Chapter 12 - Networking: Market Order: LANs 1983-1986
12.5 Interlan
Paul Severino, President of Interlan, knew growing revenues required more than selling Ethernet controllers facilitating computer-to-computer connections. Severino remembers:
It was just when the Intel chip set was starting to become available, we decided that what we should try to do next is that terminal stuff, and we thought that would give us a niche in the marketplace that the Ungermann-Bass and Bridge Communications really didn’t have, which was host-to-host plus terminal-to-host access.
With the priority given to producing a low cost product, Interlan introduced a very competitive terminal server in August 1983. Severino remembers:
Ralph [Ungermann] was doing broadband by that time. Bridge [Bridge Communications] was going in that direction. And they also were going in to solve a lot more of the terminal connect problems. All we were interested in was asynchronous terminals. We had no other protocols. We had no synchronous. We did a very small box, eight ports, no disk in it or anything. It was very cheap. We made it cheap, low cost.
Once Interlan began selling their terminal server, three issues arose that necessitated considerable effort and expense: offering LAN protocols, creating a personal computer product, and building a direct sales organization. Severino remembers the difficult decision of LAN protocols:
We wanted TCP/IP. We just kept putting it off. Then we tried to get XNS. What we did was, we went to Xerox and Xerox finally let us have the filing protocols. And my feeling was that if we can get the filing protocols, then we could start to provide this multi‑vendor file transfer capability. So what we did was, instead of going back and implementing TCP, which is a transport layers thing, we went up to the filing protocols on XNS. And it was just difficult because we said: “Gee, we’ve got to add value here. Let’s get the file transfer stuff put together between UNIX,” and the idea was UNIX, VMS and MS‑DOS, those three. So you had a system.
In 1983, Interlan had revenue of $6.7 million, up 180%, with a small profit of $154 thousand.
In early 1984, management turned their attention to creating a personal computer Ethernet controller. Creating a PC product, however, proved as challenging as creating host controllers. Announced in mid-1984, the Net/Plus did not ship until November 1984. [10]
With a PC product to sell, it was time to begin building a direct sales organization and to phase down their use of manufacturers representatives. Only creating the direct sales force required something which Interlan had little of: cash. Severino laments:
We just didn’t have the resources. I mean, the thing about Interlan that was so much different from the other LAN companies is we hardly raised any money, compared to everybody else. I mean our total amount of venture capital from the very beginning was $5 million, total. So as a result we didn’t have the dollars and the resources that were being thrown at the problem from some of the other vendors, but we did very well. We always made our numbers and we were profitable. We had been starting to build a direct sales organization, and we sort of needed more time on the sales organization to prove that it could be productive. What we had built in the past was OEMs with reps, and we needed a little more time on the direct sales organization.
In the fall of 1984, the board of directors considered the option of going public to raise the needed cash, but as Severino remembers:
By the fall of ‘84, we had no cash and we actually had a little debt, so we just needed to have cash in the door, and we just could not grow the business the way we thought we could grow it without having cash in the door. And we just didn’t feel that the company was really ready to go out to the public markets. My feeling is that if I were to take the company public, I’d have to feel very, very strongly that I’m going to make all the numbers I’m talking about. I just don’t want to get into a situation where you’re selling stock and not getting there. It’s not the kind of way I like to do business.
The next obvious solution was to sell the company, so Interlan retained the investment bank, Alex. Brown & Sons, to find a buyer.
- [9]:
Datapro, PC Communications, June 1985, p. 15