Classic Computer Magazine Archive CREATIVE COMPUTING VOL. 10, NO. 11 / NOVEMBER 1984 / PAGE 292

Tandy Radio Shack enters the magic world of computers. David Ahl.

Ever since Charles Tandy's original acquisition of nine ailing Radio Shack stores in 1963, Tandy Corporation has grown like Topsy, with the 35% annual earnings growth of the computer division setting the pace for the past five years. While generally profitable, this corporate growth has not been without pain--again, with the computer division contributing more than its fair share.

Until recently, Tandy was a very tightmouthed company. Writers were welcome in Fort Worth as long as they printed the company line. But if a publication said anything the least vit critical, it found itself on the black list.

Recently, however, Tandy's growth has slowed; its share of the computer market has slipped; and its stock price has plummeted to $29 compared to $64 in mid-1983. Realizing that Tandy's image has lost some of its glitter, Chairman John Roach recently appointed Ed Juge director of market planning with part of his mission being to set up a formal public relations department, something the company has never had before. Thus the door is being opened to outsiders--at least a crack--and the outside world can finally catch a glimpse behind the scenes.

Despite some current problems, Tandy has made one of the most significant contributions to the small computer field and plans to be a major player in the business in the years to come. How did they get where they are today? Death of CB; Birth of Computers

Remember the CB craze? Tandy certainly does. From nothing in 1970 to over 20% of the corporate business in the early 70's, CB radios not only contributed to profits, but brought an entire new group of customers into Radio Shack stores. Indeed, things were so good in electronics that Tandy Corp. sold off all its other subsidiaries including the original Tandy Leather in 1975.

But the abrupt collapse of the CB craze in 1977 left the company in disarray. Enter Don French and John Roach. Roach had joined Tandy in 1967 as a data processing manager and, by 1976, had been promoted to vice president of manufacturing. Don French was a buyer on the West Coast in the heart of Silicon Valley. He had bought an Altair and had been trying to get Radio Shack involved in computers, even though his boss, Bernie Appel (recently promoted to president) was opposed. Despite this, French had even gone so far as to devise a design for a computer on his own time.

In mid-76, Roach and French were traveling together on the West Coast and stopped in to see National Semiconductor's new SC/MP microprocessor. While there, they met Steve Leininger who briefed them on the hardware and software.

Roach and French were impressed with Leininger and wanted to hire him to do some consulting. However, the National Semi marketing people refused to part with Leininger's address or phone.

Next stop on the itinerary of Roach and French was Paul Terrell's Byte Shop on El Camino Real. Imagine their surprise to find Leininger moonlighting there as the night sales clerk. They talked to him about consulting, and four weeks later asked him to come down to Ft. Worth to see the facilities. At the end of the day, Roach offered him a job.

Leininger accepted but found that Tandy wasn't really committed to a computer just yet. For six months he, in his words, "played around with a couple of things--an audio pre-amp, a computer kit, and some other minor projects."

But as CB turned sour, there was a growing cry at Tandy for something new. Finally, Leininger was moved off into a room of his own with instructions to build a computer. Leininger remembers it well: "It was there that I wire-wrapped the predecessor of the Model I. I even put Tiny Basic with the graphics extensions in a 2K ROM." (Tiny Basic was written by Dr. Wang at Stanford and placed in the public domain. Leininger had helped implement it for People's Computer company, an open-to-the-public center in Menlo Park.)

The unveiling to Charles Tandy was on February 2, 1977. Leininger put the six wire wrapped boards under a table draped with a curtain. Only the keyboard and monitor were on top, so it resembled the proposed Model I. Leininger remembers feeling a bit discouraged since Tandy seemed rather indifferent and just puffed away on his big cigar. But at the end of the demonstration, Tandy confessed that he had already leaked word of the project to the press, and the only question to be decided was how many to build.

Appel and others were still quite opposed to the project, so the suggested quantities were quite low. Finally, agreement was reached to build 3500 units. Leininger explains, "That's how many stores we had at the time, the thought being that we could use the darned things for inventory or something--one for each store--if we couldn't sell them. So I went off to turn the thing into a real product."

