Cardinal Technologies

» see cardtech.com as it lived, on the wayback machine

~ the obituary ~

Cardinal Technologies came out of a corporate tidy-up. General Electric finished buying RCA in 1986 and began selling the parts it did not want, and one of those parts was RCA's New Products Division in Lancaster, Pennsylvania, which went to Thomson of France. In February 1987 an engineer there named Harold Krall and seven colleagues bought the plant and its equipment back out, liabilities included, for four million dollars. The company they founded in it stayed privately held for its whole life, running out of a hundred thousand square feet on Freedom Road. It set out to sell into the personal computer market that RCA had spent the decade ignoring.

The plan was whole computer systems. They started with modems because modems were quicker, and the modems were what worked. Within three years Cardinal was a serious name in the category on the back of OEM contracts with the big system brands, and it spread into graphics cards and monitors. Late in 1990 came the PC 10, a 386 machine aimed at IBM's PS/1, and in 1991 the SnapPlus, built with Fujifilm, which could key computer text over a videotape feed and pull stills off Video Floppy disks. The first profit landed in 1990: six hundred thousand dollars on sales of thirty-three million. By 1992 Cardinal was the second largest maker of fax modems in the United States, behind Intel and nobody else, with around two hundred and twenty people in Lancaster.

Then Paul Allen arrived. In September 1993 his Vulcan vehicle put fifteen million dollars in for just under a fifth of the company, and within six months the founders were gone, Krall and two co-founders pushed off the board between February and March 1994 while thirty-one people were laid off. That August Vulcan took its stake past half, to 50.35 percent, having accused Cardinal of overstating its own worth in the paperwork it had shown Vulcan before the original sale. The company that survived all that made modems and sound cards and not much else, and by 1997 Vulcan owned three quarters of it.

Cardinal had been inside Hayes for a year before I ever dialed anything. I went online in Turkey in 1998 and got to 56k a year or two after that, and the brand stamped on the modem was whatever the shop in Ankara happened to have, which is the honest reason this is a name I met for the first time writing about it. What I did live through is the tail end of the argument Cardinal staked itself on. In 1998 the question of which flavor of 56k your modem spoke was still the difference between a connection and a shrug from the ISP.

~ the case file ~

~ the standards war ~

On 14 November 1996 Cardinal announced a letter of intent with U.S. Robotics to license x2, the first of the two incompatible ways of doing 56 kilobits over an analog line. The other was Rockwell's K56flex, and Hayes was a strategic supporter of Rockwell and a member of the Open 56K Forum lobbying to make it the standard. Cardinal had ridden Rockwell silicon for its 14.4 and 33.6 lines and jumped to a Texas Instruments chipset to follow U.S. Robotics. The Connecta range went on sale in February 1997 with an estimated street price of a hundred and fifty-nine dollars for the internal 56K model and eighty-nine for the 33.6, with a twenty-dollar rebate on top.

The easy story is that Cardinal picked the losing dialect and died of it, and the easy story is wrong. Hayes wrote the real mechanism into its own annual report a year later: when Rockwell and 3Com announced 56k in late 1996, and every modem maker promised shipping product for early 1997, the retail channel stopped ordering 33.6 modems and ran its inventories of them down, then placed orders for 56k that nobody could fill because there were no 56k chips. Hayes watched its backlog go from 4.6 million dollars at the end of December 1996 to 10.5 million at the end of March 1997, and its revenue fall by 22.5 percent across the year. Cardinal was a smaller and thinner-capitalized company standing in the same wind. A product announcement emptied the market for the product it was still living on, and the ITU then settled the dialect argument with V.90 in 1998 and made the whole fight a footnote.

~ the day it died ~

The letter of intent was signed on 12 March 1997 and Wired had the story the next day. The merger agreement followed on 11 April, and Hayes acquired Cardinal Technologies on 24 April 1997. The price is in the filing. Hayes paid two and a half million dollars for all of the stock, 3.1 million once costs were counted. Against that it took on 15.35 million of assets and 17.06 million of liabilities, so the books it was buying were underwater by about 1.7 million, and it booked 4.8 million of goodwill for the privilege. As part of the same transaction, Vulcan Ventures put 5.5 million dollars into Hayes, which is more than twice what Hayes paid for Cardinal.

Hayes said it had bought a highly visible brand for its retail portfolio, and for a while it kept that brand alive: the Lancaster plant closed and the work moved to Norcross, Georgia, but Cardinal press releases carried on going out from Atlanta, one of them in January 1998 boasting that Connecta modems beat U.S. Robotics' own Sportster on 3Com's own server. The last item the website ever posted was dated 1 June 1998 and announced V.90 upgrades. Hayes filed Chapter 11 on 9 October 1998 and closed its doors at the beginning of January 1999. The assets went to auction in twenty-four lots on 13 February. Zoom Telephonics took most of the modem assets that April for 5.3 million dollars, the Cardinal name among them, and never sold anything under it.

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