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How Olivetti stitched up Acorn

I bumped into Chris Curry last week, a Cambridge legend and visionary innovator who, along with Hermann Hauser, founded Acorn Computers in 1978, an era which still holds a fascination for many.  Acorn dominated the Cambridge technology scene in the 1980s and 90s, and was estimated to make half of the computers used in schools.

With the imminent launch of a new book highlighting the 50 year history of the Cambridge Phenomenon, I asked Chris to reminisce about those halcyon days. This is the first post of his anecdotes.

In Chris’s words:

For many years there were no low moments, there was just terrific fun and excitement and energy non-stop. In fact, right up until 1986 when Acorn started to get into serious trouble, there was not a care in the world, it was just a wonderful time from working for Clive Sinclair for 12 years and then starting Acorn, and all the way through that. It was hard work and every week there was achievement, and every week there was progress, so it was terrific fun.

The difficult times came when the sales dried up and all the bad things started to emerge. We had to sell part of the company to Olivetti and then watched Olivetti exercising its right to take control. When we sold 25% to Olivetti,  the deal was because they bought it cheaper than the share price at the time, that they would use the Olivetti distribution network worldwide to sell all the stock of BBC computers and Electrons that we had in the warehouse. That should have made everything better and Olivetti would have had a profitable investment in a company that suddenly didn’t have cash problems if they had done that.

A year later they hadn’t sold one unit, not one. We had a big meeting with De Benedetti (Chairman of Olivetti at the time) and he said, why hadn’t we? He called all his staff in and said, why hadn’t we sold any of these products? And nobody answered.  He asked again,  and he almost banged on the table, and said, why hadn’t we sold any?

And then somebody said, “Please Signore Benedetti, it is because you told us that we were not allowed to sell anything except IBM PC compatible products.”

At the time that AT & T bought 25% of Olivetti, that’s what he promised, and that’s what he told his sales force. So they were told not to sell anything that wasn’t IBM compatible, and we were not. We had Acorn’s own operating system, so it was a total disaster to have done this deal with Olivetti if we had known that they couldn’t possible use their sales force to get rid of our stock.

After that reality became known, we should have sued them because they breached the contract. But, of course, we didn’t behave like that, and afterwards Olivetti exercised its right to take 75% of the company and put in their own controlling management and gradually shut the place down, completely destroying everything that was there.

The only thing that they didn’t destroy was, of course the ARM chip, which was saved because it was part of a joint venture with Apple, and it saved Apple too. That was an amazing thing, but Olivetti  didn’t see the value in any of those things.

One of the other things that they completed wasted was the fact that where the ARM building is on Cherry Hinton Road, I had spent the last year arguing and dealing with the planning people and the college and farmers to get planning consent for a whole vast area around the Acorn site which we got. I said to Olivetti, “look, you’ve got £10 million worth of planning consent there”; they just let it go. It drifted back until the college got it in the end, and that’s site that has been developed around there, it has benefited Peterhouse rather than us.

I asked Chris if Olivetti could have developed the ARM chip, now used extensively in mobile phones; in 2008 ARM produced its 10 billionth processor chip, and last year Microsoft announced that its next generation of Windows operating system would be based on ARM microchips.

Olivetti could have done, but they didn’t know what to do. The thing about ARM, the Acorn RISC Machine is what it stands for, is that it was already in several Acorn products, including the off-shoot that was making set-top boxes, but nobody had really started to sell the chip as a design to other chip makers until Robin Saxby came along. Acorn was part owner of the joint venture with Apple, and what happened in the end was that there was a reverse takeover so that ARM took over Acorn and Acorn shares were converted into ARM shares, so I imagine Olivetti had some shares still by then, they probably got some ARM shares out of it.

I asked Chris if  he still benefited from his links with ARM, or had any of their shares.

No, only an historical one.  When the company sold, I was selling shares to build new companies that I was working on. I did have shares, but I don’t now. Of course, if I had known the shares were going to be worth so much more in just two years time, I wouldn’t have been selling them off for 20p as I was. At the time we were building a company which was a very exciting project, so I didn’t mind. That was Keyline, a tele-shopping system, an entire tele-shopping service, a combination of Amazon and Google and everything else.

 It’s astonishing to think that Chris was developing this in the pre-internet era, and his terminal included a small screen and search facility that enabled people to type in what item they wanted to buy and they would be directed to stockists. Leading mail stores, including Littlewoods and Great Universal stores had signed up to it, as well as all the banks, except Barclays. Tesco’s were keen to use it as a platform to start home shopping years before it ever happened.

It got to the point of launch and we hit something called Black Monday. John Major’s folly destroyed everything that was being created at the time. He decided that we had to stay in the ERM and the only way was to keep putting interests up, and he put them up until some people we paying 25% interest. Lots of people were paying 18%, but some people were paying 25%. If you are a venture capitalist, your model is that you normally expect to make a 10% return on investment. If you can put your money in the bank and get 15% without any risk at all, you stop putting it into ventures that have risk attached, and that’s what happened, the entire venture capital market disappeared entirely shortly before Black Monday and he destroyed all new growth businesses, and he didn’t even notice it, of course, because he didn’t have the sense to see it.

We spent four years developing it, we had a Keyline club and were ready to launch, and then the world just went completely haywire when interest rates went up, everybody was going bust, suicides, marriage breakdowns. I lost all my investment in Keyline, and in the E2S, the software business that had developed the thing very much like Java. I think in total, including venture capital input, I lost less than £4 million in both projects, which is peanuts these days, but was a lot then.

What hurt most, losing Acorn or Keyline?

The Black Monday thing made me angriest  because it needn’t have happened, and it was only because of the stupid behaviour of John Major that it happened. The Acorn problem was over production, our refusal to accept that IBM had a steam roller, and it was going to steam roll everything else in the world, which it did.

It’s interesting really, that if we had stayed  a little bit longer, the real time operating systems that are in mobile phones would have appeared and we would have been back with a real chance, in fact ahead of the game, because before the mobile phones came along, there was a brief period where what we call pocket organizers were very popular,  and one of those was the Psion organiser, and it was a fairly uninspired operating system that appeared in the first mobile phones and became the basis of the Nokia.

Psion was our distributor in South Africa, and also the Sinclair distributor, his name was David Potter. He then built the Psion organizer and that grew into the mobile phone market place. Psion was a pocket organiser based on computer-like architecture.

It is estimated that more than 30 spun-out companies developed from Acorn, creating an astonishing legacy for technology and innovation. It also makes me wonder how differently our British computer market would be today if Olivetti had kept its word all those years ago, if Acorn had survived.

More anecdotes to come tomorrow …….

Update: The figure of 30 spun-outs was referred to in an FT article back in 2005 and has grown considerably since then. Thanks to Steve Crane on LinkedIn who says: “I’d estimate it at more like 130 new companies spun out or inspired by Acorn and the guys that founded it. ”

25 February: Day 2 of anecdotes from Chris.



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