Commodore. (Commodore Corp.) John J. Anderson.
It began as a lowly dinghy, with only one oar in the water. Now it is a well-armed battleship which is trying hard to blow its competitors out of the water. Atari and Coleco both well know that despite their best efforts, Commodore rules the micro waves. Without a pitched fight, one or both of them may end the year in Davy Jones's locker.
Commodore, which began years back as a business furniture and calculator company, was among the first manufacturers to offer an assembled micro-computer. It introduced the Commodore Pet in 1977. And despite the fact that the initial machines were slightly flaky and sported the most unfriendly keyboards around, the Pet remains in use in many homes and schools today. It is at least remembered fondly by many.
When the 5K Vic-20 machine was first introduced in 1981, it met with little enthusiasm. At $300, the machine was too cheap for the hobbyists and too expensive for the fledgling "mass market.' So it remained in the harbor for a while.
But Commodore kept right on pushing the machine and, to the chagrin of the industry, made cost-cutting its basic strategy. By the time the mass market for microcomputers really began to materialize (Christmas of 1981), the Vic-20 was selling for $200. It had some decent software, too, though mostly from third-party manufacturers. And so the yacht race was on.
By Christmas of 1982, over a million Vic-20s had been sold, and they continue to be sold today, at prices well under $100. Without a doubt, the Vic was the first true mass market machine. It set Commodore afloat on the high sales seas. The dinghy had sprouted guns.
Then the Commodore 64 was christened. It was news even at a list price of $595, but it did not stay there for long. Soon after the introduction of the C-64, the first volleys of a bloody and now legendary price war were heard. Commodore abolished entirely the practice of setting list prices. They leveled the heavy guns at the competition and gave a dramatic definition of the term "vertical integration.' The flotsam and jetsam of wrecked competitors will be washing up for some time to come.
Boom. Atari retreated, counting heavy losses. Boom. Radio Shack regrouped, losing its stomach for battle in the low-end theatre. Boom. Texas Instruments abandoned a swiftly sinking ship. Coleco, still at sea in an experimental sub that may or may not be leaking badly, has not surfaced in some time. All we have seen to date is what might be an occasional periscope.
Vertical integration. Definitely a buzzword, and as such, hides more than it tells. In Commodore's case, it means simply this: because Commodore manufactures its own chips, its costs are lower, and it does not need to compete with other micro makers in the micro-processor marketplace. That simple fact is a lethal weapon.
The Commodore 64 is a cheap computer. It fits in exactly the same case as its ancestor, the Vic-20. Like the Vic, it resides on a single board. It can be assembled on the same production line. At $200 retail, it can still return a respectable margin. And at the same time, it is a compeitive machine. It has all the color, all the sound, and all the memory of its more expensive competitors. So why buy anything else?
Well some consumers have found what they perceive as good answers to that question. The hardware wars seem to have exacted a price form Commodore as well. Never known as a company with a remarkable support system, they have run aground on a few reefs of their own making.
In the industry, a return rate of 7 percent or below is typically considered "acceptable.' Problems with reliability have plagued the C-64 since its inception, and though these problems seem largely to have been solved, there is still a ghost in the machine. Early 64s suffered from serious video problems. Later runs turned up units that were D.O.A. (dead on arrival).
Commodore stock fell $10 in late 1983, upon rumors of unreliability reported in the Wall Street Journal, which quoted a return rate of up to 30 percent. Commodore's own inept rebuttal to the piece probably hurt it further (See "Commodore's Port,' Creative Computing, February, 1983). Commodore spokespersons stalwartly stuck to an "official' return rate of 7 percent. From our own experience, we can only judge ourselves as highly unlucky if that figure is true. We have been through a total of seven C-64s in our quest for four working machines.
Then there is the mournful chantey of the 1541 disk drive. One positive by-product of Commodore's pricing strategy was to bring the notion of the disk drive to the common man. At a price of under $500 for C-64 and disk drive, Joe Consumer began to realize what a necessary peripheral it truly was. And so they started to sell.
And they kept on selling, until a funny thing happened. Suddenly there were no more disk drives. To hear it from Commodore, they were simply overwhelmed by the demand for drives. They had estimated that perhaps 30 percent of new C-64 owners would want disk drives for their machines. In reality, the number was more like 90 percent. Commodore simply could not supply the number of drives the market demanded.
According to the Wall Street Journal and Electroinc News, the problem was a bit more serious than that. Drives that were shipping had an absolutely alarming return rate. They didn't work. The counter story was that a schematic error emanating from Commodore caused huge lots of OEM drives to be shipped with the wrong ROM circuitry.
Commodore denies this. But because more than one OEM supplied defective drives, the story has credibility. Once here at the lab, we received three dead drives within a two-week period.
Regardless of whom you believe, it is probably fair to assume that the severe shortage of drives going into Christmas 1983 had a deleterious effect on C-64 and C-64 disk-based software sales. Commodore "airlifted' drives from Japan to try to fill the gap, but this was a makeshift solution.
Commodore has also experienced problems with its monitors and printers, though not on anything approaching the scale of its problems with 64s and drives. We have been waiting for the model 1526 printer for ages now, and it seems to have slipped off the edge of the earth.
One side effect of the hardware problems in 1983 was a stockholder class action suit against CEO Jack Tramiel, who may depending on your point of view, be painted as Commodore's Lord Nelson, or alternatively, its Long John Silver. It is Tramiel himself who wields the real power of Commodore. Say what you will about him, but don't say he has been unsuccessful. He is one of the few utterly successful executives in the industry. His sense of timing is incredible.
The suit cites him for the following: allowing an "autocratic individuality;' firing all sales staff outside the home office of West Chester, PA, without notifying stockholders; rushing products to market while they still displayed known bugs; and of knowingly being unable to ship enough product.
Sounds like a red-blooded American executive to me.
Hit Commodore with your best shot--it will only roll. It can handle the weather, no matter how rough it gets. While TI and Atari were losing big, Commodore had earnings of $91.7 million on sales of $681.2 million. Those figures make the criticisms sound more like sour grapes than impeachable offenses.
Commodore has some new surprises in the wings, including a Z-8000-based RGB portable and a new, ultracheap consumer machine. Along with this commitment to the hard world of hardware is a relatively new but sincere commitment to software. The Commodore software line is growing quickly, in quantity and quality. Tramiel has sold the razors. Now he wants to sell you the blades.
And while everybody else in the lowend has raised their prices for 1984, Commodore had vowed to hold the line. In fact, they have threatened further cuts if and when the Adam truly appears. They have damned the torpedos and are moving full steam ahead.
Photo: Commodore's founder, Jack Tramiel, abruptly resigned on Friday, January 13, 1984 as president, CEO, and a director, saying the firm needs a "professional executive' to take it beyond the $1 billion annual sales mark reached just recently. Sources speculated that Tramiel quit following a disagreement with Irving Gould, chairman, over the choice of a new president from outside of the computer industry.
Photo: It is difficult to find fault with income and earnings figures like these.