Commodore History

Overview

Commodore International, a manufacturer of electronic products, was a leading player in the early years of the personal-computer revolution. A pioneering innovator, the company produced a series of low-cost, easy-to-use machines that introduced millions of people to computers. At its height, Commodore was a billion-dollar company, outrunning its competitors in technical acumen and dwarfing them in sales. In the early 1980s it appeared that the maverick organization would dominate the global computer market. A combination of mismanagement and poor marketing caused Commodore's position to steadily erode for nearly a decade. In 1994 the Bahamas-based company liquidated its assets and went out of business. Yet in its wake Commodore left legions of loyal users, and posed technological challenges that its former rivals are still unraveling.
 
 

Computers for the Masses

Commodore was founded by Jack Tramiel in 1954 as a typewriter repair service. Tramiel, a native of Poland, survived six years of slave labor at Auschwitz and other concentration camps. After liberation, he emigrated to the United States and joined the army. Stationed in New York City, he was trained to repair typewriters. After military service, he set up a small repair shop in the Bronx and drove a cab to make ends meet. A restless visionary with an eye for emerging trends, Tramiel gambled on new technologies such as mechanical and electro-mechanical adding machines. Tramiel was a shrewd and sometimes ruthless business strategist. His strong-arm tactics made the company an early success, and defined its agenda for decades.

In 1955 Tramiel moved Commodore to Ontario, Canada. Continuing to diversify, the company became the biggest manufacture of low cost office furniture in Canada. In the early 1970s a bustling Commodore Business Machines entered the volatile market for calculators and digital watches. Badly bruised in the ensuing "calculator wars," by 1976 Commodore drifted close to insolvency.

In a desperate move, Tramiel borrowed three million dollars from Canadian financier Irving Gould and purchased MOS Technologies, an American manufacturer of semi-conductors. The acquisition was key to Tramiel's philosophy of vertical integration. By controlling sources of production and distribution, Commodore kept its costs low and its products competitive. That same year, he incorporated the company as Commodore International in the Bahamas to take advantage of lower taxes. Moving Commodore's headquarters and manufacturing base to Costa Mesa, California, Tramiel's lean company quickly regained muscle, and was poised to conquer new vistas.

In the 1970s, some experts thought the future of computers lay in mammoth databases that users accessed via terminals. Powerful desktop computers, they believed, were unlikely fixtures of science fiction. Practical affordable models were deemed years away. A populist at heart, Tramiel rejected this notion as elitist. "Computers for the masses, not the classes," became his guiding aphorism. Certain of his vision, Tramiel drove his engineers to make it a reality. In 1977 Commodore unveiled the Personal Electronic Transactor, better known as the PET.

Designed by Chuck Peddle, the PET entered the market around the same time as the Tandy TRS-80 and the Apple II. For $795.00., the PET featured a built-in monitor, keyboard, and tape drive housed in a compact case. "User-friendly" in only the most fundamental sense, the PET nevertheless became a favorite among computer enthusiasts.

In 1981 Commodore introduced the VIC 20, a color computer that sold for about $300.00. Another low-cost industry first, the VIC 20 was little more than a keyboard with a built-in central processing unit. With 5K RAM, the VIC often ran out of memory before users finished writing their programs. Still, it was an enormous success. Producing 9000 units a day, Commodore's VIC was a hot seller. Sales in 1982 reached $305 million.

VIC merely foreshadowed achievements to come. In 1982, the new Commodore 64 became the best selling computer in history. Like its predecessor, the 64 came without a monitor, but had 64K RAM, and featured a sound synthesizer chip. Developed by Bob Yannes, the Sound Interface Device was the first audio chip made for a home computer. In another cost containing move, Commodore now manufactured all of its own chips. Selling nearly 22 million units, the company took in nearly $681 million in 1983. Commodore's profits increased 85% that year. In fact, the computer-maker's growth rate was nearly twice that of Apple and Tandy. In 1983, Commodore's global market share soared to 32%. Continuing the parade of innovation, Commodore brought out the SX-64, the first portable color computer (1983). And 1984's Plus/4 pioneered integrated software in ROM.

