Lee Data

~ the last words ~

In January 1979 Northern Telecom bought Data 100, a Minneapolis maker of terminals and peripherals for IBM machines. Two of its people, John M. Lee and John Roy, left and went to see a former employer named Ed Orenstein, who gave them enough money to start building. Lee Data Corporation was incorporated in Minnesota in March 1979 and set up in a 21,000 square foot plant in Eden Prairie, where by April 1980 it had thirty-one people making things.

What it built was a copy of IBM's own equipment, sold against IBM. A 3270 installation meant display terminals and a controller to run them, usually with a printer hanging off the side, and Lee Data built all of it to be compatible and cheaper, with features IBM had not yet bothered to add. For a plug-compatible vendor that is the whole business model: find the thing the monopolist is too comfortable to improve, then sell the improved version back to the monopolist's own customers.

The first year brought in about $631,000. Fiscal 1982 did $13.6 million and turned the first profit, $1.9 million. By 1984 the company was over $50 million and held roughly 4 percent of the American data terminal market, with the Bell System alone accounting for about a quarter of sales. It had gone public over the counter in November 1982, and in January 1985 employment reached 1,128, which was as high as it ever got.

~ the record ~

~ two deals that collapsed ~

Having grown that fast, Lee Data went shopping, and neither trip worked. In July 1983 it offered $6.4 million in stock for Wordtronix, a word processing systems maker founded by other ex-Data 100 people and competing with IBM's Displaywriter. That was called off by September, leaving Lee Data holding 19 percent of a company it had meant to own outright.

The second attempt was larger and ended worse. In November 1984 it announced a $16.1 million stock swap for Visual Technology of Tewksbury, Massachusetts, another terminal maker, intending to keep it as a subsidiary and take its intellectual property. The deal collapsed in January 1985 shortly before signature, and Lee Data paid $3 million in cancellation fees. What it got for the money was a set of Visual patents and the unbuilt design for an Intel 80286 machine, which it finished and shipped in 1985 as the System 2000. In January 1986 it bought Datastream Communications and Phaze Information Machines instead.

~ October 1989 ~

The argument that had built the company stopped working, and it stopped working for the most ordinary reason available: IBM started shipping the improvements itself. When the thing you sell is the same thing, only better and cheaper, the better part has a shelf life set entirely by the other company's engineering schedule. Lee Data tried to move into specialized networking software to hold the bottom line up, and the terminal business kept shrinking underneath it.

On 5 October 1989 the company announced it was cutting 260 jobs out of 913, ahead of a projected quarterly loss of $18 million. The full fiscal year came in somewhere between $45 million and $50 million of losses, roughly ten times what it had lost in 1988. I was five years old and half a world away, so this is a story I am reading rather than remembering. The mechanism is not historical though: you can build on another company's platform and beat them on their own feature list, but the date they decide to catch up is not yours to set. Lee Data's was October 1989.

~ the name goes last ~

In February 1990 Lee Data sold the data terminal assets, the entire reason the company existed, to Intelligent Information Systems of Hackensack, New Jersey, for $8 million. John Lee announced his resignation from all three of his offices in the same breath. The sale completed that April.

The name lasted five more months. In July 1990 what was left renamed itself Apertus Technologies and became a terminal emulation software company, meaning it now sold the program that let a PC pretend to be the hardware it used to manufacture. The headcount tells that story without further comment: 650 people in February 1990, 275 by July.

Apertus then did well for a while. By 1994 it was the second largest terminal emulator vendor with about a quarter of that market, earning $4.5 million on revenues of $26.9 million. In late 1997 it sold the emulation business to Computer Network Technology for $11.4 million, bought a Minneapolis data warehousing firm called Carleton Corporation and eventually started trading under that name instead. Oracle bought the result in 2000 for $8.7 million in stock. Three names and twenty-one years on from the plant in Eden Prairie, what was left of it went onto a database company's balance sheet.

@}-->--

              )
             (_)
            .-'-.
            |   |
            |   |
            |   |
            |   |
          __|   |__   .-.
       .-'  |   |  `-:   :
      :     `---'     :-'
       `-._       _.-'
           '""""""

« previous  ·  random  ·  next »