Four wire wrap prototypes were built: two for Leininger, one for David Lien, a San Diego-based technical author who had been hired to write the User's Manual, and one for a newly-formed software applications group (initially the "group" consisted of one man, Van Chandler).

Chandler recalls how he got involved with the project. "I had worked for John Roach years before in the data processing center. Then, in February '77, John asked me to come over and look at what this crazy kid Steve Leininger had put together. It was sitting there on a pine board with wires and a keyboard and monitor hanging off the side. John asked if I could make it do something, so I learned Basic practically over night and entered a few programs. He was thoroughly impressed."

Unfortunately, the consultant who had been hired to write the full Basic (he had written a 6800-based Basic for Southwest Technical Products) just up and disappeared. Again, Tandy turned to Leininger--to do Basic as well as finish the hardware design.

Leininger remembers those days well: begging for a 30 cps DECwriter to replace his aging 10 cps Teletype, the disk drives of the development machine crashing on Memorial Day, laying out the boards over and over, and the cassette interface that just wouldn't load. "The next day was 'drop dead' day and Jack Sellers, general manager of Tandy Corp. was in the office with me that night. It was 1:30 and the computer just wouldn't read from the cassette. I had a 'scope on it and everything checked out okay. For the life of me, I just couldn't figure it out. Jack was wringing his hands and saying, 'What are we going to do?'"

Leininger continues, "So I finally took the (operating system) listing down the hall with me to the john and sat down with it. While I was there, I found the problem."

Days later, on August 3, 1977, the TRS-80 (for Tandy Radio Shack) was unveiled at the Warwick Hotel in New York City. Leininger recalls, "They were going to show six computers, but we took ten machines just in case. As it turned out, the first six worked flawlessly, and we never needed the back-ups." From a marketing standpoint, the introduction was somewhat less successful. Roach recalls that the press coverage "was ho-hum since a building someplace else in the city had been bombed the same morning."

Chandler has a cheerier memory of the introduction. "When we got back to Ft. Worth," he recalls, "there were six sacks of mail inquiring about the product. We got on top of the stack of mail and had someone take a picture." (Sorry, we couldn't get a copy for this article.)

On the other hand, there were no mixed feelings about the product roll-out; it was eminently successful. Unlike other manufacturers who announced products months before they were ready to ship (commodore had announced the Pet nearly four months earlier and yet to ship one), Tandy was ready to go by September 1977. Moreover, the company had a chain of stores in place, the name was known (even if it did not suggest computers), and it had good advertising support via the monthly Radio Shack flyer.

The original target price for the computer was $199, then $300. In the final announcement, a stripped machine was pegged at $399--considerably less than competitors were charging for a kit--and the TRS-80 was to come assembled!

It was quickly apparent that 3500 machines was a low guess. Within a month, Tandy had 10,000 orders. By the end of December 1977, 5000 machines had been delivered. But unlike other entrepreneurial companies, Tandy had experience with ramping up to produce high quantities, and by the spring of '78, they were looking for way to increase sales still further.

According to Roach, "That spring, we began our version of computer barnstorming. Our first stop was Phoenix. From there, we went around the country. rented hotel rooms, and invited people--the press, financial community, and general public--to see a real personal computer. Our major goals were to build computer awareness and to make sure that the early enthusiasm was sustained. After all, once you have your factory up to producing 18,000 units a months, you've got to make sure you can sell that many."

In the summer and fall of 1978, the Tandy barnstormers visited nearly 50 cities throughout the U.S. Then, in '79, the program was repeated on an even grander scale. Much to the amazement of everyone involved, the people who showed up were far more than young techies. "We had curiosity seekers, kids and their parents, electronics hobbyists, senir citizens--a real assortment," said Roach. Business Users, Too

"Initially, we looked on computers as just another product, mainly something of interest to the electronics enthusiast, But after we'd been selling them for a while," said Roach, "we realized that business users were buying a high percentage of the equipment. We did a survey after we had about 50,000 machines in the field and found there was a big hobbyist and enthusiast market, but a surprisingly large business market as well." Unfortunately, there wasn't much in the way of business software, nor was the Model I itself, particularly the cassette version, especially suitable for business use.

