T he story of Commodore Business Machines must be divided into two distinct parts_the Tramiel era and the post- Tramiel era. It was Jack Tramiel who created Commodore and made it the leader in home computers, and it was his exit that changed the company culture and made it into what it has become today_a bad company with a great product.
To understand Jack Tramiel you had to remember where he come from and the road he traveled to get to the start of the personal computer revolution. A Jewish refugee who survived six years in Hitler's death camps, Jack found his way across the Atlantic where he joined the U.S. Army. The Army taught him how to repair typewriters and stationed him New York City. When he finished his military duty, Jack stayed in New York and opened a typewriter repair store in the Bronx. This grew into a business machine company selling mechanical adding machines and repairing typewriters.
In 1955, Jack saw opportunities in Canada and moved the company across the border where it continued to expand, and in 1962 Commodore went public. In 1965, the rags-to-riches story took a detour, and Commodore found itself in financial trouble because of the dealings of a former Chairman, whose company failed. As usual, Jack survived the crisis, but the price he paid was loss of control of his company. This was to come back and haunt him later. He made a deal with Irving Gould, a Canadian financier. giving up his stock in Commodore in exchange for cash, with the provision that some stock would be returned if his rescue operations succeeded. Jack took three million dollars of the money and bought MOS Technology, a semi-conductor manufacturer in Pennsylvania. He knew that the future of all electronic machines was dependent on a supply of chips, and if he had to buy from competitors like Texas Instruments he could not stay in business.
With characteristic fervor Jack pushed Commodore toward recovery, and the company gave him back 8% of the stock.
Among other chips, MOS Technology made the 6502 microprocessor, a near clone of Motorola's M6800, but with a completely different instruction set. In an effort to get the 6502 adopted by computer engineers, MOS distributed them at very low prices. For this reason, Steve Wozniak designed the Apple computer using a 6502 chip, a decision that was to make this one of the most popular 8-byte CPU's. Two other companies were later licensed to make the chip, to meet the demand from Apple, Atari. Ohio Scientific, and others.
Within MOS Technology, Chuck Peddle, the chip's designer, built a single-board computer called the KIM-1. The KIM contained many advanced features and allowed many users to gain a low cost introduction to microcomputing. However, after acquiring MOS Technology Jack gave Peddle six months to design and build a prototype of a real personal computer. The Commodore team put together the first self-contained personal computer which they called the "Personal Electronic Transactior ," or PET. The PET was announced in 1976 and first shown at the Consumer Electronics Show in June of 1977. It came with either a 4K or 8K memory, and a built-in green video monitor. The keyboard was built like a Commodore calculator instead of a typewriter keyboard. Programs and data were saved and loaded from a built-in cassette recorder. The price for all this started at a mere $795, a price decision that Jack was later to regret. However, there would be no PETs available to dealers or the public for six months. Commodore announced that if you wanted to order one, you had to pay the full price now and wait for delivery some time in the future.
It was even harder to become a dealer. Dealers had to have a store and a service facility and were also required to post at least $2,500 with their applications, and there was no promise when they would get delivery. Moreover, Commodore played favorites and channeled product to dealers who were on the favored list. In spite of this, the public demand for PETs was huge.
When Jack realized that he had a real winner, he doubled the price and introduced the PET into the United Kingdom and Europe. It was an incredible success, and within a short time Commodore had rounded-up 80% of the market overseas.
Meanwhile, back in the United States. the company was gaining a terrible reputation for lack of support of both users and dealers. As a dealer, I would order 20 PETs to cover orders. They would ship perhaps 10, and of those only 6 would work. We got to be more expert in the repair of PETs than of any other computers because we had so much more experience. We never sold a PET that had not been "burned" in at least a week. However, the machine did evolve, and the calculator keyboard was replaced by a "almost" standard qwerty model (which lacked an alpha period. You had to use a decimal point!) That was typical of Commodore. The printer interface was non-standard, so you had to buy your printer from Commodore. The cassette interface was different_even the parallel port was strange. Later, the cassette was eliminated, and a floppy disk drive was sold as a necessary option. The 2040 Disk Drive had two disk drives, which allowed the user to work with two disks, and Commodore's engineers found a method of storing 170K bytes on a drive (or about 50 pages of text.) At that time, Apple's drives held 150K and Atari's only 90K! The operating system was built into firmware on the 2040 disk drive rather than being a separate software program. This made it easy to use but kept Commodore locked into obsolete operating systems for long periods.
