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