2. You can more easily work with long electronic documents.

With one drive I’m storing WordStar and a number of other goodies that take up almost all the space on the floppy; there’d be hardly any room for the information I’m typing out. All this is happening on my “A” drive. The “B” drive is my =data disk=, devoted entirely to storage of my writing. I can easily squeeze the equivalent of about fifty pages of double-spaced typing with WordStar, which is one reason I bought a Kaypro instead of an Osborne. Brand O’s earlier versions could store only half that amount of material. Before buying a computer, you should always analyze your paper records in terms of “K.” Each K stands for 1,024 characters; and that includes letters, numbers, punctuation marks, and spaces in between. A double-spaced page of typing might be 66 (the number of columns across each line) × 28 (the number of lines), or 1,848 characters. Bingo! That’s 1.8K, plus a little slack for safety. Since Andy Kay allowed 191K of working space on each floppy, I’d have enough room for a document some hundred pages long, except that WordStar makes an electronic carbon copy for additional security. So my actual working space is around 50 pages. That’s easily enough for this chapter to fit on one of the Kaypro II’s floppies. And newer floppy disk drives can accommodate more than 2.5 million bytes. Although the Osborne and Kaypro both used twin drives, there were also major differences between the two—beyond the =double-density= feature that allowed Kay to squeeze twice as much material on each floppy. Osborne’s first computer, for example, came with only a five-inch monitor. “Adequacy is sufficient,” he once said. “All else is irrelevant.” It was a neat excuse for his early machine’s limited disk space and for the five-inch, black-and-white screen, which could display only 52 columns and which wasn’t as kind to the eyes as green. The production-model Kaypro, on the other hand, boasted a nine-inch, 80-column green screen from the start. And the Kaypro keyboard made the Osborne board seem flimsy. “I like something I can feel when I’m pressing a letter down,” said Kim DeFilippis, a dealer relations woman who was one of the touch-typists chosen to try out different keyboards for the new machine. “The board doesn’t feel like one on a computer. It feels like a typewriter.” And the keys, unlike the Osborne’s, were in all the right places for people weaned on Selectrics. Kay had used the same Tiffany-quality keyboard found on computer terminals costing thousands of dollars more than his economy machine. Kay, moreover, had given his Kaypro a metal case unlike the plastic one of the Osborne. Metal dispersed heat better, and that meant that the parts might last longer than those in the early Osbornes. Brand O tended to overheat floppy disks. Recalling that Non-Linear Systems made test instruments, however, one reviewer gibed that the metal case betrayed the Kaypro’s heritage. I didn’t care. The Kaypro reminded me of old Heathkits, of smoky soldering irons, of crisp, cold evenings in my youth when I’d listened through the static for the whistling dots and dashes from my fellow hams. But many people shrugged off the Kaypro’s appearance as unprofessional, and so I asked about the case. Kay said its contents dictated the shape. “Unless we created air space and made it larger,” he said, “we couldn’t have made the shape much different.” A hood shaded the Kaypro’s =cathode ray tube= (CRT; the TV-like screen). And as it turned out, that matched the comfortable slope of the keyboard that attached to the front of the machine for carrying. I noticed only a few adornments added for buyers’ eyes. One was the blue “KAYPRO II” lettering on the case and the stripes on it and the keyboard; another was the blue color of the keys on the calculatorlike numbers pad. No, you couldn’t mistake the Kaypro for a Gucci creation. And yet, as good, functional design, the Kaypro succeeded: at least one other portable appeared in a sharp-edged metal box. The location of my Kaypro’s two disk drives, to the right of the CRT, was especially logical. Kay and his engineers wanted them well separated from a high-voltage transformer on the left—an electrical component that was part of the video circuitry and whose magnetic radiation could interfere with the operation of the drives. Bill McDonald noted the Osborne disks were on either side of the tube. Circuitry for a nine-inch tube produced more electronic noise than that given off by a five-incher. And McDonald speculated that this was one reason Osborne had to make do with the smaller size. Inside the Kaypro, atop the printed circuit boards, you saw integrated circuits with leglike leads of the kind that one writer compared to caterpillars. You found somewhat similar looking parts inside the Osborne. But there was a difference. “Oh, my God,” said Michael Pond, owner of a Washington-area Kaypro dealership, the Computer Shoppe, “once you take the cover off the Osborne, everything sort of falls apart in your hand. It’s held together by the wiring harness. It’s like a jellyfish.” That may have been a bit off target. Chris Christiansen, however, a computer analyst with the Yankee Group, a high-tech marketing research firm, compared the Osborne to a Chinese puzzle and said an Osborne user “in the next office gets very nervous when I come around with a screwdriver.” By contrast the Kaypro looked eminently repairable. “When you take one part of the machine off,” Pond said, “the rest of the machine doesn’t fall apart.” Andy Kay’s people had divided up the circuitry into several modules that repairmen could remove _easily_. His computer had far fewer chips than the old Apple II. And with fewer chips, repair people more often could locate glitches by replacing various parts until the machine was working again. Fondly, Pond said the Kaypro II was “over-engineered,” like an early-model Volvo. “Well,” you’re wondering, “what about the Kaypro I?” It never existed except as a prototype. Of course, the II didn’t hurt Kay’s efforts to convince buyers that he had one up on Osborne. The prototype’s screen was between the disk drives, interfering with them, and another flaw became clear: the shortness of the cable between the keyboard and the main unit. Bill McDonald was worried. Suppose a customer crushed a finger while wrestling with the little cable? Why not hinge the keyboard to the twenty-pound console? And that’s how Non-Linear Systems indeed built the prototype. But McDonald still fretted that someone might undo the latches; and so, driven by fear of a lawsuit from a klutzy Kaypro owner, the engineers redesigned the computer to accommodate a coiled cord several feet long. Altogether, Andy Kay’s people spent only a year and less than half a million dollars developing the Kaypro II. “After we’d been at it eight or nine months,” he said, “someone brought in some literature from Osborne, who had just announced his portable computer. I said, ‘Oh, oh, somebody beat me to the punch.’ But I saw he had a different idea in mind—a smaller screen, plastic case, different market.”[10] The words “different market” are more than a little off mark. Andy Kay, like it or not, was in direct competition with Osborne. Kay might sell his computers at independent stores rather than at the ComputerLands and Sears stores where many of Osborne’s machines ended up. But at meetings of Kaypro owners and “Ozzies,” I found the same hodgepodge of small-business people and professionals. Footnote 10: _San Diego_ is the source of the “After we’d been at it eight or nine months” quote. Hearing of Osborne, Kay actually was grateful in a sense. “When he started telling the world about how many orders he’s got, I said, ‘Well, if he’s getting all these orders, I’ll start making more of them.’” Kay used an electronic spreadsheet on his newly developed computer to forecast its sales. The Kaypro II had better succeed, since the half million in expenses didn’t include marketing costs and miscellaneous ones such as manuals—another million altogether. Kay, however, said the high-interest loans for the project “never really bothered me that much. I felt confident of getting it done. In one sense I place very little value on money. My wife, Mary, is quite different. She said, ‘You’ll lose your money.’ She was secretary of the company. She had to sign mortgages on our home that we had paid for, property we owned, the plant site. It was a heavy burden for her. If you’re in an airplane or car, going up a winding road on a mountain, the fellow who’s driving isn’t as nervous as if someone else is driving. I was involved in getting it done. She was on the sidelines worrying about it.” The Kaycomp—that was the original name before the Kays changed it because it resembled another computer firm’s—first went public at a San Francisco computer fair in March 1982. Just a routine item appeared in _Byte_, the phone-book-sized microcomputer magazine. I wondered why. Maybe it was because Andy Kay’s technology wasn’t new, merely good repackaging, and he wasn’t selling himself as God or Henry Ford. But dealers at computer shows were raving. The Kaypro’s suggested retail price was $1,795, the same as the Osborne’s, and Kay, too, threw in software: a word processor, an electronic spreadsheet, and other programs that could have cost more than $1,000 if purchased individually. Kay was smart. Osborne had pioneered by including business software for “free” with an economy-priced machine, and now Kay must follow with its own “bundled” programs. “Has _Catch 22_’s Milo Minderbinder, World War II’s greatest wheeler-dealer, hired on as a software buyer at NLS?” _San Diego_ marveled. “You don’t think that took a lot of time to put together?” Kay said. “We purchased some software outright and pay royalties for some.”[11] Footnote 11: _San Diego_ contains the quote on software purchases and royalties. By mid-1982, customers and dealers had placed several thousand advanced orders. Kay’s production lines cranked up, though the pace was slow at first as his people searched for bugs. They did not always stamp them out. A disk drive on my Serial #3083, lasted only a year; my warranty was for the industry’s usual ninety days. Moreover, despite visits to several dealers, my computer still streaked lightly across the screen when I typed, and finally I had to have the monitor replaced. But the view easily beat the Osborne’s. And later, modifying the circuitry and positioning the disk drives horizontally instead of vertically, Kay ended the streaks on new units. “In an emergency I get all the senior engineers on the job,” he said. “We don’t let problems go on like old man river.” Andy Kay rewarded his top problem solvers with benefits like stock options, and the stock offering prospectus from Prudential-Bache Securities anticipated that in 1983 Kay himself would earn $187,000 in salary, bonuses, and other remuneration. Not everyone fared so well; Kay said his labor costs were half those of competitors. “The wages on the line are so low,” quipped a disgruntled ex-employee, “I’d call them south of the border.” Kaypro was typical of many high-tech companies; the production workers were mainly women, many of them foreign born, some of them incapable of speaking English, all of them nonunion. Adam Osborne, too, tried to cut labor costs to the bone. And Atari had laid off scores of Americans and farmed out jobs to cheaper labor abroad, reddening the faces of the politicians known as “Atari Democrats” who believed that high tech could fight unemployment. Regardless of the low wages, Kay’s own company at least appeared to be the antithesis of a sweatshop. His hillside buildings didn’t look like normal factories; they were long and narrow, well windowed, split into small rooms without the racket of mechanized production lines. Kay described his workers as “always moving, interacting constantly. If one piece is missing, they work around that. If one person is slow because he happens to be new, they work around him and help him out. It’s exactly the same approach we used for stuffing printed circuit boards on the voltmeters. It uses the least amount of capital equipment, and it’s the easiest on the assemblers, because they aren’t just sitting or standing in one spot.” Lacking a conventional assembly line, Kay said he needed few mid-level managers; and even after Kay went public, he still hated to bring in MBAs. Managers built empires. They feuded. They got in producers’ way. That was how Kay felt, apparently—a legacy of the 1960s when Non-Linear Systems had splurged thousands on those seven vice-presidents and their white Cadillacs. But some practices from the go-go years lingered. One, said Kay, was participative management, the philosophy that had led to the formation of those small, friendly assembly teams. The atmosphere around the plant was informal. “We have very few written policies on anything,” he said. No dress code existed, save for an informal ban on attire like short shorts—a policy bent to accommodate workers who labored in the hot Southern California sun. Also, Andy Kay’s company at times hired people with unusual backgrounds. Clifford Odendhal, a musician-dancer-songwriter in his thirties, had come by way of COJO Wind, David Kay’s alternative energy firm. David asked Odendhal to help Non-Linear Systems catch up on back correspondence, leading to a customer-service job there. Eventually, Odendhal was helping with public relations. “This is the first job outside of entertainment that I have ever cared about beyond my paycheck,” he said. Andy said of David, “He’s less cautious about hiring people than I am. If they don’t work out, he just lets them go.” David, a six-foot-three-inch surfer with a degree in math and a hobby of collecting dictionaries, had himself started with the company several years before the birth of the Kaypro. Now he was vice-president for marketing, and when an investment banker asked Andy if David was a vice-president because he was Andy’s son or because he was the best man for the job, Andy replied: “Both.” He believed that David’s