Reference no: EM131729055
The Texas Instruments Home Computer
Texas Instruments (TI), based in Dallas, TX, is the third largest manufacturer of semiconductors worldwide after Intel and Samsung. In 2011, Texas Instruments ranked 175th in the Fortune 500 list. In the 1960s TI had lagged behind Intel and Motorola in the development of microprocessors, concentrating on the production of memory chips and calculator chips. By the mid-1970s this focus paid off by allowing Texas Instruments calculator division to engage in a world-wide price war, in which they had destroyed or crippled the competition. They had brought the price of a "four-banger" calculator from over $100 to under $10, adding refinements along the way.
By the 1970s, Texas Instruments labs were engaging in R&D to flank the CPU makers by producing a superior microprocessor. The TMS9900 was the result, a 16-bit CPU with advanced features and supported by a family of peripheral chips that provided graphics and fast mathematic processing. The first application of the TMS9900 was in the Texas Instruments line of mini-computers, which were marketed to compete with Digital Equipment's PDP-11 line of computers and Data General's Micro Nova. These were moderately successful, but the field was small and largely dominated by DEC and Data General.
What Texas Instruments was looking for was a large-volume consumer product. Tandy, Radio Shack, and Commodore seemed to be on the crest of a new wave of electronic products called Home Computers, and Texas Instruments was determined to repeat their calculator success in this field with a much superior system. Their philosophy was completely different from that of other manufacturers. They meant to control the system completely. The design of their Home Computer would include color, and programming would be in a proprietary language that would be loaded into Read-Only-Memory (ROM's). The ROM chips would be mounted in plug-in cartridges which would be sold to the computer owners. Software developers would have to buy the cartridges from Texas Instruments and program them. Texas Instruments would only license specific software developers and they did not envision much competition among them.
For about a year before TI’s Home Computer was introduced to the market, there was talk about the large impact this would have on the personal computer (PC) industry. It was the first salvo aimed at the young PC industry. Apple, Processor Technology, Altair, IMSAI and Northstar were just a few of the dominant machines selling in the late 1970s. While Commodore and Radio Shack entered the scene with very successful machines, the PET, and the TRS-80 respectively, they did not generate the buzz TI did. Not only was TI a large company with years of experience in producing computer components, the company planned on producing a 16-bit machine in a world of 8-bit computing.
The T.I. 99/4, introduced in 1980, was Texas Instruments' contender for the home computer market. It used the 16-bit TMS9900 running in an 8-bit bus for economy. One of the first places it was shown was at the Personal Computer show in Boston.
The following is the recollection of that event by a former computer retailer: “I had closed the Computer Mart and was looking for a new business to go into, so I took the shuttle to Boston to attend the show and see the T.I. 99/4. It was a low silver keyboard with ports for plug-in cartridges and a color monitor. The quality of the graphics and color impressed me, and I felt that this computer system had possibilities. The listed price was $1,200, which I felt was rather high for a product for the home. I was told that the unit also included BASIC and could support a cassette recorder so the owner did not only have to rely on cartridges but could learn to write his own programs. In addition, there would be a cartridge to load the simple integer BASIC in the machine and another containing Advanced BASIC for more extensive programs and additional memory to support it. When I left the hall to catch my return flight, I met a Texas Instruments salesman who had tried to enroll our store as a dealer for their advanced line of calculators. We shared a cab and sat together on the flight. I told him of my interest in the T.I. 99/4, and he asked me if I wanted to become a dealer. "No," I said. "I am out of the retail business, but I am interested in developing software for the machine." He told me that Texas Instruments had exclusive contracts with large, experienced firms to develop cartridges. They would not just sell the cartridges to anyone. However, I was free to develop BASIC programs which could be loaded from cassettes. All I had to do was apply to Texas Instruments for a license and pay them royalties. They would then give me information regarding the (GPL) Graphics Programming Language and color system. The catch was that there was only 16K of RAM memory in the basic computer, not enough to write any meaningful software. It was definitely not an open system.”