The overseas success lead to the development of a vastly enhanced computer called the CBM 8032. This business computer had a green monitor, a full business keyboard, and 32K of memory. Larger disk drives were also made available for business use.
There was little advertising, almost no software development (except for programs adopted from European versions) and even fewer dealers. Most people in the United States almost counted Commodore out of business.
One place that Commodore placed most of its United States production was in education. It quickly dominated the educational market by giving a free computer for every two that a school bought. This bargain made it harder for the much more expensive Apples and Radio Shack TRS-80s to get into the schools, although the teachers much preferred them. Selling the schools was one thing, but keeping them running was another. Many of the Commodore PETs ended up in closets because of lack of repair parts.
However, as a result of its overseas operations and the MOS Technology chip business, Commodore had grown into a prosperous company and was actually the third largest personal computer company after Apple and Radio Shack.
In 1978, MOS Technology developed a chip that allowed a computer to use a color monitor or color TV instead of the monochrome display. It was called The Video Interface Chip, or VIC, and it could only display 22 columns in color. The VIC chip had not sold well because the price and availability of color monitors or TVs. Now, two years later, Apple and Atari had color computers, and Commodore had none. Chuck Peddle was lobbying for the development of Color PET and CBM computers. Then, at a meeting called in England to discuss the future of Commodore's products, Jack Tramiel suddenly announced that he wanted to market a color computer right away, and he wanted to retail it for $300!
This was an unheard-of price, but Jack justified it by saying, "The Japanese are coming! So we will be the Japanese! We have to compete with ourselves." Tramiel told
his people, 'We have to be like the Japanese. We constantly have to come up with something new, something better. We have to believe that we are the competition. If we do this, then no one can get ahead of us."
Tramiel knew that the way to beat the Japanese at their own game was to produce a product at a price they could not compete with. The Japanese tactic was to watch carefully while an electronic device was introduced, first at a high price and later at a lower price as the market grew. Once the ground was broken by others, and the quantities being sold were sufficient to support mass production, a Japanese company could then enter the market with an excellent product at much lower price.
Tramiel's strategy was to introduce a new product at the lowest price possible right from the start. He could then capture the market before anyone else could get in and compete. Once the competition matched his low price, he could cut prices even lower since he would have already achieved large-scale mass production.
The little color computer evolved in secret at MOS Technology, Valley Forge. Pennsylvania. It was not a self-contained unit such as the PET. The entire machine was housed in the keyboard case, and its memory capacity was only 5K of RAM. There was a slot for a software cartridge which would contain a program recorded in Read-Only-Memory (ROM) so it did not use any of the 5K main memory. However, the computer could also be programmed with a small version of BASIC that was also in ROM. and the program could be saved on a Datasette recorder. The keyboard was much more standard than the PET model and the missing period was found. The number keys (0-9) served double functions. When pressed at the same time as the Control key, they changed the color of the display. There were eight colors available; white, black, red, cyan (light blue), purple, green, navy blue, and yellow.
The color computer also could display the PET graphics set and even a reverse set of graphics characters. The video screen was only 22 characters wide, but the characters were nice and large. Naturally, there was no CRT with the little computer, but by then most users had a color set at home, and a video switch was supplied to connect into the antenna terminals. The code name of the small computer was Vixen, but there was much discussion on a final name before settling on VIC-20.
Introduced in January 1981, at the Winter Consumer Electronics Show (CES) in Las Vegas. the VIC-20 was a big success. The press very favorably compared it to the new TI-99/4 and the Atari 400 computers. However, it was not until the Spring CES in Chicago that the final version with FCC approval was available.