role in the development and marketing of the Kaypro “was extremely important. In thirty years I’ve never seen a man in marketing who measures up to one-tenth the dedication and performance he’s shown.” Andy’s son used what the _Wall Street Journal_ described as “idiosyncratic” marketing techniques. Dealers couldn’t sell Kaypros by mail. They didn’t enjoy extended credit. The Kaypro Division, in fact, did not even spend much at first on national advertising. Examined closely, however, each policy seemed logical. Most customers couldn’t just walk out the door of their computer dealer and wave an eternal good-bye. Chances are that they’d be back for advice or repairs. So Kaypro wanted local dealers not to face competition from cutthroat mail-order houses that left the customer on his own. Without a strong network of local stores, Kaypro might perish. Andy Kay appreciated this. “If a fellow does mail order and the contract says he can’t,” Kay said, “David cuts him off without a qualm. Maybe the dealer says we need him or he won’t be able to support his family and kids. Well, forget it. This is a business, but it’s also our livelihood, too.” Of course, not all mail-order establishments in the computer trade were unethical: I knew of some good ones. But from a manufacturer’s viewpoint the policy made sense. The Kays at the time wanted to befriend the independent dealers, who were less likely to flood the market with heavily discounted computers than the chains were. However sympathetic to the independents, Kaypro didn’t follow the lead of some expansion-minded computer companies and grant extended credit—a sensible policy in this volatile business. A California chain folded, owing hundreds of thousands to Apple as well as customers. As to how he originally picked up many dealers, Andy Kay said, “The orders just started rolling in. Now we’re sort of clearing out dealers which are operating out of backs of cars or whatever.” Kay was also benefiting by selling through his own network rather than being at the mercy of distributors—and supporting their profit margins. By the summer of 1983, Kaypros were selling at some thousand dealerships. Christiansen observed that Kaypro gave dealers “30 or 40 percent margins. So does Osborne. That’s how they get the dealers to carry the damned things. You know, when you have fifty guys a week knocking on your door, you pick the one who’s going to put the most money in your pocket, and Osborne and Kaypro both know how to play this game as well as or better than anyone else. How do you think Kaypro went from nothing in 1982 to 100,000 units in 1983?” Kay disputed this. He said that the Kaypro’s quality sold the computers, that he hadn’t offered more than 25 percent dealer discounts, and never would; and his claim seemed creditable enough when some stores dropped the Kaypro because the markup wasn’t big enough. Whatever the facts, Kaypro in 1983 boasted sales offices in some fifteen U.S. cities and one in the Netherlands. One-third of the computer-store ads in the _Washington Post_ business supplement of August 8, 1983, mentioned the Kaypro. The limited _national_ advertising was equally wise. Why not depend at first on local ads telling where people could buy the product? And what was the use of creating a demand for more computers than Kaypro could make? Andy Kay had learned from Osborne’s example. Adam Osborne’s splashy ads had helped create the market that the Kaypro was now enjoying. Besides, Kay was benefiting from something better than advertising: the articles of friendly writers. And why not? Writing was just another form of word processing—a category for which most Kaypro owners had bought their machines. Certainly the Selectric-style keyboard and 80-column screen had impressed _me_. Peter McWilliams, the very same writer who had led the cheering in the micro magazines for the Osborne, was a Kaypro convert. “Put simply, as a personal computer, the Kaypro II is superior to the Osborne 1 in almost every detail,” he wrote—“yet it retails for the same $1,795. As David Letterman might say, ‘Unbelievable!’” James Fallows, the Washington editor of the _Atlantic Monthly_, free-lancing for _TV Guide_, called the Kaypro “the best value” for “complicated accounting” or “heavy-duty word processing.” I was used to seeing hype in and out of computer magazines for inferior products. The Kaypro, however, deserved the paeans. Granted, I didn’t like Perfect Writer, a word processor included between 1982 and early 1984; and the sharpness of the monitor was no match for some more expensive machines. The Kaypro wasn’t the best computer, period. But at the time Fallows praised the Kaypro to the millions of _TV Guide_ readers, it may well have been the best dollar-for-dollar value. Fallows himself didn’t own a Kaypro. He honestly reached his conclusion unassisted by a special offer from Kaypro: 40 percent discounts for writers; the company said—convincingly or not—that it didn’t attach any strings. As production increased, Kaypro finally did trot out national advertisements. One, in _Esquire_, showed a young Kaypro user in an office swept by a fierce wind, blowing coworkers’ papers away and tousling his hair, while he was typing happily away with his chair and desk raised a foot off the floor, “KAYPRO RISES TO THE OCCASION,” said the advertisement. I didn’t really see the point. The technical specs were buried in small print at the bottom of the page; why couldn’t the ad tell me in large print and simple language what the Kaypro could _do_? A Kaypro staffer said the ad was to build name recognition. Then the company might unleash a campaign portraying its steel ugly duckling as the Volkswagen of small computers. It seemed a sensible-enough idea. Then, again, it was another indication that the computer business was becoming more like Detroit—selling not only economy but the _image_ of economy. Finally, the new ads came out. In simple, helpful language they told novices what to look for in a small business computer. And yet you could hardly confuse the ads’ goals with _Consumer Reports_'. The ads for beginners recommended consulting with an expert before choosing a machine; at the same time ads in sophisticated magazines like _Byte_ asked computer pros to suggest the Kaypro to beginners. (“Once you tell people about the complete business computer for $1,595,” said an ad appearing after the Kays lowered the price $200, “they’ll probably stop bugging you with a lot of questions.”) The public relations campaign was just as slick. No one lied. But Hill & Knowlton, the fast-track public relations agency, laced its Kaypro releases with quotes skillfully reflecting the computer makers’ self-interest. In one, David Kay said, “If it isn’t portable, it doesn’t pay to buy it.” That was hyperbole, pure and simple. The nine-inch screen, for instance, was a major improvement over the Osborne, and it was entirely right for an economy portable from which many buyers would eventually trade up, anyway; but writers and other heavy-duty users might prefer a twelve-incher