Chapter 14 - Internetworking: Emergence 1985-1988
14.19 Concord Communications, Inc.
In August 1986, Concord Data Systems (CDS) executives and investors came to the painful, yet only option left to save the company, and signed stacks of legal documents dividing CDS into two companies; one to focus on dial-up modems and one on MAP/token bus. The profits from dial-up modems, the fortunes of which had suddenly declined, could no longer fund the unremitting investment required by MAP/token bus. The simple fact was continuing to fund MAP/token bus seemed certain to bankrupt CDS. The charter of the new company, Concord Communications, Inc. (CCI), was the capital draining MAP/token bus business. Simultaneous with the reorganization, CCI closed a $9 million financing, $7 million of which was new money, with a post-money valuation of $22 million. Investors chose to ignore sluggish MAP revenues, focusing instead on the aggressive promotion of MAP by General Motors (GM) and the success of the Autofact ’85 Show, that had painted a promising future for MAP and factory automation. The hollow factory fears of the early 1980’s had an answer in the technological prowess of American ingenuity and investors wanted part of it. The management of CCI was now free to weave an exciting story beginning with the pioneering innovation of token bus, leading to its adoption as the LAN technology of manufacturing giants like GM, and selected as the LAN for MAP/OSI. It was a story no longer weakened by excuses for being in the boring business of dial-up modems.
In 1988, Ken Miller, the founder of CDS, remembers the fortunate timing of the 1986 reorganization:
I mean, CCI got the money at the right time, boy. It was right after that, that MAP stalled.
The softening sales of MAP/token bus quickly tested the optimism of the new CCI management team. Exhibiting a sense of survival unpracticed by prior management, Tony Helies, the new CEO of CCI, launched an immediate effort to cut costs. Since costs for a start-up are principally for personnel, Helies had little choice but to reduce headcount. By early 1987, CCI was down to 55 employees, a staff reduction of roughly 30% in six months. Now the challenge was to reclaim the perception of market leader from INI, the joint venture of Ungermann-Bass and General Electric, that itself was reorganizing. The ideal opportunity was to stage a high profile presentation at the publicized Enterprise Networking Event (ENE) scheduled for June 1988. To do so meant mastering the MAP communication protocols of the Network and Transport Layers, something that had eluded them in the past. Miller, opining in no uncertain terms on the challenge in February 1988, remarked: “There’s a lot of protocol shit.” Being late had its advantages, however, for the communications standards for MAP were final: they would not be coding software to changing specifications.
CCI could hardly have envisioned a more successful ENE. In addition to hosting an Exhibitor’s Booth, they played prominent roles in three of the eight Sponsor Booths, those of General Motors, Deere & Co. and Process Industries. Prominent in use was their Series 4200 Broadband to Carrierband Bridge that allowed transparent connections between the 802.4/10 Mbps Broadband and the 802.4/5 Mbps Carrierband – all token bus. The Series 4200 extended the useful life of CCI’s slower 5 Mbps technology and demonstrated its mastery of both the higher speed 10 Mbps technology and the OSI communication software. The success made all the pressure they had endured from GM for the past year somehow bearable. They had reclaimed the mantel of technology leader through their own hard work as well as the unexpected disappearance of INI/UB. The days of big spending by INI had ended with its merger back into UB beginning in October 1987, their act to solve their cash hemorrhaging, and further minimized by the pending and then final purchase of UB by Tandem Computers in February, a few months before ENE. Tandem Computers acquired UB for $260 million and MAP/token bus was hardly a focus of attention. Miller remembers, in his own blunt and terse form of expression:
The good news is INI is falling apart.
For a joyous management team returning from ENE, the prospect of achieving the coming year’s ambitious financial plan of $10 million of revenue and profitability, seemed much more realistic than before ENE. Their new expertise with the MAP communication protocols was generating new sales opportunities as well, especially with DEC. But no sooner had the attendees settled into their accustomed routines then the luncheon and closed door conversations turned to the question: Did they really believe the MAP/token bus market was going to take off? Helies responded by forming task groups to explore what were their best strategic choices leading to a reliable and prosperous future. In the fall of 1988, a team ventured to the West Coast and the TCP/IP Interop conference. So even as they were committed to achieving a revenue plan of $10 million and, all the while, professing belief in MAP/token bus, they had concluded internally that their future laid elsewhere, not with MAP/token bus.