He was still fuming over the price when he got a surprise call from Lloyd Frink on the Pen Windows project. “You’re negotiating with me now,” Frink stated. “We might be willing to give you the FFS2 license in trade for the rights to some of your patents and copyrights.” Kevin was astonished, not just that Frink would suggest this but that in a big corporation like Microsoft, his request for a simple file-format specification would so quickly become known to the group working on Pen Windows. “And one other thing,” said Frink. “We also want a release from any claims arising out of my earlier visits to GO.”
Kevin was temporarily speechless. Then he spoke. “Are these Microsoft’s usual terms?”
After the conversation with Frink, Kevin set about finding another party already familiar with the specifications that could write the FFS2 code for us. He was close to signing with a company called Systemsoft when it abruptly withdrew its offer.
Kevin called Systemsoft to find out why. His contact there said, “Well, frankly, Microsoft has threatened to sue us if we help you.”
Kevin stomped into my office with the news and waited for my response. “What blows me away is that Microsoft even knew about the proposed contract in the first place,” I said.
Kevin narrowed his eyes and spoke softly. “Now I know what it’s like to be blacklisted by the KGB.”
Throughout the winter of 1992, the team hunkered down to meet a self-imposed deadline of the end of March to complete the first full release of Penpoint. For over a year, the only version available for sale had been the so-called developer’s release, which was primarily intended for use by ISVs. It was a long and difficult haul, punctuated by persistent rumors of delays and problems. Overzealous engineers had burdened the design with arcane features of questionable value, complicating the development and testing process.
With more than a hundred programmers coding away at top speed, Robert’s job was like choreographing a ballet for a centipede. Each morning, programmers would “check out” the software modules they needed and download them over the local area network. A special control system would then prevent anyone else from changing the same modules until they were checked back in that evening. All modules were due for return at a prescribed time, posted high on a wall. Then the buildmasters would take over—nocturnal trolls who pulled together the day’s changes into a new, interim “build” for testing. We instituted “build dinners,” so anyone who was around the office at seven o’clock could feast on programmers’ ambrosia: a rotating carte du jour of gourmet pizza, Thai food, fried chicken, and pasta. As a show of solidarity with the engineers, not to mention the lure of free food, nearly everyone stayed late into the night. I gained five pounds that winter.
Robert offered to pay for baby sitters for those who needed to come in on weekends. We held a Family Appreciation Day, when spouses and children were invited in for presentations, to learn about why their loved ones spent so much time at the office. To help build morale, two senior technical managers with New York accents dubbed themselves the BBC—Brooklyn Broadcasting Company—and prepared a daily videotape of the day’s progress, punctuated by important announcements for the team, spoofing network broadcasts of the Olympics.
The press, desperate for anything that looked vaguely like news about pen computing, amplified the slightest rumors to the status of gospel. Gossip columns had sprung up on the back pages of several trade magazines, and readers inevitably turned to them first. The editors caught on to this trend, but rather than dignify the gossip columns by moving them to the front, they shifted the important news to the back pages. Industry executives learned to read the trades from back to front, like Hebrew religious texts. When we settled on April 16 as the announcement date—mainly to avoid conflicts with some other big events scheduled for the end of March—PC Week ran an article labeling this a setback, suggesting that we were losing ground to Microsoft because of repeated delays.
The IBM negotiator that Randy had been dealing with continued to pressure him about the loan. Since our new financing had allowed us some breathing room, the negotiator decided to use our upcoming announcement as leverage to win rights to Penpoint’s “look and feel,” broadening his demands. “We need these rights to justify continuing with you as a partner,” he would say. IBM was planning to unveil its own pen computer, cleverly dubbed the ThinkPad, at the announcement, but threatened to pull its support for the event up to the last minute.
“IBM isn’t a partner, it’s a competitor,” Randy would retort.
The week before the announcement, Randy stopped by to pick my brain about the meaning of some particularly obscure language in the Penpoint license agreement with IBM. “Randy, they’ve got to be kidding. According to their interpretation, if we took a fifty-million-dollar one-time payment for a license from someone else, with no per-copy royalties, IBM’s royalty rate would automatically go to zip. Besides, their public relations people are already out giving advance briefings to the press about the announcement.”
Randy swallowed his distaste and proposed a face-saving resolution: we would consent to certain modifications to IBM’s license, but the changes would go into effect only if the entire loan agreement was closed within forty-five days. Nevertheless, Randy and Bill had to spend the entire weekend in the office, working out the details. With only one day to spare, the negotiator finally put out the word inside IBM that everything was settled.
Just prior to the event, our partners began squabbling like children. The IBM people were annoyed because they weren’t going to be the only hardware company to speak from the podium. NCR was miffed that we provided space for IBM to announce the Thinkpad. Vern Raburn complained that Slate wasn’t getting enough play, despite the fact that Robert was going to demonstrate PenApps extensively. Editors at PC Week suggested that they might withhold frontpage coverage because InfoWorld, whose office was nearby, got a chance to look at a Thinkpad before they did. Here we had rented most of the beautifully renovated Sheraton-Palace Hotel in San Francisco and spent more than half a million dollars to showcase the efforts of our partners, yet they were at each other’s throats and blaming it on us. In contrast to the camaraderie of our earlier announcement, it was beginning to feel as if we were staging a brawl.
