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Chapter 3 - Data Communications: Emergence 1956-1968

3.5 Codex and Milgo: Needing Money 1967-1968

In June 1967, Jerry Holsinger, now working for Codex, began the challenge of converting his prototype 9600 bps lease-line modem into a shippable product. A year later, in May 1968, Codex introduced the AE-96, the world’s first 9600 bps modem. It weighed approximately 125 pounds, and consisted of sixty-six printed circuit boards of RTL semiconductor logic. When installed, every pair of modems needed to be manually “tuned” to the telephone circuit, and when the line characteristics changed, as they invariably did, the modems had to be re-tuned in order to work. Re-tuning was more than simply an inconvenience, it required qualified personnel to make adjustments to the modems at both ends of the telephone circuit at the same time - a serious problem given many early customers wanted to use the modems on expensive international circuits. As was true for many early electronic products using RTL logic, the AE-96 generated so much heat that keeping it cool presented a problem. Since each end of the circuit required an AE-96, the total cost for a customer was $46,000.

Codex management and the Board of Directors knew they needed to hire personnel with commercial experience if they were going to be successful. Jim Cryer, President of Codex, felt the most pressure to find someone to head sales and marketing.

Art Carr needed little persuading. He recently had completed an assessment of the opportunities in data communications for Computer Control Corporation (or 3C, as it was fondly known) and recommended that the minicomputer manufacturer make data communications a strategic focus. No stranger to this new field, one of 3C’s best customers was the time-sharing operations of GE. Only Honeywell now owned 3C and, for reasons long forgotten, Carr’s recommendations were not adopted. The timing could not have been better for Codex. Carr, convinced of the emerging opportunities in data communications was ready to leave 3C. In his enthusiasm for data communications, he was even willing to overlook the fact that Codex lacked any commercial experience, telling himself that maybe their lack of experience meant freedom to run his own ‘show,’ the opportunity he really sought.

Quickly coming to terms, the outwardly calm, yet intensely competitive, Carr joined Codex as Vice President of Marketing in July. Decades later, he still remembered his first day with the company:

Jim Cryer, the founding president of Codex, was a fine man, but he was the world’s greatest optimist. It’s just beyond my ability to describe it to you, but I can give you an example. I started at the end of July at Codex. All of the orders that had ever been received in Codex in its corporate history, which then was about six years, were on three or four typed sheets of paper. They were strictly in the military business, some years you would get an order, and some years you wouldn’t. He had a memorandum waiting for me the day I started that was about four or five pages long that added up to six or seven million dollars of business that was about to close, and the very first thing – now this is a company that had just done a million dollars, OK, the very first thing I did was take a two week vacation. I said to him: ‘If you’ve got all this business lined up, I was going to go down to the Cape this year.’ And he said: ‘Oh, yeah, no problem.’

Cryer then recruited James Storey as Vice President of Administration. Soon the increased costs began straining Codex’s financial resources. Without more money, all their efforts at self-transformation would mean little more than accelerated death as bankruptcy. The good news was that the prospects of the AE-96 had investors and investment banks claiming they easily could raise the money Codex needed. The phenomenal success of the IBM System/360, the promise of time-sharing and the growth of service bureaus, all contributed to an excitement for computers - and technology in general. And that kept investors salivating for the next great product opportunity. With the prospect that the stranglehold AT&T had on connecting to the telephone network might be ending, what would be a more perfect product than the highest speed modem?