The VIC-20 introduced thousands of people to computers, because it was inexpensive and was sold in the mass market stores. It also had a full line of peripherals. Many of the on-line services such as GEnie and Compuserve owe their growth to the low-cost VIC-Modem. This unity allowed large numbers of people to get on line who might have never tried telecommunications. The price and capability of the VIC-20 was a factor that destroyed the market for video games such as the Atari 2600.
The other very important thing about the VIC-20 was that its expansion gave birth to the most popular computer ever built_the Commodore 64.
The Commodore 64 had 16 colors in place of the eight on the VIC-20. It had a 40-column screen rather than 22. It had a music synthesizer chip (SID chip) and easy-to-use graphics called Sprites, and it could use all the VIC-20 peripherals. Most of all, it had 64K of RAM at a time when Apple had a maximum of 48K. It went on sale to computer store dealers for $595, and a few months later was moved to K-mart for $400.
The home computer price war really started between Texas Instruments and Commodore in the summer of 1982, with Texas Instruments issuing a $100 rebate on the TI 99/4A, bringing the price down to $200. Commodore dropped the VIC-20 price to dealers by $40, and let them sell it for any price they wanted. In September 1982, the Commodore 64 hit the computer stores at $595, and then Atari joined the fray with a $55 rebate on the Atari 400 and dropped the price on the Atari 800 to under $500. Commodore moved the C-64 from the computer stores to mass merchants such as K-mart for $400.
The dealers roared with pain at seeing one of their most profitable incomes going out the door. To a computer store, the sale of a C-64 was only the start on a much more expensive computer system. They made more money on the peripherals and software than on the computer. The VIC-20 price was dropped to less than $130, and merchants started selling them below cost whenever a complete system was purchased.
In February 1983, Texas Instruments again cut the dealer's price of a TI 99/4A by $48 making the retail price $150. Commodore responded by cutting the prices on all peripherals and reducing the price of the VIC-20 to below $100!
Then Commodore came up with a massive "trade-in" offer. They would give a $100 trade-in on any video game, or computer, against the purchase of a C-64! Out came all the old Atari 2600s, Intellivisions. VIC-20s, Sinclairs. and Timexes. People bought Timex Computers on sale for $50 and turned them in on C-64's for $100! The retail price with a "trade-in" was $300.
Atari had just introduced its new 1200XL and found they had to rebate $100 right from the start. However, at the Spring CES Commodore really lowered the boom. They slashed the C-64 dealer's price to between $200 and $250 and cut the price of all their software, including new releases, by 50%.
The blood was flowing all over the home computer industry, but at Texas Instruments it was the worst. Commodore's costs were so low that even at the depressed prices they actually made money on their computers. However, Texas Instruments was losing $100 million in a quarter, and things were not getting better. Texas Instruments' president resigned, and the company quit the home computer business after taking enormous losses.
There were other fallouts of the price wars, and Atari represented one of the worst to its parent company, Warner Communications. This would have an unforeseen effect on Commodore.
During the summer of 1983, Commodore announced that it had become the first personal computer company to hit one billion dollars in sales. Then, upon this announcement came the totally unexpected resignation of Jack Tramiel. The industry was shocked; there had been little indication that Jack was that unhappy with conditions at Commodore.
The computer press was full of rumors about the cause. It was said that Jack wanted his sons to come into the business in top executive positions, and that Irving Gould objected. It was claimed that Gould wanted to make Marshal Smith President and that Smith declined as long as Jack was in the company. The actual reasons have never been revealed, but Jack and his wife left for a tour around the world, and upon his return he formed a company with his sons. Shortly thereafter, they bought Atari from Warner Communications.
Commodore has had a succession of CEOs and executives and is said to have a revolving door in its executive suite. The C-64, in various versions and the upgraded C-128, have lasted for more than ten years. Their numbers alone make them the most popular computer ever built. Commodore went on to feature the Amiga, a 16-bit machine developed by the Lorrane Amiga company.