Chandler recalls working on the disk software from November 1977 to March 1978 and "still finding one bug after another. It was so unstable and screwed up that John roach finally told me, 'go to albuquerque (home of Microsoft, suppliers of the disk Basic) and don't come back until you have the disk Basic running." It took three weeks, but we got it done."

The original TRS-80 was a limited machine with 4K of memory, upper case only, a restricted Basic, and casette sotrage. Even with the disk system and extended Microsoft Basic, the improvement was not enough to make it a serious contender in the business market. Tandy executives recognized that, and on May 30, 1979, the TRS-80 Model II, a state-of-the-art business machine was announced. It had dual 8" disk drives and might have taken the business market by storm had it not had a nameplate reading "Radio Shack."

The design of the Model II was as farsighted as that of the ubiquitous Apple II. With a few plug-in cards it can become a Model 12, a real small business workhorse, or even a Model 16B, today the best-selling Unix-based system in the world. The 16B even supports three additional users under the specially designed TRS-Xenix version of the Unix III software.

And as long as we are getting ahead of ourselves and talking about today's business products, let us remember that Radio Shack has the best selling notebook computer in the world, the Model 100. Although the Epson HX-20 was introduced more than a year earlier, the Model 100 is the unquestioned sales leader in the notebook computer derby. Distribution: The Key to Profits

According to John Roach, Radio Shack is "basically a distribution system for high technology products." President Appeal echoes that view: "We sell to the true middle American. Radio Shack is the local store." This broad based, middle American approach has brought excelent profits to the company. While the product mix has changed from primarily components in the 60's to hi-fi and audio in the 70's to a mixture of computers (35%), hi-fi (18%), parts (13%), and other lines in the 80's Radio Shack has been consistently profitable. Much of that can be attributed to the widespread chain of stores.

Tandy opened its first computer center (in Forth Worth) almost at the same time it shipped its first computer. Nine months later, in June 1978, Tandy announced it planned to open 50 computer centers around the country. Today, there nearly 500 full-line Tandy Radio Shack computer centers and 800-900 "plus" computer stores (Radio Shack stores with a large computer section).

On paper, this sound goods, but in reality it means training a large number of people and long lines of communication. Ron G. Stegall, senior vice president for computer marketing, explained that the system is continuing to evolve. On the horizon is a plan to put the computer centers under a newly-formed business product management group. This group will be more tightly structured than the existing organization which is responsible for regular Radio Shack stores as well as computer centers. Under the new separate structure, each of 60 district managers will be responsible for only eight or nine computer centers.

Tany expects this new structure to result in better sales training. Our own undercover consumers (see June '84, pp. 126-141) certainly confirmed that this is a weak spot. In addition, in the future, computer centers will deal mainly with business (including education) customers, and the regular stores will sell to home consumers. The computers themselves will be changing too; in the future they will become combined computer/telephone centers and start to handle key systems (2 to 16 lines) and other telephone equipment for small business.

Recalling the success of the barnstorming team in the early days, Tandy is hoping for a repeat performance on a much wider scale. Market research indicated that many families with young children wanted computers, but felt they did not have the knowledge to choose among the systems available. In response, the company started hiring experienced door-to-door salespeople to make presentations to PTa meetings, church groups, and families at home (who requested them). This nationwide sales team is eventually expected to grow to 1000 or more people. Product Evolution and Price Erosion

In addition to telephone key systems, other important changes are taking place in the Tandy product line. Of course, there is the usual evolution to offering more products in growing areas and fewer products in contracting areas, but in addition, the company has identified a group of products as the "Advanced Technology Series." Whereas Tandy has normally been a price leader, these products are expected to sell on their technical merits, rather than their low prices. Also, some 600 products in the 1985 catalog are priced higher than they were in the 1984 one -- a sharp departure from previous years in which there were few, if any, price increases.

On the other hand, first and foremost, Tandy is interest in producing a return for its investors. While computers are important, "we still sell vacuum tubes," says Roach. Why? Because they are profitable. But he admit that it is becoming more and more difficult to make a profit on computers.