from the very start. For not much more than the Kaypro at the time of the release, you could buy a desktop computer called the Morrow Micro Decision with good software and a twelve-inch screen. Milton Viorst, a Washington journalist, couldn’t stomach the Kaypro monitor. He considered the Kaypro the kind of machine you might tote back and forth between home and the beach but not the best for heavy-duty viewing. He bought the Morrow, or two, actually: one for himself and one for his wife, Judith, a well-known poet and magazine writer. However pro-Kaypro, I could see why. The Kaypro, strictly speaking, wasn’t even portable; instead, it was _transportable_. Unless you were a 300-pound tackle playing for the Pittsburgh Steelers, you weren’t about to tote a sharp-edged, 26-pound computer and battery pack as casually as you would an attaché case. Other “feature information” from Hill & Knowlton in spring 1983 offered more tips for computer shoppers in a way cunningly designed to steer them to the Kaypro without the customers’ quite knowing what was going on. “KAYPRO Division of Non-Linear Systems” appeared on the first page in big blue letters above the text. But the seven-page “feature information”—the part intended for publication—mentioned the computer by name just once and in an inconspicuous location. It laid out the specs for a good portable. Then, several hundred words after the Kaypro mention, it triumphantly concluded, “For as little as $1,795, you can already buy the only fully portable personal computer with a full-sized screen, one that offers large enough memory capacity to handle business, entertainment and educational programming and a service network that’s available anytime or anyplace—just like the optimal portable personal computer itself.” I recalled the canned releases from food companies that women’s pages ran verbatim. How many newspapers and magazines would do the same with “feature information” from Kaypro? David and his father had made a good machine. And yet I wondered how many manufacturers of bad computers might start using similar tactics. Joel Strasser, at the time the Hill & Knowlton man handling Kaypro, later protested that he was engaging in standard public relations practice, but his remarks simply dramatized how the welfare of shoppers might clash with that of the manufacturers. Disguised puffery was hardly in keeping with David Kay’s portrayal of himself as a consumer advocate. Around the time the Kays were calling in high-powered public relations people, Adam Osborne himself went a step further. In January 1983 he hired a professional manager to be Osborne Computer’s president, Robert Jaunich II, formerly president of Consolidated Foods. Osborne would later blame Jaunich for many of the computer firm’s problems, telling a reporter that Jaunich wasn’t fleet-footed enough for a young company in an industry with a fast-changing market. Jaunich’s recollections would differ. Recalling the discoveries he made during the audit before the never-to-take-place public offering of Osborne stock, he told the _Wall Street Journal_, “Every day you came in, the numbers got worse. Every number you touched went soft.” He blamed the corporate chaos on Adam Osborne. “The real message,” said Jaunich, who resigned as Osborne president in December 1983, “is the professional people got here too late to help.” Osborne was also critical of another executive; he accused him of cutting a deal with a supplier—while still working at Osborne Computer—to make a rival machine. Whatever happened, the internal squabbles at Osborne may have wasted time and energy that he and colleagues could better have devoted to their battle against the Kaypro. He himself would later admit in his book _Hypergrowth_ that “new product development moved slowly” until the second half of 1982. A smaller, cheaper Osborne 1, the Vixen, never reached the market while he was running the company. His $2,495 Executive computer—with a seven- rather than five-inch screen—did make it out the door. “Wayne” didn’t. Introduced early enough, Wayne could have given the Kays fits. This $1,995 model was to offer a nine-inch screen and include a built-in printer and a pile of free programs for word processing, communications with other computers, and other tasks. But technical problems bedeviled Osborne. When Osborne finally caught on that IBM had established a new industry standard, he sought to make his Executive compatible, but he was aware of his own company’s “dismal record in engineering development.” Osborne entrusted the task to a San Diego firm. By May 1983, however, Osborne realized that the firm’s IBM-compatible prototypes were “expensive, late, and included wholly unacceptable features such as circles that would be displayed as ovals when an Executive user switched from CP/M to IBM compatibility.” Adam Osborne was clearly losing his sales war with Andy Kay. He had talked to reporters about the Executive in early 1983, and in July newspapers said this had discouraged some dealers from ordering too many Osborne 1s. The story was that Osborne’s cash reserves had fallen as orders for the older machines dropped from 10,000 a month to almost nothing. Apparently he’d forgotten one of the precepts of any business with changing products: you're always competing against yourself. If you make too many old models or brag too soon about the new ones, then you may imperil your cash flow and see surplus product inventory pile up. Your customers will keep their wallets shut as they await your coming attraction. It was a most plausible explanation for Osborne Computer’s cash-flow problems but perhaps not the main one. In _Hypergrowth_ Osborne revealed that his sales levels for his Osborne 1 had been dwindling even without all the puffery about the forthcoming Executive model; he confessed that he had lied to the press to throw it “off the scent of the real story.” His bankers were threatening to call in loans; he was laying off workers, yet he still hoped to woo private investors. As the end neared, Osborne dealers were fighting Kaypro ones with price reductions. An Osborne 1, discounted, sold for as low as $1,000 by late August 1983. Stores also were dropping the Executive’s price, and with good reason: why so expensive a machine without IBM compatibility right off the bat? The first prototypes of the new IBM-compatible Executive weren’t being built until September 1983, or as Osborne later observed, “precisely at the time the company was filing for bankruptcy.” The bankruptcy papers showed next to no income and $45 million owed creditors. _Newsweek_ ran a photograph of Osborne leaving his office without a portable computer in sight. Instead, a briefcase was shielding his face, and the caption read: “Founder Osborne exits: IBM was too big.” That was somewhat wrong. The IBM-compatibility issue notwithstanding, _Kaypro_ had been Osborne’s main competition. “I’ve always had a great deal of respect for Kaypro,” he would later confess to _Popular Computing_. “You’ve got to make those statements [knocking