Wednesday, December 4, 2019

Digital Equipment Corporation - the Rise

Among the many stories Ken Olsen told about the early years was how primitive the working conditions were in the early years. Workspaces had walls but no doors (bathroom stalls did not have doors, either).  Summer, with no air conditioning, windows were opened, but there were no screens, so the work area was plagued by pigeons. In the deeps of winter, heat was constantly on, but during the spring and fall, not on for weekends. Raytheon shared one building with Digital’s space. If Raytheon wanted heat, Digital got heat. Raytheon would call noon on Friday to specify which buildings it wanted heated, paying $15/hour for the service. Ken Olsen would call at 1:00 to see if he was going to get his part of the building heated for free.

The early successes of DEC rested on two concepts – real time computing and time sharing. The first described the ability to sit in front of a computer, create program code on a keyboard, and see code and output on a video screen. The second referred to the idea that more than one user could be using the same computer at the same time, with speed fast enough that each user had the sense that they were a sole operator.

Digital Equipment Corporation: PDP-1. "PDP" was from
Programmed Data Processor, as Digital was adverse to
calling itself a computer company. 
The PDP-1 was DEC’s first computer, introduced in December 1959. First delivery to a customer was November 1960. It introduced the concept of real-time computing. It weighed about 1,600 pounds, sold for $30,000 (roughly $1,000,000 in inflation-adjusted dollars, and was considered a huge bargain compared to mainframe computers. DEC sold 53 of them. One was on permanent loan to the Massachusetts Institute of Technology Electrical Engineering Department, Ken Olsen’s alma mater, where faculty and students could sign up for computer time, 24/7. DEC recruited students who showed programming promise.  

The PDP-8, introduced in 1965, became DEC’s first superstar computer, selling more than 50,000 over its lifespan. The innovative idea – radical at the time – was to make a smaller, cost-effective computer rather than going for “bigger equals better.” There had been missteps prior. PDP models 4-7 were sluggish sellers, and the PDP-6 in particular had devoured huge amounts of the company’s research and development budget. The PDP-8 supported time-sharing, meaning that many people could be using terminals at the same time, but have the response time they expected from being the only user of a real-time computer. The introductory price was $18,500.

The original PDP-8 spawned a large family of models that were progressively smaller and faster and less expensive. One anecdote of the time was that Bob Metcalf, a graduate student at MIT, had received permission to have a PDP-8 on loan in his office for a weekend demonstration for visiting high school students. When he got to his office that Saturday, the computer was gone. DEC’s public relations department turned the crime into an advertising coup, describing the PDP-8 as “The first computer small enough to steal.” Metcalf went on to co-invent the Ethernet, parent concept for the Internet. The PDP-8 system was later incorporated into one of DEC’s entries into the personal computer niche – the DECmate II/III.

Financially, a major milestone was achieved when the company issued stock on August 18, 1966 as an initial public offering (IPO) of 375,000 shares at $22/share, raising a bit over $8 million dollars for about 20 percent of the company (the majority of shares retained by the investor). Given that the company had been initially funded by $70,000 from American Research & Development, one of the first venture capital companies in the U.S., for 70% ownership, this achievement was insanely profitable for AR&D. Harlan Anderson, one of the co-founders, later wrote: “This deal seems ridiculous and unfair by today’s standards; however, we never contacted an alternative source of capital. We were very na├»ve and there was very little venture capital money available then. We accepted the offer without any negotiation.” When AR&D was purchased in 1972 the price was $450 million; the major asset in its portfolio was Digital Equipment Corporation.

Image of $1,000 bond issued in December 1978. The computer in the
central image appears to be a PDP-12. Click on image to enlarge.
PDP-11 reached the market in 1970. DEC had ended up behind the competition – IBM, and Data General – the latter started in Hudson by ex-DEC engineers. DEC “bet the farm” on leapfrogging the competition. It succeeded. Various versions in the PDP-11 family sold more than 600,000 computers to all corners of the world. The need to fulfill sales and service contracts on this vast family meant DEC needing to have thousands of employees in scores of countries. The PDP-11 models had a successful twenty-year run, until being rendered obsolete by microcomputers connected to server networks.

Prior to the Soviet Union invading Afghanistan in 1979, and a subsequent boycott on importing U.S. computers, PDP-8s and PDP-11s legally made their way behind the Iron Curtain. There, they were reverse-engineered to create knock-offs. Some were so compatible that they could run DEC software, and DEC sales force in eastern Europe reported seeing Russian language PDP manuals. Most of the early personal computers in the USSR were PDP-11 compatible. Years later, VAX machines were smuggled into the USSR and cloned as ‘WAX’ superminicomputers, also able to run DEC software.

There is a confirmed story that the scribe lane of the Digital CVAX microprocessor had text in the Cyrillic (Russian) alphabet, with one suggested translation as: "VAX - when you care enough to steal the very best". This was actually a rift on the famous Hallmark card slogan: "When you care enough to send the best".

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