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Entrepreneurial Capitalism and Innovation:
A History of Computer Communications 1968-1988
By James Pelkey

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Entrepreneurial Capitalism & Innovation:
History of Computer Communications
1968 -1988
By James Pelkey

This history is organized by three co-evolving market sectors and also standards making.
An overview of the schema is presented in the Introduction.

Ch. 1: Emergence
Ch. 3: Competition
Ch. 5: Market Order
Ch. 11: Adaptation

Ch. 2: Vision
Ch. 4: Arpanet
Ch. 6: Diffusion
Ch. 7: Emergence
Ch 8: Completion
Ch. 10: Market Order

Ch. 9: Creation

Ch. 12: Emergence



Chapter 8
Networking: Turbulence 1981-1982
The PBX, the IBM PC and the Chaos of Competition

8.31     3Com

For fiscal year ending May 1982, 3Com’s revenues soared 250% to $1.8 million with a loss of $690 thousand. Only their burn rate - expenses needed to execute to the EtherSeries plan - will consume their roughly $2 million of cash in less than a year. The impact of Interlan’s entry had made it clear that their current products are rapidly being driven obsolete; meaning cash from sales will be harder and harder to come by. If EtherSeries is either late to market or does not sell, 3Com faced a problematic future. So ran the pending press obituaries.

In June 1982, 3Com’ Board of Directors, concerned with how to grow sales even faster, approve a plan to promote L. William Krause to CEO and put Robert Metcalfe in charge of Sales and Marketing. It proved to be a brilliant move. Metcalfe remembers:

“We really started heading into the tank. So we made ME head of sales and marketing. So I was head of sales and marketing for two years which is my major accomplishment at 3‑Com. I mean I did a lot of other things, but THAT was the thing that I really did, was get us to a million a month.”

To get sales to $1 million a month took competence aided by the aura of an industry leader, the man who had invented Ethernet. In Metcalfe’s words:

“I can get an appointment with anybody that I wanted to, because I was the inventor of Ethernet, and they would talk to me. So unlike a lot of other salespeople, I had an entrée anywhere I went. And I'm good at personal selling. I mean I can talk to people and I listen to them, and then I have intelligent things to say and then they want to buy my products later.”

In October 1982, 3Com introduced EtherSeries: IBM PC-compatible EtherLink controllers and the EtherShare file server. The price of an EtherLink interconnecting two PCs and a shared disk drive, was $950 per computer: a price breaking the mythical $1000 per computer price point and down sharply from $3 thousand per connection just a few years earlier. (The Seeq-supplied Ethernet chip made the lower price possible.)

The XNS-based EtherSeries took advantage of the knowledge gained from working with XNS and TCP/IP networking protocols. They were in fact offering some of the higher-level services inherent in these networking systems such as file sharing, print sharing and a platform on which to build other user applications. These services and features reflect a user’s, especially a computer user’s, point-of-view, one very different than those of the communication community that thought in terms of physical connections and moving bits reliably over those connections.

EtherSeries would be a success. 3Com had skirted disaster.