

The original pricing of the unit was announced in mid-1977 at $495 for the 4K RAM unit. The price quickly went to $595 for the 4K unit and a $795 8K (optional) unit was announced.

The industry scoffed and said it couldn't be done at that price. Well, basic marketing philosophy (and good corporate management) dictates that if you come out at the lowest possible price point, with a good possibility of a mass market, you make small profits (if any) at the beginning, and you make it up in future large volume production. Of course, a low price also helps to preclude market entry from competitors. An ulterior pricing motive may have been to announce a price that would remain stable. In the mid 1970's the pricing in the calculator market continuously decreased as companies ‘skimmed’ the market with one lower price point after another. Due to these regular decreases in price, the purchasing public began waiting for lower prices before they purchased. If the PET was announced at a higher price, say at $1195 and then dropped to $995 and then again to $795 the market would possibly have waited for even lower price points. As the PET, by its very nature, would have a much longer product life cycle than a calculator product, a stable pricing policy became an important consideration.

In June of 1977, Commodore unveiled the PET at the Consumer Electronics Show in Chicago. There was the PET, amidst all the Commodore calculators. The public went wild. I personally stood there and like many others wrote out a check (at full retail) to Commodore to purchase a PET. I watched one person purchase four units. During the three-day Show, Commodore's stock again jumped, this time to 9¼.

Commodore originally announced that the PET was capable of handling many different tasks, especially with their "soon to be available" 2020 printer. Many of these potential uses would, of course, require a printer as well as support from Commodore. However, Commodore never had a chance. After Popular Science put the PET on it's cover the demand for the PET exploded. Commodore quoted 30-day delivery, then 60, then 90, then an astounding 4-5 months! Remember, these were all prepaid orders. Commodore was inundated with customer orders, dealer inquiries, and requests for information. Due to the size of Commodore's staff, many requests went unanswered, as Commodore concentrated on the task at hand — producing as many PETs as possible.

As Commodore was marketing the PET directly to consumers, the 40 to 50 dealer inquiries received per day piled up. A few persistent dealers continued to clamor for attention.

Due to the absolutely incredible demand for the PET, Commodore was extremely selective of it's dealers. Commodore required a service technician, a retail outlet, an excellent credit history, and a cash deposit on future orders. The cash deposit weeded out a large percentage of potential dealers and left Commodore with only financially strong dealers to choose from. A tremendous committment to the future of the PET and to Commodore was required for a prospective dealer to send a certified check for a large amount of money, with no idea when to expect their deposits back. The required cash deposit also supplied Commodore with short-term working capital, allowing them to maximize production. In early 1978, as demand continued to expand, the Commodore PET dealer network was started.

The dealers who were selected found themselves able to require prepayment from customers: in economic terms, a vertical transfer of funds. Commodore required deposit funds and in turn, the dealer required prepayment; delivery to customers (from dealers) was now 30-60 days. The purchasing public prepaid and prepaid. Commodore's stock rose and rose.

As volume production began in earnest, Commodore (I assume) realized that within a year or so PET production and therefore supply would be close to PET demand. Commodore had increased production, but had not increased their marketing staff to support the large numbers of PETs being delivered. As the PET is a computer, many user and dealer questions arose. Most of these questions went unanswered as the small marketing staff at Commodore was taxed to the limit. In order to expand the markets for the PET, a crash effort began to bring the long-awaited peripheral printer to market.

Problem after problem developed, vendor designs were examined, tested, and discarded one by one. A print head was finally accepted and Commodore announced that the long awaited printer would go into immediate production with deliveries commencing in a few months. After this public announcement, in January of 1978, Commodore found that the print head they had selected did not perform within the specified engineering parameters. The print head mechanism developed problems after continuous use. An increase in price was announced hoping (I assume) that the extra projected profits would justify a quick re-engineering of the unit. However, this was not happen. The print head problem, coupled with other problems was enough to force Commodore to cancel the 2020 printer. Back to the drawing board. Within a few months, Commodore announced that they would come out with two new printers, at higher prices, at some point in the future.

Many customers had prepaid 2020 printer orders and the lack of information from Commodore on their orders, coupled with the lack of good documentation an the PET, strained customer and dealer relations. In the midst of all these problems, a larger problem arose. PET production was rising faster than PET demand and soon a production surplus would be created.

A major corporate decision was finally made to bring in some upper echelon personnel to assist. Commodore in the transition from the marketing of the 8K PET to the marketing of the CBM business system (large keyboard PETs and peripherals). A secondary charter for the new, upgraded marketing department was to expand the chain of distribution.

The new personnel began to support the Commodore PET line which would soon include the business peripherals: the 2040 Dual Floppy Disk Drive, and the 2023 and 2022 printers. With the new large keyboard PETs, Commodore introduced the long awaited updated version of their operating system and offered a ROM Retrofit Kit to 8K owners. This ROM Retrofit Kit, while eliminating the major problems of the 8K operating system, also allowed 8K owners to utilize the new 2040 Dual Disk. Up until this time, Commodore had only one product to worry about, the 8K PET. However, with the start of production of the new units, suddenly Commodore had eight products to worry about. In February of 1979, concurrent with this new production, Commodore consolidated their operations (previously in three different locations in the Palo Alto, California area) under one roof. Commodore's new 60,000 square foot facility in Santa Clara tremendously simplified production and other logistics.

In April of 1979, all of the new business peripherals became available — suddenly, all the components required for a business system (CPU, Disk Storage, and a printer) were available. Owners and dealers scrambled to understand the 2040 Disk operating system and to write/modify business software to run on this system. Many people in the industry thought that demand would increase once a full system configuration and software were available. However the market didn't even wait for the software and demand increased tremendously. In April of 1979, Commodore announced that they had appointed five regional distributors (an important and necessary move) to provide front end marketing and logistic support to smaller and new dealers. At this time Commodore announced an educational block-buster. For every two 8K units purchased at retail (from a dealer), Commodore would supply the school with one free 8K unit; an effective discount of 33⅓%! Many people in the industry suggested that this was Commodore's method of cleaning out the existing stock of 8K units. This was not completely true. Since the announcement of the PET, Commodore had not directly advertised the PET. Rather than advertise nationally on a product that was experiencing strong demand, Commodore decided to support the educational market. This program achieved its goal of moving the 8K unit, in large numbers, into the educational markets.

Demand continued unabated on the entire Commodore product line. At the June, 1979 National Computer Conference in New York, Commodore announced a Work Processing program written for the PET system. This excellent program was a milestone in the evolution of the PET system as it was the first viable business-oriented software that would be mass marketed by Commodore. Soon thereafter, various distributors announced a full line of business programs including General Ledger, Mailing List, and the new Word Processing System. For the first time, a fairly complete set of business software was available for the Commodore System. During June of 1979 Commodore's stock having almost continuously risen, reached an all-time high of 41 5/8!

In my opinion, the Commodore system has the potential of becoming the most popular and widely used small business system of 1980. New products, among them an 8K version with a large keyboard, are being developed. The early 1980's will prove to be an exciting period as the PET system becomes more powerful. If Commodore continues to keep the end consumer in mind and supports their distributor and dealer network, I expect the Commodore product line to continue achieving success. As other manufacturers enter the small computer market, with business systems not far behind, we can expect to see Commodore Marketing maintaining their new emphasis.

This brief history, from my own experience, may not be entirely accurate as far as dates, etc., are concerned. My intent was not to write a technical article. The history of the PET contained many problem periods; the fact remains that the PET is one of the most powerful and popular microcomputers and was one of the major forces behind the new era of small computers.

My congratulations to Commodore.