Archive for the ‘Digital Equipment Corp’ Category

Reader Mail: Did DEC hire a PR firm and run a campaign against IBM?

February 20, 2008

Yesterday, a former assistant managing editor of BusinessWeek who ran our overseas bureaus, Robert Dowling, was kind enough to post a comment on the blog about the development of Digital Equipment Corp. I bumped into Bob a few weeks ago at an event for the Asia Society. I was pleasantly shocked when he told me he actually moved to China, where he is serving as an editorial advisor to Caijing Magazine, the top business mag in China from what I hear.

In many ways, blogs are all about reader and writer interaction. So I am going to start a new feature today called “Reader Mail.” From time to time, I will post a good question by a reader and then answer it.

Bob asks: 

“Hi Spencer:
Congrats on the book and blog. That’s an interesting and unexpected angle on DEC, and the VC community. I wonder what behaviors, typical of VC-backed start-ups, did DEC exhibit in those early days? For example, did they hire a PR firm and run a competitive campaign for share of voice against IBM?
Best,
Dowling”

spencerante says:

As far as I know, DEC was not a big user of PR firms. But the company was very savvy in its use of public relations–a lot of which came from General Doriot.

Every spring, Doriot held an annual meeting for American Research & Development. At the meeting, Doriot always organized an exhibit of ARD’s portofolio companies, where they could show off their products to the public and the press. Doriot also encouraged entrepreneurs to use the annual meeting as an opportunity to make important announcements.

The events were always well attended and often generated lots of ink and coverage. BusinessWeek, in fact, ran many stories that came out the event.  It was sort of the first high-tech trade show in a sense and was very innovative for its time.

Here’s a bit from my book about the meetings and their impact. It is based on the 1952 annual meeting, when the New York Times wrote a page one story about Ionics, a water purification company financed by ARD.

“At the end of the meeting, MIT Chemical Engineering Professor Gilliland stood up behind a podium and announced a startling new development. Gilliland, who doubled as the president of Ionics, demonstrated the company’s new membrane that desalinated seawater more cheaply than any other existing technology. The demo and related testimony by Dr. Compton and Harvard chemistry professor and Ionics director Arthur B. Lamb was so compelling that the New York Times published a page one story about the development: “New Process Desalts Seawater; Promises to Help Arid Areas.” The story written by William L. Laurence hailed a “revolutionary new process for desalting seawater” that promised to “open up vast new reservoirs of fresh water for use in agriculture, industry and the home wherever water is now scarce.”

The page one scoop was a coup for both ARD and Ionics, generating publicity and contracts for the new company. After it came out, Senator Flanders received a visit from Sheridan Downey, a former U.S. Senator from California. Downey, who was representing the city of Long Beach, said he was “tremendously interested in the announcement” and expressed a desire to jump-start the first field trials of the technology for the city. Senator Flanders arranged for Downey to speak with Ionics cofounder and vice president Walter Juda. The meetings eventually led to one of Ionics’s first commercial contracts. In the mid-1950s, the town of Coalinga, California purchased a system from Ionics, replacing the water supply it formerly brought in by railway.”

Another Tech Bubble? History Says No

January 10, 2008

A few months ago, Fred Wilson blogged about fears of a coming downturn in technology. Then last month the hilarious tech bubble video began circulating throughout the Web. That tech stocks have plummeted early this year suggests we are heading for some stormy weather in techland. What’s going on?

Like a lot of folks, I’ve been wondering the same thing myself. But if you look at history, we’re probably not headed for a sustained downturn in technology. One of the things that struck while me researching my book was that there’s been a strong and clear technology cycle at work over the last 40 years or so. Typically, a disruptive technology is invented and commercialized, helping to drive a 6-8 year cycle of sustained growth.

The first high-tech boom happened in the 1960s, with the craze over “new issues” and “electronics”. The market went on a six-year run before it stalled. Then the commercialization of the integrated circuit and the dawn of the computer revolution sparked another boom from late 1966 to 1972. The blockbuster IPO of Digital Equipment Corporation in August 1966 was a seminal event. DEC came out at $22. By March of 1967 DEC shares topped $50, over the summer, they hit $80, and in September they crossed $100.

In 1973, the bottom fell out of the venture capital market and the economy at large. The twin economic evils of inflation and recession joined hands to create a new type of monetary demon dubbed “stagflation.” Then OPEC’s oil embargo in October of 1973 sent the booming economy over a cliff. Between 1973 and 1975, the Dow Jones index was nearly sliced in half.

All the while, entrepreneurs and technologists were working on a whole new range of innovations that would spark another boom starting around 1979 and lasting until the 1987 crash. In the late 1970s and early 1980s, venture capital helped finance the creation of four new industries that boosted the economy: microprocessors, video games, personal computers, and biotechnology.

Then we had a recession in the early 1990s, which didn’t end until 1994/1995–the same time that the Internet and Web browser were unleashed on the world. We know that story pretty well.

So where does that leave us now? Well, if you assume that today’s boom started in 2003/2004, we’re probably in the middle to late stages of the current cycle. Of course, history isn’t always a useful guide. But it feels right to me. The rebirth of the Web has driven the current boom. But there are still several groundbreaking technologies that haven’t reached escape velocity yet–I’m thinking of wireless computing, and green technology in particular. If those two areas fulfill their promise, it could help extend the current cycle for a few more years.

Now, don’t get me wrong. Even though I think there is no widespread tech bubble like there was back in 2000, I think there are mini-bubbles. The most obvious one is in social networking. Valueing Facebook at $15 billion–with a 500+ price-to-earnings ratio–is insane! That p/e surpasses even some of the ratios we saw with telecom companies in 2000. (I think JDSU boasted a 400+ p/e at one point.) So while we will probably see a pullback in certain areas, with some inevitable consolidation, I think the trendline for tech will be upwards for a few more years. Unless of course some new black swan (i.e. another major terrorist attack or financial crisis) appears out of nowhere and throws everyone for a loop.

What do you think?

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