When the great home computer price war of 1982-83 took place, Tandy attempted to stay on the sidelines, making only the price cuts in its Color Computer that were warranted by increased production efficiencies and lower parts costs. Although their market share dropped a point or two, the strategy was a sound one since Tandy's margins remained healthy. And with the demise of TI, Timex, and Mattel, Tandy's share has rebounded to a level higher than it was before the price war began. In an interview in late '83, Roach said that in the long run. TI's withdrawal would be "positive thing for the market." Time has proved that it was certainly positive for Tandy.

At the upper end, Tandy anticipated modest annual price cuts of 10% to 15%. Thus, they were caught off guard when industry-wide prices started to fall at about twice that rate. In response, this year the company has had to cut the price of the best selling Model 4 to $1099, a whopping 35% cut. They have also been forced to cut the price of the Model 100 by 25%, with the possibility of another cut by year end. Some of the associate stores are already selling the machine for as low as $469, some 41% under last year's price. Even printers and peripherals introduced as recently as the beginning of the year are being discounted in the monthly sales flyers by as much as 40%, cuts that tend to become permanent two or three months later.

Moreover, the company's current woes go beyond pricing. The Model 2000, the company's first IBM compatible, has received execellent reviews but was a late starter. Part of this was due to engineering problems in trying to make it run at four times the speed of the PC, but part was a result of in-decision as to whether to produce a PC compatible at all. Future Computing, a market research firm, estimates that the late start will cause Tandy to lose at least one point of market share among higher priced machines.

On the other hand, there seems to be no foot dragging today in product development. A successor for the Model 100, the Model 200, is planned for introduction in early 1985. It will have a larger LCD display, more software in ROM, and possibly a quieter keyboard. John Roach admits to having to speak louder at the company's annual meeting to be heard over the clacking of numberous Model 100s in the audience.

All the 8-bit computers will get a "face lift" according to Van Chandler and, in a radical departure, the company will start to offer peripherals for computers of other manufacturers in 1985. All of Tandy's computers empoly and odd printer protocol which requires the printers to insert a linefeed when a carriage return is transmitted. New printers will have a switch to defeat this feature and allow them to work with the computers of other manufacturers.

Roach commented about the Apple campaign, "Apple II Forever," and said Tany had similar plans for the Color Computer. While he sees the Model 12 declining in popularity in favor of the Model 16 and the Model 2000, he feels the multi-user configuration of the Model 16 more than picks up the slack. He also thinks the Model 2000 "will really come alive when we get a new generation of software."

Roach also admit an admiration for the HP Portable and thinks that "all machines may be basically portable sometimes in the near future."

Perhaps most important, Tandy realizes that the Radio Shack name has caused them to lag in the image race. Also contributing to a mundane image is the fact that Radio Shack has tended to emphasize price in their ads rather than capability and technology. "You'll see major change in our advertising approach," says Roach. New advertising will emphasize the capabilities for the customer and, perhaps most important, computers will be designated by the Tandy name rather than Radio Shack. Success in the Education Market

While the company has had mixed success in the home and business markets, it has been eminently successful in education. Why is this? According to Stegall, "We have never looked at it as a hardware business. We've made a more concerned effort in our education division to develop software and help others develop software than any other player in the business. We have more than 100 courseware titles developed interally and perhaps three times as many titles developed outside that we carry."

He further opined, "We have a larger market share than anybody else--even Apple." Although surveys frequently show Apple in first place, he feels those surveys are inaccurate. "We go to individual state surveys that monitor the total number of CPUs and, with the exception of California, these surveys generally show us as number 1. So we're in a very strong position, but the best is yet to come."

What's coming in education? On our visits to Fort Worth we saw an easy-to-use multi-user system and scores of new courseware packages. In addition, the company has introduced a Courseware Preview Library at all of the computer centers. This gives teachers, administrations, and parent the opportunity to test and evaluate all the available software and documentation before making a purchase. With this system, people can make informed buying decision, something that is often very difficult to do with the software for other computers. A Communications and Information Revolution

Leaning back in his chair on the 19th floor or Tandy Center, Roach philosophizes, "It is obvious that the microcomputer is at the center of a communications and information revolution. I believe that within 20 years most Americans will be computer users and will benefit from the attendant mental advantage.

"When we see the tremendous impact that mechanical advantage has had on society, the impact of mental advantage on our standard of living and rate of innovation is mind boggling. We are having a great impact on the future. Let us all do it well."