But then Robert walked proudly to the podium, surrounded by the large, pulsating “gestures” that dominated the stage set. “This is it,” he said, gently lofting a shrink-wrapped copy of Penpoint above his head like a precious newborn. “Penpoint 1.0!” He spoke with passion and eloquence, and the crowd was spellbound. At our previous event he had to make do with demonstrating mostly GO’s home-grown applications. But this time he had his pick of a number of creative applications unlike anything the audience had ever seen.
Robert debuted Numero, from Pen Magic, a reinterpretation of the paper ledger-sheet for a pen computer. He showed how you could fold over the electronic paper—by dragging in the margin with the pen—to put two columns next to each other for easy comparison. Drawing a line underneath a list of numbers caused a total to appear. After building a table of sales data in record time, he opened a “graph object” within a business letter and dropped the table into it, instantly forming a labeled pie chart. Writing an L on the chart changed it to a line graph. When he tapped on the graph three times, it became three-dimensional. The audience began stomping their feet in excitement. Concerned about the mayhem—which could be heard throughout the building—a hotel manager slipped in through a side door to monitor the proceedings.
When the house lights came up and the buffet tables opened, Stewart Alsop approached and shook my hand. “I’ve got to hand it to you. You guys have really convinced me this time. You haven’t left much room for the keyboard bigots to argue.”
After lunch, everyone went out to the broad promenade on the mezzanine, lined with booths where forty ISVs demonstrated their Penpoint products. That evening, we threw a party for the entire company at a local nightclub. Bill got up to make a toast, and was overcome with emoti
on. “Everyone thought it was vaporware. But today we really stood and delivered.”
“Christ. Last time it was Microsoft, this time it’s Apple. Won’t anybody cut us some slack?” Robert was wielding a disorganized handful of news clippings. Wayward columns of type flapped in the air as we walked down the hall toward Bill’s office. Mike Homer was already there, constructing a table on the whiteboard comparing Newton with Penpoint.
As the reverberations from our announcement were dying down, Apple had deftly stepped in to fill the widening void. Penpoint 1.0 had been hailed as nothing less than the dawn of a new age in computing. The press coverage was so extensive that John Sculley decided he could wait no longer before throwing his hat into the pen-computing ring—he didn’t want to look like an also-ran when the time came to introduce Newton. He had hoped to use the project to reestablish Apple as a technological leader. A master of promotion, Sculley knew that the secret to success was to change the name of the field and find a new audience. To my amazement, he was immediately successful. The fact that the release of the first Newton product was at least a year off proved to be only a minor inconvenience.
With little more than a videotape, a desktop demo, and a slim, one-pound model carved of wood, Sculley had arranged to be the keynote speaker at the Consumer Electronics Show, held in Chicago in May. The sponsors of this exposition—whose purpose was to showcase the latest in stereos, televisions, video games, and other assorted electronic flotsam—were pleased to have a senior executive “cross over” from the more business-oriented world of personal computers to address the assembled throng.
He regaled the crowd with optimistic predictions of “the mother of all markets” created by the convergence of computers and communications, which would foster a new class of products that he termed personal digital assistants (PDAs). They ate it up. Privately, though, many industry observers were concerned that his expectations for this new technology were overblown. “There’s sure to be a backlash eventually,” one of them cautioned, “and that’s going to hurt everyone, not just Apple.” After the obligatory editorials handwringing over the proliferation of acronyms, and a spate of columns attempting to define what PDAs really were, the term stuck. Suddenly computer companies were hiring high-priced consultants to formulate their PDA strategies.
“I guess the pen is not the point anymore,” Vern Raburn started saying at conferences, taking potshots at GO’s original positioning. I couldn’t understand why he kept harping on this. Seemingly, it would hurt him as much as it hurt us.
I turned to Layne for advice. “Forget about Raburn, you can’t count on him anymore,” she said. “He doesn’t burn bridges, he napalms them.” As usual, she was right about such matters. From that point on, the relationship between Slate and GO deteriorated badly.
When we studied the press clips of the electronics show, something looked odd about one of the pictures, purportedly a prototype of the Newton.
“Take a close look at this,” Mike Homer said to Robert.
Robert examined the picture closely. “I’ll be damned. Those LCDs do tend to peel, don’t they?”
The screen on the Newton was nothing more than a graphic printed on shiny paper and glued down. The corner had curled up from overuse.
A few days after Sculley’s press blitz, I received an e-mail message from our manager of production for documentation. He had sent it to the entire company.
I am leaving GO today. Unlike those who have preceded me, I am not going to another exciting startup (thank God). I am leaving to take care of my health. I have AIDS. My purpose in telling you this is educational. While I am sure that some of you have had direct experience with this, I also think that for some of you, AIDS remains a distant event happening outside of your lives . . .
None of us really know how long we have, despite the cultural denial of mortality. So, I urge you to take a moment and think about what is REALLY important to you and then put some extra time and energy toward it . . .