the Kaypro]. It makes good copy, damn it.” It didn’t make for the best-informed computer buyers, however. Bowled over by Osborne’s marketing campaign and well-publicized disparagement of the competition, some consumers had ignored the information that mattered in the end: the numbers. The screen measurements, disk-drive capacity, almost everything, said the Kaypro was a better computer for common applications. Osborne had faced a moral dilemma. Should he badmouth the competition and help his company survive? Or should he tell the truth—that Brand X was better than his own product? Not surprisingly, Osborne, like any other computer manufacturer, had made the former choice. In fighting Osborne, Kay had dropped his suggested retail price $200 in May 1983 to $1,595, an indication that small business computers were becoming no more impervious to price wars than the home ones were. He also offered a souped-up version of his II and beefed up his software. His Kaypro IV—the jump from II to IV reflected the substitution of two 400K floppy disk drives for the II’s 200K ones—sold for $1,995. Yet another weapon against Osborne was the Kaypro 10, a deluxe model with a 10-megabyte =hard disk=. It sold for $2,795, an amazing deal at the time. A hard disk is an aluminum platter coated with magnetic film, and 10 megabytes is the equivalent of 5,000 double-spaced typewritten pages; yet Kay was selling the computer and software for less than the prices of many hard-disk add-ons. “Adam Osborne,” said Kay, “has said he couldn’t make a portable hard disk because the hard disks are so sensitive to shock. Well, engineering advances are such that hard disks now are capable of being moved. Our very first one was shipped to a show in Germany.” An _InfoWorld_ headline was less sanguine: “Hard disk, portable ‘newlyweds’ face some problems.” Could Kay succeed with his hard disk? Another company made the disk itself, and Kaypro had to replace some drives on the early Kaypro 10s. But _some_ glitches were hardly a surprise in any new micro, hard-disk style or floppy. Meanwhile, no less than Control Data, the computer giant, was planning to offer a 5-megabyte hard disk for portables. Already some smaller companies had put out portables with hard disks. And yet Kay, turning out thousands of the machines, was gambling more heavily on their reliability than the others. It could pay, however. New technology might or might not succeed; but in his fast-moving industry, old technology sooner or later would surely fail. To stay alive, he must be among the leaders. More than 150 companies were clawing their way through the micro business in late 1983, and some analysts believed that fewer than 20 could survive five more years. Many of the 150 had only what one expert called “press release products.” But others were real threats; and without the resources of an IBM or Apple, Kay ideally would fight back through innovation as well as good marketing. He needn’t invent any new micro technology. Yet as a survival-minded “solver of problems,” he had better be prepared to make prompt use of the breakthroughs of others. So major risks were ahead—inevitable—as Kay girded for his next fights with the valley. Backups: ◼ I, Twenty-Six Questions to Ask at (and About) the Computer Store, page 281. ◼ II, A Few Grouchy Words on Printers, page 294. 3 ❑ After the War The Silicon Valley gossips in late 1983 said Adam Osborne was trying science-fiction writing. Then, the next spring, stories suddenly blossomed about his new software company; he bragged that it would be the paperback publisher of the micro world, a mass-market operation that would undercut rivals just as his computer firm had. The name of the new company, in Berkeley, California, was Paperback Software International. And his quotes against competitors were just as colorful as in the old days. “There’s a helluva lot of software out there,” Osborne told _USA Today_, “and a lot of it’s overpriced garbage.” He planned to sell his programs at book chains and book racks at less than one-fourth the prices of the Brand Xs. The idea seemed apple-pie admirable, but most people would rather not buy more software than they had time to learn and use; how many hardcore buffs were out there itching to spend hours mastering cheap new programs? Circumstances might change as software becomes easier to use. But could you imagine a Word-Processor-of-the-Month Club or a spreadsheet rack to the right of the gothic romances? No, except for games programs and very cheap enhancements of existing business programs like Lotus 1-2-3, the paperback concept seemed dicey. Even Osborne wasn’t infallible as a seer and market analyst. Once he’d predicted that IBM would fail in the micro market, and hadn’t he been too slow to grasp the importance of IBM compatibility for his own products? Still, although Osborne Computer Corp. itself had floundered, it had not been for want of the right vision at the company’s inception. His new software enterprise might indeed survive in the proper niche. First, however, he would need capital. In fall 1984 _InfoWorld_ reported that Osborne had paid for a booth at a software show but had not set it up because, for want of funding, his first products weren’t ready. Investors may have shied away due to Osborne’s earlier failure to overcome the classic entrepreneur’s challenge: not just to start a company but keep it prospering. In shrunken form, with Osborne having resigned as president in September 1983, his old company lingered on in early 1984, selling old machines and still promising a new IBM-compatible portable. Andy Kay at the time had no need to fear this corporate husk. For a while, in fact, Kaypro may even have been the fourth largest maker of personal computers _shipped to stores specializing in them_. And his hard-disk gamble was paying off for the moment—the same risk that Osborne himself had avoided as too perilous for a portable manufacturer. Orders had kept piling up for Kaypro 10s. Then again, so had the problems with Tandon, Kaypro’s major hard-disk supplier. David Kay even claimed that Kaypro was receiving Tandon drives “with ‘IBM’ stamped on them that also have ‘reject’ stamped on them.” Delivery delays allegedly had cost perhaps $30 million in sales of the Kaypro 10s over eight months. Tandon, while conceding that some rejected drives may have accidentally reached Kaypro, claimed that such problems were rare.