Commodore Computer

Commodore International (other names include Commodore International Limited) was an American home computer and electronics manufacturer founded by Jack Tramiel. Commodore International (CI), along with its subsidiary Commodore Business Machines (CBM), was a significant participant in the development of the home personal computer industry in the 1970s, 1980s and early 1990s. The company developed and marketed the world's best-selling computer, the Commodore 64 (1982), and released its Amiga computer line in July 1985. With quarterly sales ending 1983 of $ (equivalent to $ in ), Commodore was one of the world's largest personal computer manufacturers.

History

Founding and early years

Commodore co-founders Jack Tramiel and Manfred Kapp met in the early 1950s while both employed by the Ace Typewriter Repair Company in New York City. In 1954, they formed a partnership to sell used and reconditioned typewriters and used their profits to purchase the Singer Typewriter Company. After acquiring a local dealership selling Everest adding machines, Tramiel convinced Everest to give him and Kapp exclusive Canadian rights to its products and established Everest Office Machines in Toronto in 1955.

By 1958, the adding machine business was slowing, but Tramiel made a connection with an Everest agent in England who alerted him to a business opportunity to import into Canada portable typewriters manufactured by a Czechoslovakian company. On October 10, 1958, Tramiel and Kapp incorporated Commodore Portable Typewriter, Ltd. in Toronto to sell the imported typewriters. Commodore funded its operations through factoring over its first two years, but faced a continual cash crunch. To bolster the company's financial condition, Tramiel and Kapp sold a portion of the company to Atlantic Acceptance Corporation, one of Canada's largest financing companies, and Atlantic President C. Powell Morgan became chairman of Commodore. In 1962, the company went public on the Montreal Stock Exchange, under the name of Commodore Business Machines (Canada), Ltd.

With the financial backing of Atlantic Acceptance, Commodore expanded rapidly in the early 1960s. It purchased a factory in West Germany to manufacture its own typewriters, began distributing office furniture for a Canadian manufacturer, and sold Pearlsoud radio and stereo equipment. In 1965, it purchased the furniture company for which it served as the distributor and moved its headquarters to that company's facilities on Warden Avenue in the Scarborough district of Toronto. That same year, the company made a deal with a Japanese manufacturer to produce adding machines for Commodore and purchased the office supply retailer Wilson Stationers to serve as an outlet for its typewriters.

In 1965, Atlantic Acceptance collapsed when it failed to make a routine payment. A subsequent investigation by a royal commission revealed a massive fraud scheme in which the company falsified financial records to acquire loans funneled into a web of subsidiaries in which C. Powell Morgan held a personal stake. Morgan then either pocketed the money or invested it in a series of unsuccessful ventures. Commodore was one of the Atlantic subsidiaries directly implicated in this scheme, but the commission was unable to find any evidence of wrongdoing on the part of Tramiel or Kapp despite heavy suspicion. Nevertheless, the scandal left Commodore in a bad financial position because it had borrowed heavily from Atlantic to purchase Wilson, and the loan was called in. Due to the financial scandal, Tramiel could only secure a bridge loan by paying interest well above the prime rate and putting the German factory up as collateral. To extricate himself, Tramiel worked with a financier named Irving Gould, who brokered a deal to sell Wilson Stationers to an American company. Commodore now owed Gould money and still did not have sufficient capital to meet its payments, so Tramiel sold 17.9% of the company to Gould in 1966 for $500,000. As part of the deal, Gould became the new chairman of the company.

Through his Japanese contacts, Tramiel saw some of the first electronic calculators in the late 1960s and pivoted from adding machines to marketing calculators produced by companies like Casio under the Commodore brand name. In 1969, Commodore began manufacturing its own electronic calculators. Commodore soon had a profitable calculator line and was one of the more popular brands in the early 1970s, producing both consumer as well as scientific/programmable calculators. However, in 1975, Texas Instruments, the main supplier of calculator parts, entered the market directly and put out a line of machines priced at less than Commodore's cost for the parts. Commodore obtained an infusion of cash from Gould, which Tramiel used beginning in 1976 to purchase several second-source chip suppliers, including MOS Technology, Inc., in order to assure his supply. He agreed to buy MOS, which was having troubles of its own, only on the condition that its chip designer Chuck Peddle join Commodore directly as head of engineering.

Through the 1970s, Commodore also produced numerous peripherals and consumer electronic products such as the Chessmate, a chess computer based around a MOS 6504 chip, released in 1978.

"Computers for the masses, not the classes"

Chuck Peddle convinced Jack Tramiel that calculators were already a dead end and that they should turn their attention to home computers. Peddle packaged his single-board computer design in a metal case, initially with a keyboard using calculator keys, later with a full-travel QWERTY keyboard, monochrome monitor, and tape recorder for program and data storage, to produce the Commodore PET (Personal Electronic Transactor). From PET's 1977 debut, Commodore would be a computer company.