In 1985 Commodore introduced the world's first multi-media computer, the Amiga 1000. Unveiled at New York's Lincoln Center with a blitz of media and celebrity fanfare, the computer set standards that other manufacturers still struggle to reproduce. With only 256 RAM, the $1,200 computer rivaled the features of some contemporary multimedia systems. The Amiga was the first computer with built-in speech synthesis and text-to-speech conversion, delivering crisp sound with four-voice, sampled stereo. Its monitor could display multiple screens at different resolutions. And custom chips provided accelerated video and exhibited 4,096 colors. With built-in outputs for TVs and VCRs, it anticipated the inevitable merge with home entertainment systems. It was by far the most advanced system available for home use.

In spite of its sophistication, the Amiga 1000 was not widely appreciated. Misunderstanding the importance of graphics and sound, many computer users dismissed the Amiga as a game machine. But the computer's image problem represented a much deeper malady at Commodore. Although Amiga was introduced with enthusiasm, Commodore failed to follow through with advertising and consumer education. Even as the company sailed toward the billion-dollar mark, the pattern of its demise was emerging.

What Went Wrong?

Once, it seemed that Tramiel's aggressive strategy of vertical integration, massive production and low retail defined the standards of an industry. But as debt mounted with each passing quarter, it became clear that this was not so.

In January 1984 Jack Tramiel resigned as President of Commodore International and sold off his controlling shares. The move came as a surprise both to industry analysts and company insiders. Tramiel's departure created a vacuum of management and vision that was never adequately filled.

Irving Gould, Commodore's new reigning CEO, failed to grasp important industry trends. As a result Commodore became increasingly isolated. While other manufacturers raced to build compatible systems, Commodore remained singular and eccentric. Declining to build PC compatible hardware or software systems, they were pushed aside by more muscular companies like IBM.

Shareholders and industry analysts criticized Gould and his president, Mehdi R. Ali, for misunderstanding the nature of the computer industry. High turnover in management led to poorly coordinated marketing efforts. Even as Commodore entered its technological golden age, bad management decisions irrevocably damaged the company.

Although Commodore's engineers continued to devise brilliant new systems, management clung to word-of-mouth marketing. Consequently, many consumers were never aware of Commodore products.

Ironically, Commodore's unwillingness to adapt may have been rooted in one of its biggest successes, the Commodore 64. Reaping huge profits with minimal advertising, the 64 set the pattern for future marketing strategies. Unfortunately, the Amiga was born into a radically different environment than the Commodore 64.

By 1985, IBM was already assuming unquestioned dominance of the personal computer market. And Bill Gates' Microsoft Windows environment catered exclusively to PC compatibles. Meanwhile, Apple made inroads with its revolutionary Macintosh, developing mutually beneficial relationships with its software developers. Commodore assumed software makers would cater to the market they created, and did little to nurture manufacturer's efforts. Subsequently, companies that once produced software for Commodore turned their attention to the expanding markets of IBM and Apple.

Eventually, Commodore introduced add-ons that allowed users to run Macintosh and IBM software. But the company was already too far marginalized to make many inroads or bridge the gap with its competitors.

Commodore continued upgrading and expanding the Amiga series through the 80s and 90s. And though each model was enthusiastically received by loyal customers, the company failed to expand market share. IBM and Apple continued to dominate the computer world, despite having what some viewed as inferior technologies.

Departing from its languishing home computer market, the company launched Commodore Dynamic Television (CDTV) in 1992. Targeted at consumers who were intimidated by computers, CDTV played games and CD ROMs on a standard TV set. Controlled by a television remote control, CDTV housed a sophisticated computer. Again, due to lapsed marketing, the innovative system was barely acknowledged. Its improved successor, the CD32 had a 32 bit memory, and played interactive game software with vivid graphics. It also played CD movies. Although some reviewers ranked it superior to products by Sega and 3DO, the CD32 went nowhere. By this time Commodore's financial position was disintegrating. Even if they had devised a coherent marketing plan, their limited resources would not have funded it.

A shining spot in the midst of decline was Amiga. Because of the computer's advanced video capabilities it was the perfect choice for NewTek Inc.'s Video Toaster, a popular video production tool. Linked with the Video Toaster, Amigas were used to produce broadcast-quality video and 3-D graphics. Although highly sought after by film and television studios, the specialized niche was not enough to help the ailing company.