[12] Footnote 12: _Business Week_ is the source of the facts on Kaypro’s disk-drive problems. The Kays’ 1984 sales would exceed $100 million. But some rivals were growing faster, and IBM, Panasonic, and other household names were now muscling in on the portable market. “Kaypro’s immediate prospects are good,” said one analyst of the industry. “I don’t know about the long-term ones.” He told of a big white tent that the Kays had put up on a hillside to store badly overstocked computer parts. The Kays might argue that they wanted to keep expenses down. To the analyst, however, the white tent symbolized amateurish management. In September, Kaypro acknowledged that millions of dollars in computer parts might be missing from the tent and some large trucks; and whatever the cause, theft or bad accounting, the crisis hardly endeared Kaypro to investors. They now could recover only $4 per share—a fraction of the $10 offering price. Around the same time, some angry investors filed lawsuits charging Kaypro with falsely reporting its finances. Kaypro denied this. I hadn’t any idea of the validity of the suits. An official with Osborne Computers, however, discussing the tent and the general management problems it symbolized, appropriately observed: “It was déjà vu to hear about Kaypro’s inventory situation.” Six regional sales managers had left earlier that year for a competitor. Former Kaypro executives griped that the Kays paid too much attention to trivia. Andy Kay even interviewed prospective security guards. Some employees relished this personal touch, but Blair G. Newman, ex-director of marketing and strategic planning, complained to _Business Week_, “There are too many Kays and not enough pros.” Unconvincingly, a Kaypro spokeswoman shrugged off the resignations, saying a small clique of friends had left and plenty of people had lined up to replace them. Andy Kay’s antipathy toward professional managers was coming back to spook him. All along his attitude hadn’t been so different from that of Adam Osborne, who, stubbornly, told a reporter after the Chapter XI filing, “The major lesson I learned from this thing is that I’m as good a manager as any of those guys.” An ex-Kaypro employee complained to me: “The Kays are worried that professional managers will take away their power. Andy Kay wants to run the company himself. It’s a feudal society there. A lot of employees call it the Kay fiefdom. It’s like a training ground for young knights. You can learn a lot, but it locks you into a rigid structure. There are no changes from the bottom up. That’s the big problem. I don’t know how they get away with calling it ‘participative management.’ Ordinary employees never have any meetings with Kays to discuss major decisions. There’s no checks and balances. If the guy at the top makes a mistake, there’s no way to correct it. No one can call the king’s bluff and stay.” The Kays fired someone close to the outspoken Newman. It was Clifford Odendhal, the bearded musician who a year earlier had told me, “This is the first job outside of entertainment that I ever cared about beyond my paycheck.” “Part of it had to do with salary,” he said: his request for a raise. “They’d been paying me no more than what an assistant manager makes in a K-mart. And I’d handled user groups, done publicity, and edited their in-house newspaper.” The users groups were mostly local organizations of Kaypro owners who traded technical tips and gossip and bargained with stores for discounts on equipment; they kept Kaypro in touch with the best-informed customers, the trendsetters. They also relieved the strain on Kaypro’s own technicians and stores. But Kaypro had cut back the money budgeted for sending people out of town to meet with the users groups; skeptically, Odendhal said the company had hoped to do this work almost entirely via a computer network. Then there was the question of whether Kaypro had a true marketing department. “They don’t,” Odendhal said. He and others around Newman had hoped that the Kays would sound out the need for products scientifically before turning the engineers loose. Odendhal may or may not have been right. If marketing men at the large computer companies were so smart, how come Kaypro and Osborne had been the first firms to make portables usable in business? And what about all the IBM clones? Couldn’t the marketing men’s me-too-ism have stifled innovation? Then again, another company dominated by engineers—Texas Instruments—had flopped in the home-computer market because it didn’t pay _enough_ heed to marketing. The Kaypro Corporation, at least, still boasted a dealer network of more than a thousand stores in mid-1984. But some stores in my area had dropped or downplayed the Kaypro line in the earlier part of the year. One reason was that just about all the Kaypro machines were still 8-bit and didn’t run the new IBM-style software. Also, ComputerLand and other big-name chains, a growing part of the business, complained that margins on Kaypros were ten percentage points under competitors and that the machines' software hurt sales of off-the-shelf programs. So ComputerLand shunned Kaypro. It was a clear case of the interests of the consumers being at odds with those of the computer dealers. For the Kaypro II at the time was a remarkable bargain; Andy Kay had lowered his _retail_ price in March to $1,295. What a contrast to the overpriced PC_jr_ from IBM. Just rumors of the machine—nicknamed the Peanut—had kept the entire industry on edge. It bore the three magic initials. And as the pros said, IBM was compatible with IBM. Only it didn’t work out that way. The PC_jr_, at least the first version, couldn’t run some electronic spreadsheet software and other important programs written for the IBM. The introduction in November 1983 had been anti-climactic in other ways. _Jr's_ little keys were like chiclets, horrors for the touch-typist, and by the time you bought your software and added a second disk drive, you’d be paying hundreds of dollars more. Even after IBM upgraded the PC_jr's_ keyboard in summer 1984 and lowered the price to $999 with one drive, the Kaypro II was still superior for word processing. So were other machines. With two disk drives and WordStar, the Sanyo MBC550—a somewhat IBM-compatible desktop from Japan—listed for just $1,400. Not that the Sanyo lacked limitations of its own. Its keyboard, too, was no match for the Kaypro’s. In 1984 the Kays introduced the New Kaypro II, which offered only one disk drive but sold for just $995 and allowed for another to be added for a few hundred dollars more. Anyone using the New Kaypro II for business would be foolhardy to depend on just one drive. Not surprisingly, the $995 machine inspired jibes that Kaypro was guilty of using the same gimmickry as IBM and Apple had been with their single-disk computers. Moreover, all the Kaypro models, despite their low prices, made _some_ customers pay for their bargains with headaches. Take Chris Jensen, a writer in Cleveland. He futilely tried for months before he could send his stories to his newspaper from home via the phone lines. His dealer had sold the Kaypro IV, promising that Jensen could. “It’s really scummy to put this out,” the _Plain Dealer_ reporter said of his machine, “and know that the communications software has serious bugs in it. It’s the kind of thing that the government would kick the shit out of the automobile companies for doing.” A Kaypro employee admitted that the communications software for the Kaypro IV had come out with bugs, but not those of the kind that were plaguing Chris Jensen. He confirmed another of Jensen’s complaints: that the Kaypro IV model with the modem couldn’t use the