Commodore had been reorganized the year before into Commodore International, Ltd., moving its financial headquarters to the Bahamas and its operational headquarters to West Chester, Pennsylvania, near the MOS Technology site. The operational headquarters, where research and development of new products occurred, retained the name Commodore Business Machines, Inc. In 1980 Commodore launched production for the European market in Braunschweig, Germany.

By 1980, Commodore was one of the three largest microcomputer companies and the largest in the Common Market. The company had lost its early domestic-market sales leadership, however; by mid-1981 its US market share was less than 5%, and US computer magazines rarely discussed Commodore products. ''BYTE'' stated of the business computer market that "the lack of a marketing strategy by Commodore, as well as its past nonchalant attitude toward the encouragement and development of good software, has hurt its credibility, especially in comparison to the other systems on the market". The author of ''Programming the PET/CBM'' (1982) stated in its introduction that "CBM's product manuals are widely recognized to be unhelpful; this is one of the reasons for the existence of this book."

Commodore reemphasized the US market with the VIC-20. The PET computer line was used primarily in schools, where its tough all-metal construction and ability to share printers and disk drives on a simple local area network were advantages, but PETs did not compete well in the home setting where graphics and sound were important. This was addressed with the VIC-20 in 1981, which was introduced at a cost of and sold in retail stores. Commodore bought aggressive advertisements featuring William Shatner asking consumers "Why buy just a video game?" The strategy worked and the VIC-20 became the first computer to ship more than one million units. A total of 2.5 million units were sold over the machine's lifetime and helped Commodore's sales to Canadian schools. In another promotion aimed at schools (and as a way of getting rid of old unsold inventory), some PET models labeled "Teacher's PET" were given away as part of a "buy 2 get 1 free" promotion.

In 1982, Commodore introduced the Commodore 64 as the successor to the VIC-20. Thanks to a well-designed set of chips designed by MOS Technology, the Commodore 64, (also referred to as C64), possessed remarkable sound and graphics for its time and is often credited with starting the computer demo scene. Its price was high compared with that of the VIC-20, but it was still much less expensive than any other 64K computer on the market. Early C64 advertisements boasted, "You can't buy a better computer at twice the price." Australian adverts in the mid-1980s used a tune speaking the words "Are you keeping up with the Commodore? Because the Commodore is keeping up with you."

In 1983, Tramiel decided to focus on market share and cut the price of the VIC-20 and C64 dramatically, starting what would be called the " home computer war". TI responded by cutting prices on its TI-99/4A, which had been introduced in 1981. Soon there was an all-out price war involving Commodore, TI, Atari, and practically every vendor other than Apple Computer. Commodore began selling the VIC-20 and C64 through mass-market retailers such as K-Mart, in addition to traditional computer stores. By the end of this conflict, Commodore had shipped somewhere around 22 million C64s, making the C64 the best selling computer of all time.

At the June 1983 Consumer Electronics Show, Commodore lowered the retail price of the 64 to , and stores sold it for as little as . At one point the company was selling as many computers as the rest of the industry combined. Its prices for the VIC-20 and 64 were $50 lower than Atari's prices for the 600XL and 800XL. Commodore's strategy was to, according to a spokesman, devote 50% of its efforts to the under- market, 30% on the market, and 20% on the over- market. Its vertical integration and Tramiel's focus on cost control helped Commodore do well during the price war, with in 1983 sales. Although the company and Tramiel's focus on cost cutting over product testing caused some hardware defects in the initial 64, some resolved in later iterations by early 1984, Synapse Software—the largest provider of third-party Atari 8-bit software—received 65% of sales from the Commodore market, and Commodore sold almost three times as many computers as Atari that year.

Despite its focus on the lower end of the market, Commodore's computers were also sold in upmarket department stores such as Harrods. The company also attracted several high-profile customers. In 1984, the company's British branch became the first manufacturer to receive a royal warrant for computer business systems. NASA's Kennedy Space Center was another noted customer, with over 60 Commodore systems processing documentation, tracking equipment and employees, costing jobs, and ensuring the safety of hazardous waste.

Tramiel quits; the Amiga vs. ST battle

Commodore by early 1984 was the most successful home computer company, with more than in annual revenue and more than in net income while competitors had large losses. The company's revenue in the fourth calendar quarter of 1983 of more than doubled the of a year earlier. Although ''Creative Computing'' compared the company to "a well-armed battleship hichrules the micro waves" and threatened to destroy rivals like Atari and Coleco, Commodore's board of directors were as impacted as anyone else by the price spiral and decided they wanted out. An internal power struggle resulted; in January 1984, Tramiel resigned due to intense disagreement with the chairman of the board, Irving Gould. Gould replaced Tramiel with Marshall F. Smith, a steel executive who had no experience with computers or consumer marketing. Tramiel's departure at the moment of Commodore's greatest financial success surprised the industry; he founded a new company, Tramel Technology (spelled differently so people would pronounce it correctly), and hired away a number of Commodore engineers to begin work on a next-generation computer design.

