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Chapter 13 - Data Communications: Adaptation 1979-1986

13.9 Digital Communication Associates

In 1980, investors in Digital Communications Associates (DCA), frustrated with the leadership of the founder John Alderman, began the search for a new president to lead the company that laid claim to be the first to introduce a statistical multiplexer. On February 1, 1981, they hired Bertil Nordin who would, with an infusion of $3.5 million of venture capital, quickly transform the sleepy little company in Norcross GA into a market presence.8 Nordin remembers:

If you take any industry that starts out as a cottage industry, you always have a lot of competitors. As the industry grew, it took more and more marketing, more and more R&D in order to remain competitive, and the upshot was that it’s like a pyramid. It starts out with a lot of competitors – actually, more like an hourglass. It starts out with somebody with the original product, and then a lot of companies – small companies – are in it, and then it narrows down again to be very few of them, and only the strongest survive. So, our feeling was at the time that if you’re going to be one of the longer term players, you better put together a pretty broad spectrum of data communications products and become pretty large or you’re not going to be one of the survivors. So that’s essentially what we did.

In February 1983, buoyed by the prospects of their new statistical multiplexer, DCA went public and raised $24 million.9 A few months later they acquired Technical Analysis Corporation that had a hot product named IRMA that enabled IBM personal computers to connect to IBM mainframe computers. DCA management then set their eyes on the modem manufacturer Rixon, a subsidiary of the French conglomerate, Schlumberger Ltd. They soon reached a deal that for $27 million would transform DCA into a leading Data Communication firm with realistic prospects of reaching $100 million of revenue in 1985.

Only CASE, the British data communication firm that had played such an important a role in the early years of Micom, had a distribution deal with Rixon. Rixon resold the CASE multiplexers and CASE was not about to lose its key reseller. After complicated negotiations, DCA backed out of the deal, saving $27 million, but not gaining the sales force and product line it so dearly desired.10 A sales force it needed to sell the T-1 multiplexer it had negotiated the rights to manufacture and sell from Scitec, an Australian company. The result: in 1985, DCA had yet to establish a presence in the T-1 market.

  • [8]

    “Merger Signs Sprouting DCA Quadruples Revenues,” Data Communications, April 1984. pp. 90-92

  • [9]

    Alex. Brown & Sons was the lead manager

  • [10]

    “Follow-up: DCA Fumbles the Rixon Acquisition,” Data Communications, May 1984, p. 96