most popular communications software at the time. Coincidentally or not—shortly after Jensen griped to me, the _New York Times_, and computer writer Peter McWilliams—Kaypro released SuprTerm version 5.3. And that did the trick for him. The machine delighted Jensen in other ways, but he still wondered about all the ordinary customers out there who were unwilling or unable to wage a media campaign to get their software up to snuff. Jensen’s story was atypical—many Kaypro owners still spoke as if their computers were micro manna. Still, the new Robie, introduced in early 1984, might be a sign of troubles to come. It was unique, a desktop selling for $2,300 with two 2.5-megabyte _floppy_ disks. But disks didn’t run as quickly as a hard disk, and as of late 1984, the Robie just hadn’t caught on. The Robie looked so ugly—ungainly, plastic cheap, fit for a discount store—that even some value-minded buyers might have thought twice about bringing it into their offices. It was a computer that only a designer could love. And it was just an 8-bit machine. In the 8- versus 16-bit battle, people were accusing Kay of living in the past. It was Osborne all over again, some might have said—just like Kay’s old rival babbling on and on about the virtues of a machine with a tiny screen. This may have been unfair. For simple word processing, for instance, an 8-bit machine could be a terrific bargain. But many buyers still gravitated to the 16-bitters, worrying that future software might not appear in the Kaypro CP/M format. Kay’s attitude didn’t help. He was showing less of the adventurousness that had led to his hard-disk portable. And he now felt that the Kaypro II was just like the old Volkswagen bug and would always be around—an ominous parallel considering VW’s recent fiascos in the auto market.[13] Footnote 13: Kaypro later dropped the Kaypro II and replaced it with the $1,595 Kaypro 2X. It’s still a II, though, except for some improvements such as more disk space. The 2X’s disks store almost 400K each. Some software programs endured because enough people learned and liked them; and the Apple II in one form or another would last; but the Kaypro II? Even with hundreds of thousands of users? What about the ill-fated Osborne? No, computer buyers normally spurned antiques. Within a year or two Andy Kay might change his mind and ponder whether to update the Kaypro II drastically or kill it. In November 1984, well over six months later than Kaypro had promised investors, a 16-bit IBM-compatible machine appeared. “He’d rather not call it an IBM clone,” said an industry observer. “He’d rather call it just a 16-bit computer. It’s a matter of pride.” The 16-bit model, a portable with a 10-megabyte hard disk and 256K RAM, looked somewhat like the Kaypro II and IV. It had an =expansion slot= into which you could plug a device to hype up the performance of the machine or expand its versatility; and it offered free WordStar along with other software. At $3,295 it sold for $1,700 less than a hard disk portable from Compaq. But it faced stiff competition from machines such as the hard disk desktop from Leading Edge, which was discounted to as low as $2,000. The 16 just wouldn’t wallop rivals the way the original Kaypro II had. And it shared some of the drawbacks of the Compaq and many other IBM clones—especially the keyboard. The left shift key was in an awkward position like the IBM PC’s, with a weird, nonalphabetical character separating it and the “Z”; imagine the reaction of touch typists who had enjoyed the Kaypro II’s close resemblance to the traditional Selectric keyboard. Many makers of 16-bit machines had aped the horrid PC keyboard, causing one reviewer to liken them to idiot savante piano players who imitated the mistakes of true geniuses. The 16, moreover, showed Kaypro’s internal weaknesses. Dan Berger of the San Diego recalled how Kaypro had futilely struggled for more than eight months to design the computer in-house. The project had flopped. Kaypro farmed the design out to a San Diego firm, which did the job in a fraction of the time. Earlier in 1984 Andy Kay had told Berger that Kaypro was spending only 1 percent of revenues on research and development, compared to the industry average of about 10 percent. How frustrated he must have felt paying an outside firm. Osborne had had to do that, but technically Kay had placed himself and his company in a different league. Kaypro was heavily depending on the 16. The company hoped it would provide 40 percent of income for the year ending August 31, 1985. Early signs were good. A small dealer in Virginia, for instance, The Disk Connection, sold six Kaypro 16s in one week—half to existing Kaypro owners and half to new customers. Some people had demanded an IBM clone, bungled keyboard and all; now Kaypro had given it to them with a vengeance. Appearing late, however, the 16 had lost much of its price advantage. In another six months IBM might well sell its XT hard disk model for as little as the new Kaypro portable.[14] Footnote 14: “XT” stands for “extended.” The 16, if successful, would triumph at a helpful time. In the 1983 budget year, the company had earned $12.9 million on $75 million in sales; the next budget year it had _lost_ $267,683 on sales of about $120 million—blaming everything from advertising costs to price-cutting and inventory problems. No longer was Kaypro a success story. It remained strong in some stores specializing in computers; but the share of the whole domestic market for personal micros would be 2.5 percent in 1984—a drop from 1983.[15] Footnote 15: Kenneth Lim of Dataquest, Inc., the San Jose, California marketing research firm, is the source of the 2.5 percent estimate quoted in the _Wall Street Journal_, November 14, 1984. In the long run, moreover, unless Andy Kay made major production changes, his computers might lose what price advantage they did have. Automation was improving rivals’ quality control and whittling down their labor expenses. Eventually, they’d be just a tiny fraction of the cost of a computer. Apple already had built a $20 million plant to crank out the Macintosh computer, using Japanese-style manufacturing savvy; Macs even helped oversee the manufacturing of Macs. “I don’t even know if the Kays could automate their plant,” said the ex-employee who’d accused the family of running a feudal society. “You’ve got these four buildings no wider than a single room. They have a lot of windows, and that’s great for the people—but hard on computer parts. Often people placed piles of parts on the lawn overnight when they didn’t have space elsewhere.” The Kays, to be sure, had put up a semiautomated warehouse designed by Andy’s daughter Janice and built by his son-in-law’s construction firm. “But,” said the ex-Kaypro employee, “that’s not the same as automating the whole plant.” And Andy’s selection of the architect and construction firm was further evidence of the Kays’ tight-grip management style. This lack of flexibility could especially hurt them in responding to the threat from lap-sized