In 1993 Commodore lost $357 million and its market share shrank to 1.7%. By June of that year, Commodore laid off more than half of its engineers. Unable to meet its loan obligations, the company struggled to keep its doors open through the first half of 1994. Commodore International was a shadow of its former self. Its 585,000 square-foot facility in West Chester, Pennsylvania was inhabited by twenty or so employees. As recently as 1992 the new corporate headquarters had been home to 1,500 workers. In May, the beleaguered company closed its doors forever.

Epilogue

Even after its demise, Commodore cast a long, albeit fading, shadow. Amigas, with companion technology like the Video Toaster, remained in high demand by film and television professionals. In fact, a kind of secondary industry of support and distribution emerged to exclusively cater to this market.

On the Internet, Commodore users run web sites, chat groups and technical support lines. There is even an on-line computer museum where users can reminisce about their old models. But clearly, Amiga was the company's most enduring asset. Prices for the increasingly rare machines went up by 50 percent within months of Commodore's liquidation. Naturally, the demand stirred debate over the future of the technology. For the next year it was unclear who would eventually control Amiga. In May of 1995 the uncertainty ended

ESCOM AG, a large PC retailer based in Bensheim, Germany, purchased all of Commodore International's rights and patents, including Amiga. Production of the computer was resumed by a new subsidiary, Amiga Technologies GmbH. Petro Tyschtschenko, a former Commodore director, was recruited as president.

Like Tramiel, Tyschtschenko is an ambitious and impatient visionary. By the end of 1995, his fledgling division had produced and sold 20,000 Amiga 1200s in Europe. While Amiga will initially focus on the Continent, Tyschtschenko plans to aggressively enter the North American market in 1996.

The eagerly anticipated Amiga 4000 Tower will be the last model produced using Motorola's 68000 series processors. Gathering a core of former Commodore engineers, Tyschtschenko is overseeing the development of an improved operating system and new hardware utilizing the Power PC 604. Dubbed the Power Amiga project, the company is creating hardware and software in conjunction with IBM, Motorola, Apple and over a dozen other companies.

Amiga's updated operating system will include memory protection, virtual memory and improved network capabilities. Coupled with the Power PC it should make a very fast hybrid. The company will also produce Power PC boards for older models, including the A1200, A3000, and A4000 series

Exploring the needs of the film and television industries, Amiga is working with NewTek to develop products based on the Video Toaster. CDTV has also been revived as the Set-Top-Box. The multi-media device has reconfigured hard drives, a sophisticated Amiga chip set and multitasking functions that will integrate phone lines, network services and TVs.

Acknowledging Commodore's deep-rooted managerial and marketing ills, Tyschtschenko vowed not to repeat them. Amiga Technologies fosters strong relationships with software developers and is attentive to its user base. Sobered by memories of Commodore's ineffectual customer relations, Tyschtschenko promises a full range of support, including on-line Internet services for new and old Amigas.

Copyright 1994-99 Jones International and Jones Digital Century. All rights reserved.
 
 

Related Resources

Sources
 
 

Kittel, Peter, ed., "Speech by Manfred Schmitt at Software Evening of Computer '95," Amiga Technologies GmbH, 20 November 1995.

McClellan, Stephen T., The Coming Computer Industry Shakeout: Winners, Losers, and Survivors New York: John Wiley and Sons, 1984.

Metz, Gretchen. "QVC Buys Former Site of Commodore," Daily Local News, West Chester, PA, 28 December 1994.

Stets, Dan. "Distributors Find High Demand for Amiga Computers After Commodore's Demise," Philadelphia Inquirer, 1 September 1994.

Tomczyk, Michael S., The Home Computer Wars: An Insider's Account of Commodore and Jack Tramiel. Greensboro, North Carolina: Compute Publications, 1984.

---. "Amiga Goes Power PC," Amiga Technologies GmbH, 7 November 1995.

---. "Speech by Petro Tyschtschenko at Video Toaster Expo Conference," Amiga Technologies GmbH, 6 November 1995.

---. "Speech by Petro Tyschtschenko in Bradford about Microvitec," Amiga Technologies GmbH, 17 October 1995.

---. "Speech by Petro Tyschtschenko in Bordeaux at Solectron," Amiga Technologies GmbH, 20 November 1995.

---. "Everything About Amiga and Multimedia: What Do Amiga and Multimedia Have in Common?" Amiga Technologies GmbH, 7 February 1996.

---. "Viscorp Agreement Complete," Amiga Technologies GmbH, 23 January 1996.

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