I vividly recall reading "Soul of a New Machine" by Tracy
Kidder back in 1982. I loved the book because the hero of the story was
an electronics engineer. There are plenty of books and movies and TV
series about doctors and lawyers and police officers and even news
reporters. But here was a book where the hero was an engineer.
In
preparing his book, Tracy Kidder got a preview of this world in the
late 1970s when he observed the engineers of Data General design and
build a new 32-bit minicomputer in just one year. His book starts with
a description of Edison de Castro who is one of the founders of Data
General. As a young engineer in his twenties, he led the team that
developed the PDP-8 for Digital Equipment Corporation. Now leading his
own business, he needed to respond to the latest development from his
former company.
For those that don't know, the PDP-8 and
DEC (Digital Equipment Corporation) started the minicomputer boom and
the PDP-8 was both Bill Gate's first computer and also the genesis of
the internet. It was the PDP series that led to the development of UNIX
and the C language, and I cut my early computer teeth on a PDP-11 which
was a more advanced model.
This was the age of DEC, Data
General, and Wang — all Massachusetts companies — as the leading
computers that I would call personal computers, at least compared to IBM
mainframes. This was before Radio Shack and Apple and the IBM PC and
the "micro" computers that became the personal computers we think of
today. As micros increased in size and capability, they often adopted
technology first developed on the minis.
In the story,
Data General has moved their main development lab from Boston to
Research Triangle Park in North Carolina. A few northeastern patriots
refused to go south, and they remained behind to develop a new computer
before the team in RTP could do it. It was a sort of "skunk works"
development only partially endorsed by management. The company was
expecting its team in NC to produce a new product, and commissioned the
small Boston team as a "plan B."
At one point Edison
sneaks into an office to look at the new PDP-11. He opened the drawer.
(Computers in those days looked like file cabinets and had several
drawer like sections that opened up to give access to the components.)
He looked at the computer chips inside which conveniently have their
model numbers printed on top. He did a quick inventory, figured out the
total cost, and knew he could design a comparable computer at a
competitive price.
At that time, minicomputers were 16
bit, and the PDP-11 was the first 32 bit mini. (Mainframes were 64 bit
at that time — a key difference between mainframes and "minis." The
minicomputers were growing up.) As we know today with the transition
from 32 bit to 64 bit to 128 bit in Windows and MacOS, the wider the
data path the more efficient … and faster … and — well — just
better the design. Those were halcyon times. Ever since then I've kept a
close eye on the component marketplace. I've read about new
microprocessors and support chips with eager anticipation and I've
written before about specific chips and my prognostications.
So,
it was interesting to read the news in the Electronics Engineering
Times, a newspaper for nerds, that Apple is now the leading chip
purchaser, having taken the mantel from HP. That can be misleading
because IBM is one of the largest chip producers and consumes its own
products without public notice. So it may be that IBM is still the
number one chip consumer, but, then again, the volumes that Apple is
selling could even outdistance my old employer.
The news
is that Apple Inc. became the largest buyer of chips in 2010,
overtaking Hewlett-Packard Co. by spending $17.5 billion to grab nearly
6 percent of global production. Apple's chip purchasing was up 79.6
percent from $9.7 billion in 2009. In that year Apple had been in
third place behind HP and Samsung. It was sixth in 2008.
Apple
spent more than 61 percent of its 2010 semiconductor budget on chips
for wirelessly connected equipment such as iPhones and iPads. In
contrast HP spent 82 percent of its 2010 chip-buying budget on chips for
notebooks, desktop and server computers. This is clearly working to
Apple's benefit. Smartphone shipments increased 62 percent in 2010 and
tablet computer shipments exploded by 900 percent, driven by the debut
of the iPad. Meanwhile global PC shipments, not counting tablets,
grew by 14.2 percent in 2010.
As a result Apple is
expected to keep on increasing its semiconductor spending during the
coming years at an above-average pace. In 2011 Apple’s semiconductor
spending is expected to exceed that of Hewlett-Packard by $7.5
billion, up from $2.4 billion in 2010.
Apple's surge to
leadership in semiconductor spending in 2010 was driven by the
overwhelming success of its wireless products, namely the iPhone and
the iPad. Is it any wonder that Google (Roid), Microsoft (Win7) and HP
(WebOS) want a piece of the action! These products consume enormous
quantities of NAND flash memory, which is also found in the Apple
iPod. Because of this, Apple in 2010 was the world’s number one
purchaser of NAND flash.
Chuck and I recently traveled
through four states stopping at almost every Apple store to buy an
iPad. They were always out of stock. We would call, they said they had
some, and by the time we got to the store, they were gone. In one case,
the last one was sold to the person just ahead of us in line.
Don't
you wish you had that problem at your business? For those looking for a
good investment, I suggest Apple Computer. The P/E is really low for
such a hot stock and the future seems so bright that you will have to
wear shades. The secret to success in the stock market is growth, and
Apple continues to show growth that is amazing and no sign yet of
slowing down, despite strong competition by other world class companies.
They just can't keep up the the undisputed market and thought leader.
By
the way, the Boston team of Data General did succeed and produced the
Nova, their most successful product. And, today? Well, DEC was purchased
by Compaq who, in turn was purchased by HP. Wang went broke. And Data
General? It is just gone.
And how should we view Data General's legacy?
Maybe
the most fiercely innovative companies simply can't help but flame
out. It would have been nice if his company had endured, but what
Edison de Castro and his small team did lives and breathes in the fact
that computers are even more broadly integrated into our society.
Data
General didn't last nearly as long as some of the other U.S. high tech
companies, but it did leave a lasting influence. Shouldn't that be
enough? Edison, now 64 years old (the age of yours truly) lives in the
Boulder area. I always hope to run across him in a coffee shop and tell
him how the book about him and his team influenced me and my career. Who
knows, maybe we can become friends on FB.
Originally written on June 11, 2011.
Sunday, September 16, 2012
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