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Chapter 13 - Data Communications: Adaptation 1979-1986

13.15 Spectrum Digital

In March 1984, a team led by former MCI employees founded Spectrum Digital. Although not technically a spinout of Tymnet, there was an important connection. Audrey Maclean remembers the meeting that she, Bruce Smith and Walt Gill had had with MCI during their July 1983 tour to collect market data and meet with potential customers:

One of the places we went was to MCI, because we wanted to also understand their perspective, in terms of what their users were asking for. We had a series of conversations under non-disclosure with MCI, and then two or three people that had been included in those discussions left MCI, and they went out and formed Spectrum Digital.

Reflecting the red-hot excitement being generated by the prospects for the T-1 market within the investment community, Spectrum Digital went public in May 1985; even though Spectrum Digital was not expected to ship its NET-1.5 T-1 multiplexer until the second quarter of 1986. The NET-1.5 was targeted at the low end of the high-end of the market and could be configured as an inexpensive point-to-point T-1 multiplexer. In the fall of 1985, following the lead of Cohesive Networks and NSS, Spectrum Digital embarked on an OEM strategy signing Paradyne as its domestic partner and Marconi for overseas distribution. Eyeing the opportunities before them, Spectrum Digital management realized they needed $6 million to complete the NET-1.5. Only they had to go back to private investors and, in so doing so ran afoul of the Securities and Exchange Commission. After resolving the legal difficulties, Spectrum brought in new management, including a new president, Joseph Pisula, formerly a vice president of Timeplex, and closed a private round of $15 million in 1986. Unfortunately, their problems caused two other OEMs, Racal Milgo and Infinet (formerly Intertel) to end their agreements and, to keep from losing Paradyne they had to give Paradyne exclusive manufacturing rights.