Anthony J. Pennings, PhD

WRITINGS ON DIGITAL STRATEGIES, ICT ECONOMICS, AND GLOBAL COMMUNICATIONS

TIME Magazine’s “Machine of the Year”

Posted on | October 10, 2018 | No Comments

The Apple II was quite a success when it was introduced in 1977 with sales of US$770,000 in its first year. Its growth over the next few years, however, was tremendous. Revenues hit $7.9 million in its second year of operation and $49 Time's Machine of the Year covermillion in 1979. Its founders, Steve Jobs and Steve Wozniak, were soon multimillionaires despite still being in their early 20s. Apple’s sales were initially concentrated in the hobbyist market with recreational software such as games dominating. Another important market was education, with simulation games for teaching mathematics, music, and science, etc. Most of these programs were poor in quality though, and in both of these areas, the software industries failed to develop significantly. It was not until the business market for microcomputer software matured that demand for the smaller machines solidified and ultimately ensured Apple’s success, but not without a challenge from a similar machine – the IBM Personal Computer (PC).

Although it was not apparent at first, three software packages: databases, spreadsheets, and word processing created significant demand for the PC in the business world. In 1983, dBase emerged as the database leader with 150,000 units sold, WordStar sold 700,000 packages to take the lead among word processing software, while VisiCalc led the spreadsheet market with 800,000 units sold.[1] It was the spreadsheet though that had the most significant allure. When VisiCalc was created for the Apple II in late 1979, sales of both increased rapidly. Software Arts, who marketed and priced its VisiCalc for around $100, had sales of $11 million its first year while Apple’s sales also continued to grow, reaching to $600 million in 1982.[2] With the success of these three software areas, microcomputers were proving to be more than toys.

Until the electronic spreadsheet, the Apple II was largely considered primarily a hobby toy for “men with big beards” to control things like model train sets.[3] But VisiCalc combined the microcomputer and money in extraordinary new ways. It was the “killer app” which launched the PC revolution, but it also brought powerful new techniques of numerical analysis to the individual. Countering the prevailing notion that accounting calculations were the domain of meekish accountants and subordinate secretaries, electronic spreadsheets reached a whole new range of entrepreneurs, executives, traders, students, etc. Competition was growing though, and in 1982 it was a small company called Microsoft whose new spreadsheet called Multiplan received acclaim. The software continued to advance however, especially when a former employee of Personal Arts (a company hired to market VisiCalc) took his earnings from rights to software he developed to start his own company and create a new spreadsheet program that would dominate sales for the rest of the decade. The new software package was called Lotus 1-2-3.

Lotus 1-2-3 was a product of a new company started by Mitch Kapor. Like Steve Jobs and Wozniak, Kapor came from a bastion of military investment in computer technology, but in this case, it was Boston, not Silicon Valley. In the 1960s, he actually had the chance to learn computer programming in his high school and had built a small computer/adding machine using a telephone rotary dialer for inputting data. But also like Jobs, he was highly influenced by the counter-cultural movement, primarily a reaction to the Vietnam War. After exploring a wide variety of life experiences including teaching meditation for awhile and getting a masters degree in counseling psychology, Kapor returned to his computer roots. He went to work for Personal Arts and designed a program called VisiPlot/VisiTrend in order to increase the readability of the spreadsheet.

But after a management change he left the company. Before he left though, he received $1.2 million for the rights to his software program. Despite his counter-big business sensibilities, he took the money and started his own company called Micro Finance Systems. Their first product was called the Executive Briefing System. But before he released it, he changed the name of the company to Lotus Development Corporation in honor of a mediation practice. Soon he got venture capitalist Ben Rosen to invest in a new product that would integrate a spreadsheet and a word processor into his graphics program. After an unsuccessful attempt to produce the word processor, they added a database program and began to market Lotus 1-2-3.[4]

The success of this new spreadsheet software was tied intimately to the success of another new microcomputer, the IBM Personal Computer or the “PC.” On August 12, 1981, Big Blue introduced its personal computer based on a 4.77 MHz 8088 Intel chip with 16K (expandable to 256K) of RAM and an operating system, PC-DOS, licensed from an upstart company called Microsoft. The IBM PC came with a 5.25-inch floppy disk and room for another. Working secretly as “Project Acorn” in Boca Raton, Florida, the renegade IBM group also created expansion cards, monochrome monitors, and printers for new machine as well as a host of new software programs. The IBM PC was attractive to traditional businesses and to mainstream computer users who had previously considered the small computer little more than a toy. The availability of the spreadsheet however, turned the IBM PC into a practical business tool.

