Digital Equipment Corporation - PCs

Olsen was correctly quoted but misunderstood when in a talk given to a 1977 World Future Society meeting in Boston he said “There is no reason for any individual to have a computer in their home.” This statement was repeated in TIME magazine and elsewhere. Keep in mind that the first non-hobbyist ‘personal computers’, including the Apple II, reached the market in 1977, the IBM PC in 1981.

In the full context of Ken’s talk, he was a non-believer in the futuristic idea that we would turn over day-to-day operations of our homes – such as paying bills, turning lights and heat on and off, running security systems, and keeping inventory of food supplies in the house and creating a shopping list accordingly (any yet, here we are). Ken also knew that computers were evolving so rapidly that any purchased home computer would soon become obsolete. (So true!) In his mind the proper solution was to have video screens, keyboards and printers in homes and at businesses, all linked electronically to company-operated computers that would provide the software, software upgrades, and memory. DEC actually launched the first of what became a series of video terminals in August 1978 as the VT100 (superseded in time by VT200 and VT300). The VT series sold millions.    

Digital Equipment Corporation - VT100 terminal (internet download)

As to desktop computers, over decades, DEC had committed itself to selling mid-size computers that generated significant profits by customizing software and providing service. A leap to also making low-priced, low-profit, small computers that would run software provided by other companies saved IBM, but stymied Digital. Only after IBM launched personal computers in August 1981, did DEC decide to enter the fray. It initiated not one, not two, but three separate PC projects, at separate company facilities, with poor communication amongst them. DEC’s standard procedure would have been to then decide which was best and kill the other two. Instead, all three were brought to market – perhaps over-fast – in 1982: the high-end Professional, the DECmate series (offering only word processing) and the more general-purpose Rainbow 100.

DEC being DEC, everything was of high quality and ran various versions of DEC’s software, but by not being open to the flood of software that IBM was allowing all companies to make to run on its machines, DEC failed to set the standard and did not follow the standard. Even for something as simple as floppy disks, DEC used its own proprietary formatting. Disks formatted to the IBM standard worked on IBM clones, but not DEC’s machines, and vice versa. And as a consequence of poor internal communications and DEC’s bias toward proprietary systems, its three microcomputers were also not compatible with each other.

As example of the problems, the Rainbow 100 was priced higher than competing systems targeting the consumer market. DEC did not have a marketing, sales and delivery system that could put its PCs into store or else sell and deliver directly to consumers. PCs did not require the lucrative support and service contracts that followed placement of minicomputers. And finally, as one sales person put it, “Why try to sell 12 Rainbows when you can get the same commission on selling just one VAX?"

A couple of years later a proposal emerged from Engineering to start over, but this time with competitively priced clones of the IBM system, able to run all the software that was making the IBM PCs so successful for business applications. Compaq had already jumped into this niche with the Compaq Deskpro. Dell followed with the Turbo PC, priced at under $800. DEC was already doing cost-effective mass production of desktop systems as video terminals. All it would take was to improve on IBM’s construction short-cuts and turn out a sturdy, fast, high-end clone. Ken Olsen killed the proposal. His attitude had always been that Digital was a leader, not a follower.

By the time Olsen reversed himself on this topic – in 1991 – it was too late. DEC brought out a series of high-end, extremely reliable, IBM-compatible machines under the Prioris, Celebris and Venturis brands. But Compaq, Dell, Gateway and others had a much larger share of what was transitioning to a low profit margin business. When merger talks first started with Compaq in 1996, Digital was manufacturing about one million PCs a year. Compaq was doing twelve times that number. Compaq did not want DEC’s PC business. After the 1998 acquisition, what had been Digital’s PC business was discontinued.