So that’s it. It has been a pleasure and a privilege to work with this great team. I will be avidly following GO’s meteoric rise to success.
Fourteen months later, he lost his fight with AIDS.
Like some cave-dwelling species of salamander, our struggle for survival was so relentless that the seasons slipped by unnoticed. Those of us fortunate enough to have offices with windows could tell it was summer by the angle of the sun on our computer screens, bleaching out the words with its hot glare. For the rank and file in their catacomb of modular cubes, the natural world was even less intrusive. In an attempt to encourage a more healthy balance, Bill Campbell invited the executive team over to his house for a Saturday afternoon of fun, determined to get in some token relaxation. Besides, it was about time for a complete strategy review.
Bill’s large colonial-revival house sat on a full, flat acre in prestigious Old Palo Alto. He had converted the top floor into a game room, with billiards, pinball machines, darts, workout equipment, and a modest bar. After a few games of pool, we settled into some lawn chairs on the brick patio outside the kitchen. I chose a spot under the awning.
“Kaplan, aren’t you going to sit in the sun?” A sign of the season, Bill chose to use the standard summer-camp appellative form: the unadorned last name.
“He has to maintain his waxy nerd complexion,” Randy said before I could answer.
“Yeah, he stocks his sunlamp with Cool-White fluorescent lights,” Mike Homer added.
“I guess I’m just a cool white sort of guy,” I said, putting on my shades and smiling. “By the way, homeboy, how come you’re always double scheduled on meetings? You keeping two sets of books?”
“That’s only an illusion,” Mike said. “It’s the Doppler effect. The meetings get all compressed on the calendar as they approach and then sort of spread out as they pass by.”
Bill got down to business. “Well, I guess we all know the good news.”
Randy clapped his hands together. “We’re all fired?”
“Not yet,” Bill said. “We finally won the AT&T Telepen RFP—by the skin of our teeth. Boy, was Porat ticked off.” Marc Porat was the preppy CEO of General Magic, the Apple spinoff mainly developing a new communications protocol. He wasn’t accustomed to losing. “I heard he was wandering around the halls in Basking Ridge, collaring any AT&T executive who would listen to him.” Mike shook his head in mock sympathy.
Bill picked up the full bottle of light beer he had been pretending to drink all afternoon. “So we’re really at a crossroads. I think it’s time to shift our top priority from IBM to AT&T. Just in case anyone disagrees, you might want to hear this. I had lunch with the CEO of Communications Intelligence Corporation last week. He told me that IBM has licensed their DOS-based pen software and is planning a big push with the ISVs.” Everyone looked stunned. “But he told me they don’t want to announce until some deadline with us passes.”
“The loan agreement,” Randy said. “They probably don’t want us to find out until after we sign the deal. Yet another well-kept IBM secret.”
“The other good news,” Bill said, “is that we’re finally ready to close the IBM loan. But before we do it, I want you to hear what Randy has to say.”
Randy took his feet off the edge of the patio table and sat straight up. Now he was dead serious. “I wouldn’t exactly call the loan good news. We have to do this because we need the money. But it includes one term that I predict will eventually cause us real trouble. If any other party wants to buy more than fifteen percent of GO, we have to offer the same deal to IBM first. That’s the easy part. But if IBM declines, then they have the right to call the loan.”
“Ugh,” I said. “That puts a ten-million-dollar-plus-interest dowry on us if we decide to get married to someone else.”
“Exactly,” said Randy. Here it was July already and GO was running low on cash again, not to mention that we were all tired of negotiating with IBM. But by that point, IBM was in the process of imploding. Racked by gro
wing losses, wave after wave of lifetime employees were taking early retirement, accepting reassignments, or just plain quitting. It was amazing that IBM was proceeding with the loan at all.
The best people—those who were the most able to find new jobs—were the first to leave. Sue King, our only effective internal supporter, had already jumped ship to join Apple, leaving in her wake the half-finished Thinkpad project without a forceful leader. The ones who remained behind—like foot soldiers abandoned on a decimated battlefield—began building a case that we, not they, were responsible for the probable failure of their project. The acclaimed product release wasn’t followed through, and the Thinkpad became available only by special order. This meant you practically had to beg them to sell it to you, if you could find someone who had even heard of the product. By the time the first prototypes were delivered, the Thinkpad had earned a reputation for being too heavy (over five pounds) and too expensive (over $5,000).
Robert was nervously squeezing his empty can of Diet Coke, slowly reducing it to a crumpled mass of sharp points and raw edges. “Well, then, let’s just take the money and bid them good riddance.”
Randy looked around. No one else wanted to comment. “Fine. Bill, when the time comes, are you going to call IBM and tell them their project is no longer our top priority?”
“Frankly, I wouldn’t even know who to call anymore.”
Within weeks of our one-day retreat at Bill’s house, even Kathy Vieth had left—the last responsible executive who was moderately familiar with the GO-IBM relationship. With the loan deal completed, our contacts with IBM faded away, as though we were different continents imperceptibly drifting farther apart until the last land bridge sank into the sea. All that remained were a number of contractual time bombs, buried deep in a legal department file cabinet, ticking away.
Startup: A Silicon Valley Adventure Page 27