Now it was left to the remaining Commodore management to salvage the company's fortunes and plan for the future. It did so by buying a small startup company called Amiga Corporation in August 1984, for ( in cash and 550,000 in common shares) which became a subsidiary of Commodore, called Commodore-Amiga, Inc. Commodore brought this new 32-bit computer design (initially codenamed "Lorraine", later dubbed the Amiga 1000) to market in the fall of 1985 for .

But Tramiel had beaten Commodore to the punch. His design was 95% completed by June. In July 1984 he bought the consumer side of Atari Inc. from Warner Communications which allowed him to strike back and release the Atari ST earlier in 1985 for about . The Amiga chipset was already demonstrated at the CES in 1984, however the Atari ST was ready for retailers sooner.

During development in 1981, Amiga had exhausted venture capital and was desperate for more financing. Jay Miner and company had approached former employer Atari, and the Warner-owned Atari had paid Amiga to continue development work. In return, Atari was to get one-year exclusive use of the design as a video game console. After one year, Atari would have the right to add a keyboard and market the complete Amiga computer. The Atari Museum has acquired the Atari-Amiga contract and Atari engineering logs revealing that the Atari Amiga was originally designated as the 1850XLD. As Atari was heavily involved with Disney at the time, it was later code-named "Mickey", and the 256K memory expansion board was codenamed "Minnie".

The following year, Tramiel discovered that Warner Communications wanted to sell Atari, which was rumored to be losing about a day. Interested in Atari's overseas manufacturing and worldwide distribution network for his new computer, he approached Atari and entered negotiations. After several on-again/off-again talks with Atari in May and June 1984, Tramiel had secured his funding and bought Atari's Consumer Division (which included the console and home computer departments) in July.

As more execs and researchers left Commodore after the announcement to join up with Tramiel's new company Atari Corp., Commodore followed by filing lawsuits against four former engineers for theft of trade secrets in late July. This was intended, in effect, to bar Tramiel from releasing his new computer.

One of Tramiel's first acts after forming Atari Corp. was to fire most of Atari's remaining staff, and to cancel almost all ongoing projects, in order to review their continued viability. In late July/early August, Tramiel representatives discovered the original Amiga contract from the previous fall. Seeing a chance to gain some leverage, Tramiel immediately used the contract to counter-sue Commodore through its new subsidiary, Amiga, on August 13.

The Amiga crew, still suffering serious financial problems, had sought more monetary support from investors that entire spring. At around the same time that Tramiel was in negotiations with Atari, Amiga entered into discussions with Commodore. The discussions ultimately led to Commodore's intentions to purchase Amiga outright, which would (from Commodore's viewpoint) cancel any outstanding contracts including Atari Inc.'s. This "interpretation" is what Tramiel used to counter-sue, and sought damages and an injunction to bar Amiga (and effectively Commodore) from producing any resembling technology. This was an attempt to render Commodore's new acquisition (and the source for its next generation of computers) useless. The resulting court case lasted for several years, with both companies releasing their respective products. In the end, the Amiga computer outlasted the Atari.Jay Miner

Throughout the life of the ST and Amiga platforms, a ferocious Atari-Commodore rivalry raged. While this rivalry was in many ways a holdover from the days when the Commodore 64 had first challenged the Atari 800 (among others) in a series of scathing television commercials, the events leading to the launch of the ST and Amiga only served to further alienate fans of each computer, who fought vitriolic holy wars on the question of which platform was superior. This was reflected in sales numbers for the two platforms until the release of the Amiga 500 in 1987, which led the Amiga sales to exceed the ST by about 1.5 to 1, despite reaching the market later. However, the battle was in vain, as neither platform captured a significant share of the world computer market and only the Apple Macintosh would survive the industry-wide shift to Microsoft Windows running on PC clones.

Demise

Adam Osborne stated in April 1981 that "the microcomputer industry abounds with horror stories describing the way Commodore treats its dealers and its customers." Many in the industry believed rumors in late 1983 that Commodore would discontinue the 64 despite its great success because they disliked the company's business practices, including poor treatment of dealers and introducing new computers incompatible with existing ones. One dealer said "It's too unsettling to be one of their dealers and not know where you stand with them." After Tramiel's departure, another journalist wrote that he "had never been able to establish very good relations with computer dealers ... computer retailers have accused Commodore of treating them as harshly as if they were suppliers or competitors, and as a result, many have become disenchanted with Commodore and dropped the product line". However, upon the 1987 introduction of the Amiga 2000, Commodore retreated from its earlier strategy of selling its computers to discount outlets and toy stores, and now favored authorized dealers. Software developers also disliked the company, with one stating that "Dealing with Commodore was like dealing with Attila the Hun." At the 1987 Comdex, an informal ''InfoWorld'' survey found that none of the developers present planned to write for Commodore platforms. Although Comdex was oriented toward business computing, not Commodore's traditional consumer market, such a response did not bode well for Commodore's efforts to establish the Amiga as a business platform.

Tramiel's successor Smith left the company in 1986, as d