Just as VisiCalc helped the Apple II take off, Lotus 1-2-3 contributed greatly to the IBM’s success and vice-versa. The new spreadsheet package actually integrated its calculative abilities with graphics and database capabilities thus the numerical suffix on its name. For the user, it meant that not only could they do sophisticated types of calculating, they could also print the results out for business meetings, and store it as data in an organized manner. Within a year of its software release, the Lotus Corporation was worth over a $150 million. The relationship with the IBM PC was symbiotic, as Big Blue’s new little computer sold over 670,000 units were sold in its first year.[5] Lotus Corp meanwhile became the number one supplier of software as its sales revenues grew to $258 million in its third year.[6]

Lotus 1-2-3 also benefited greatly from what was arguably the deal of the century, Microsoft’s ability to license its operating system to IBM without granting it exclusive rights. Microsoft’s 1980 deal with IBM, which allowed it to sell its DOS software to other PC manufacturers meant that Lotus 1-2-3 could be used on any “IBM-compatible” microcomputer, including the semi-portable Compaq machine. Compaq was started in 1982 and set out immediately to reverse engineer IBM’s BIOS (Basic Input/Output System) in order to produce its own IBM “clone”. Soon it had developed its own microcomputer that would run the same software as the IBM PC. Compaq achieved remarkable sales of $111 million in its first year and went on to become a Fortune 500 Company.[7] Meanwhile, Lotus 1-2-3 became the most popular PC software program sold throughout the 1980s. Not unrelated, Bill Gates was on his way to becoming the richest man in the world as he made money off both the OS for the IBM PC but also each of the clones that used Microsoft’s operating system.

The personal computer was fast becoming a popular icon. By 1982 the sales of the Apple II were strong and the IBM PC was quickly gaining a piece of the rapidly growing market share. Furthermore, other companies were looking to compete and by the end of the year over 5.5 million personal computers were being used as Atari, Commodore, Compaq, Osborne, Sinclair, Tandy Radio Shack, and Texas Instruments each offered their own models for sale.[8] Another important factor for the personal computer’s popularity was its new data communication capability. Hayes successfully marketed a 1200bps modem, allowing computer users to access information services like Compuserve, Lockheed, and The Well.

The new PCs were so successful that TIME magazine decided to honor them. Originally it planned to name Steve Jobs as its “Man of the Year”. But because sales of other PCs were rising so dramatically, they changed their mind. Instead, in a January 1983 issue, TIME decided to name the “Personal Computer” its “Machine of the Year”. Although the magazine’s yearly acknowledgement generally goes to real people and was originally scheduled to go to Apple’s Steve Jobs, the dramatic sales of the IBM PC at the end of the year convinced them to change their minds.

Notes

[1] Computer: A History of the Information Machine. p. 260.
[2] Apple statistics from Rose, Frank (1989) East of Eden: The End of Innocence at Apple Computer. NY: Viking Penguin Group. p.47. VisiCalc information from Jones Telecommunications & Multimedia Encyclopedia at http://www.digitalcentury.com/encyclo/update/bricklin.html, accessed on October 24, 2001.
[3] This is a term from the documentary, Triumph of the Nerds that played on PBS during 1996.
[4] Freiberger, P. and Swaine, M. (2000) Fire in the Valley: The Making of the Personal Computer. Second Edition. NY: McGraw-Hill. p. 338-344. This section contained biographical information on Mitch Kapor and the beginnings of Lotus 1-2-3
[5] Information on IBM PC release from Michael J. Miller’s editorial in the September 4, 2001 issue of PC MAGAZINE dedicated to the PC 20th anniversary.
[6] Information on Kapor and Lotus from the (2002) Computing Encyclopedia. Volume 5: People. Smart Computing Reference Series. p. 128.
[7] Information on Compaq from (2002) Computing Encyclopedia. Volume 5: People. Smart Computing Reference Series. p. 38.
[8] Number of PCs in 1982 was accessed on December 10, 2001 from: http://www.digitalcentury.com/encyclo/update/comp_hd.html.

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AnthonybwAnthony J. Pennings, PhD is Professor and Associate Chair of the Department of Technology and Society, State University of New York, Korea. Before joining SUNY, he taught at Hannam University in South Korea and from 2002-2012 was on the faculty of New York University. Previously, he taught at St. Edwards University in Austin, Texas, Marist College in New York, and Victoria University in New Zealand. He has also spent time as a Fellow at the East-West Center in Honolulu, Hawaii.

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    Professor and Associate Chair at State University of New York (SUNY) Korea. Recently taught at Hannam University in Daejeon, South Korea. Moved to Austin, Texas in August 2012 to join the Digital Media Management program at St. Edwards University. Spent the previous decade on the faculty at New York University teaching and researching information systems, media economics, and strategic communications.

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