In the face of competition from Commodore, Radio Shack, and Atari 400 and 800, the TI 99/4 was a huge flop. For example, the keyboard was missing the question mark, backspace and arrow keys. Further, the machine was a cartridge-oriented machine with no mass storage capability. Texas Instruments pulled it back and started a re-design in their Lubbock, TX facility. They included a new motherboard known as the "Q" (Quality improved) that used a smaller number of chips. The result was the T.I. 99/4A, which was an improved machine that could be sold at a competitive price. They eliminated the color monitor and included a TV interface. They improved the keyboard and added more memory in the BASIC machine. The new computers were sold through department mass market stores for about $450. Although the new machines started to sell and gain a group of devoted fans, a problem with the power supplies caused TI to hold all T.I. 99/4As until it was solved. During that time Commodore introduced the VIC-20 for $300 and the C-64 for $595 and launched a big promotion for the C-64. By the time the T.I. 99/4A could resume selling; Commodore had launched a price war when they introduced the VIC-20 for less than $300. Texas Instruments responded by offering a $100 rebate on the T.I. 99/4A for Christmas 1982.
However, the Commodore had several things that consumers liked better than the T.I. 99/4A.
First, there was more software available at a lower price. Second, it was easy to add Commodore's floppy disk; all you had to do was plug it in. The operating software was built right into the disk drive. To expand a T.I. 99/4A required a large and expensive expansion module plus the drive unit. The price of the box which included a disk controller, a floppy drive, a serial port and 32K of memory was posted at $1474.75. Texas Instruments had never expected that everyone would want a disk drive.
Atari responded to Texas Instruments' rebate by offering rebates on their Model 400 and 800 computers. Texas Instruments came back and extended their rebates until April, plus giving away free speech synthesizers to customers who bought quantities of software. By the start of 1983, Commodore started selling C-64s to discount mass merchants for resale at less than $400. They also sold VIC-20s at $150. Texas Instruments responded by cutting $48 off the 99/4A price. Commodore cut further, and the price of VIC-20 went under $100 if the customer bought some software or other peripherals. Texas Instruments talked about meeting the cut later in the spring. Commodore's next salvo was a "trade-in" rebate of $100 on any computer or video game the customer brought in, even if it didn't work. People bought broken Sinclairs for $10 and got a $100 off a C-64, which they could take home for $300. Dealers started giving VIC-20s away if the customer bought peripherals and software.
The coup de grâce took place at the 1983 Spring Consumer Electronics Show (CES) in Chicago when Commodore announced that they had cut the dealer price on the C-64 to $200. This would allow discounts to sell the C-64 as low as $200 to $230. Then they announced a cut in their software prices, taking the last high profit item away from Texas Instruments. Thanks to perfected design and Jack Tramiel's business acumen, and Sig Hartmann' sharp dealing with software vendors, Commodore's cost on a C-64 was less than $100! They had been making money on both hardware and software while running Texas Instruments into the ground!
The debacle at the CES was the last straw for Bill Turner, President of Texas Instruments' Consumer Division. His accountants told him that they would lose $115 million in the second quarter of 1983, and that was too much even for the giant Texas Instrument Corporation. Bill Turner resigned, and on that fateful October 13th, Texas Instruments announced they were ending production of the T.I. 99/4A Home Computer. However, that was not the end of the story.
At the time Texas Instruments pulled the plug on the T.I. 99/4A, they had been working on the T.I. 99/8, which was known as the "Apple Killer." This advanced machine used an improved TMS9995 display chip and had UCSD Pascal in ROM. It also had a new rewritten BASIC interpreter and was ten times faster than the T.I. 99/4A. However, in spite of the fact that hundreds of loyal users were waiting for the machine and 100 pre-production models were made, Texas Instruments pulled the plug prior to the 1983 Summer Consumer Electronics Show. sp
The death of the T.I. 99/4A had a negative effect on the overall position of Texas Instruments as a manufacturer of general purpose and memory chips. The home computer production lines gave Texas Instruments a base on which to plan production of chips and to achieve economies of scale. With that gone, Texas Instruments had a difficult time competing against the Japanese.
The user groups continued on GEnie, Compuserve, and Delphi with support of some small hardware and software companies. One company, Myarc, brought out the Geneve 9940 which was supposed to be the successor to the 99/8. While it did attract some users, it could not compete with the attraction of the PC clones and the Mac.
1. What was Texas Instruments’ corporate-level strategy in regards to entering the personal computer market? (350 words )