machines with flat screens. Sooner or later they would menace the Kaypro-sized “luggables” in the business market. About 120,000 flat screens sold in 1983, and although they weren’t moving off the shelves as rapidly as expected in 1984, sales still might exceed several hundred thousand. Some showed 16 lines at one time. That wasn’t as many as the 24 on the Kaypro II screen, but enough for light-duty word processing. And soon others would do for the heavy-duty kind and a slew of additional uses. Thousands of traveling reporters and executives were already using the Radio Shack Model 100 introduced in 1983—despite its tiny built-in memory (no more than 24K in a typical configuration) and small screen (8 lines only 40 characters wide). But where had Andy Kay hoped to get his first flat-screen model? From Mitsui & Co. in Japan, which would offer it to other U.S. companies, including perhaps some with marketing clout far greater than his. The Kays had thought they’d be the only people selling the note-book-sized computer. By late summer 1984, half a year after the original hoopla, Kaypro should have been shipping this miracle machine, but a spokesman in September could not even tell me if the Mitsui deal was still alive. Then word came out that the deal had fallen through and a flat screen Kaypro wouldn’t appear until 1985. A rival company, Morrow, Inc.—headed by George Morrow, a witty, balding ex-grad student in math, one of Silicon Valley’s better hardware gurus—had meanwhile acted more successfully. In late 1984 it began marketing the Pivot, a ten-pound, $2,495 MS-DOS portable with one disk drive and a well-reviewed clone of WordStar called NewWord. And a revitalized Osborne—on the verge of escaping the Chapter XI bankruptcy proceedings—would soon sell its own version of the machine. Data General, the mini-maker written up in the best-seller _Soul of a New Machine_, was another threat to Kaypro. In September 1984 it unveiled the Data General/One, which offered IBM compatibility, a built-in 737K floppy disk drive, and a 25-line flat screen. A software developer joked that the letters on the screen were so faint that the machine should be sold with a coal miner’s hat to read it. But eventually the flat screen would be just as readable as the Kaypro’s cathode ray tube. With the inevitable price drops and refinements, machines like the Pivot and the Data General/One would wreak havoc on Kaypro sales unless Kay retaliated with the right flat-screen portable of his own. IBM, AT&T, and Compaq, too, were designing their own flat-screen machines. And already Hewlett-Packard had been selling a $2,995 flat-screen computer with the popular Lotus 1-2-3 spreadsheet program in Read Only Memory—permanent memory. Another firm—Epson, a branch of Seiko, the giant Japanese conglomerate known for watches—was shipping a $995 computer with a compressed version of WordStar in ROM. The screen displayed only 8 lines of information at a time. But within months a 16-liner from NEC (formerly called the Nippon Electric Company) hit the market at the same price, complete with WordStar and built-in gadgetry for talking to other machines on the phone. WordStar was now the only word-processing program offered free with the “luggable” Kaypros. If Andy Kay’s lap-sized micro couldn’t run it or a clone like New Word, he might be paving the way for some of his customers to buy rivals’ flat screens that did. Most buyers used Kaypros to write or type. And how many would relish a switch to a new word-processing program? And what about piping WordStar-composed letters and other documents from the luggables to the lap-size Kaypros? Customers could do so, but then they might have to insert new commands to tell their printers to underline or produce other special effects. Beyond everything else, Andy Kay had better offer good software to fight rivals selling flat-screen machines similar to his. And WordStar over the years had generally been the most popular word processor for micros. 4 ❑ WordStar: The Creators Arthur Clarke is _the_ Arthur Clarke, the science-fiction writer who gave us _2001_ and that beastly computer named HAL. Seymour Rubinstein is a California businessman with only fleeting mentions outside the magazines of the computer trade. He is literate but not literary. When I talked to him, he had not read Clarke’s latest novel. Yet Seymour Rubinstein and a colleague played more than a small role in the the writing of _2010_; for they created WordStar, the word-processing program that Clarke uses. WordStar is to micro software what _Citizen Kane_ is to movies: it is old—by computer standards, anyway—but it’s one of the best of its kind. If, when writing, Clarke wants to insert a phrase several sentences back, for instance, he can just zip the cursor to the proper place, then type in the addition. He needn’t enter a special “Editing” mode. Some WordStar rivals may break up your thoughts by making you change modes. Moreover, with simple keystrokes, Clarke can insert, drop, and move whole paragraphs. “I can make corrections without hesitation that I wouldn’t have done before,” Clarke said enthusiastically about WordStar and his Archives micro. “It’s at least doubled my production with a quarter of the effort.” His normal output for his books and articles was still around a thousand words a day, but WordStar had made his writing more fun, and now he was churning out letter after letter to “my neglected friends.” “I said I’d retired,” he told me over the phone from his home in Sri Lanka, “but now I’m working on three or four things simultaneously. I haven’t touched a typewriter since I got this computer a year or so ago.”[16] You can easily understand why he hasn’t. No longer, for instance, does a noisy bell tell Clarke that he’s nearing the right margin—he just keeps on typing and a feature called =word wrap= automatically takes him on to the next line. Footnote 16: Clarke responded by phone in early 1983 to questions I’d mailed about his use of WordStar. Granted, WordStar is traditional software. It doesn’t use =icons=, for instance, those cute little pictures of wastebaskets or file folders that some snazzy new programs will flash across your screen to tell you what you’re doing. And as of this writing, anyway, the original WordStar didn’t offer =split screens= to show more than one electronic file at once. WordStar 2000, a related but not identical program, does. First marketed in late 1984, it may supplant plain old WordStar eventually, but the original program will always have a special place in the hearts of the cognoscenti. It’s an indisputable classic. More than a million people have used WordStar since it appeared in 1979. Rubinstein and Rob Barnaby, the brilliant programmer who did the actual coding for WordStar, are legends. As computer technology matures, the machines themselves will be mere commodities like televisions or Walkman imitations. It’s the programs that run on them which will make the difference. WordStar is at least adequate, and mostly superb, in all but the last of these areas: