Racal-Datacom

~ the eulogy ~

Milgo Electronic Corporation was founded in Miami in 1955 by Monroe A. Miller, and its first serious business was building electronics for NASA. The pivot that mattered came in 1966, when it designed a modem that carried 2,400 bits per second over an ordinary voice-grade telephone channel. That was a real result in 1966, and it put a Florida company into data communications at the point where the business started.

Racal Electronics, a British radio and defense electronics firm, came looking for a way into the American market in 1969 and set up a joint venture called Racal-Milgo Ltd. to sell Milgo's products through Racal's international network. It worked well enough that Racal decided to buy the whole company, and in 1977 it did, for $60 million, after a bidding contest with Digital Data Systems. The subsidiary was renamed Racal-Milgo.

By 1979 it was doing $100 million a year and leading the modem market. Racal then cut research spending, which is the decision everything afterward follows from. The unit was broken into six divisions in the mid-1980s, and in 1991 Racal pulled fifteen separate data communications businesses together under one roof and called the result Racal-Datacom.

Fiscal 1994 revenue was $553 million, the high-water mark. Then the market it served stopped buying what it made. In September 1998 Racal sold the business to Platinum Equity Holdings of Los Angeles for $47 million, and the name went out of use immediately, replaced by Milgo Solutions Inc.

~ the dossier ~

~ what a modem company sold to banks ~

There are two modem industries in this period and they barely touch. One sells a card or a beige box to a person at home who wants to dial a bulletin board. The other sells multiplexers and leased-line modems, plus the software to manage them, to an organization running a private data network between a head office and four hundred branches. Racal-Datacom was entirely the second kind.

That is why the name means nothing to anyone who was online at home and a great deal to anyone who worked in a bank machine room. The equipment lived in racks inside buildings you were not allowed into. Its 1992 partnership was with BellSouth rather than with a retailer, and in 1999 the successor company won a £3.5 million contract to build network infrastructure for Scotland's three international airports, which is exactly the shape of customer it had always had.

It also explains why the collapse was fast once it started. A consumer modem brand dies when people stop buying modems. An enterprise network vendor dies when its customers replace the whole architecture, and that is what happened between 1994 and 1998. Private leased-line networks with proprietary management gave way to IP over routers from Cisco and Bay Networks. By the time Milgo Solutions was setting out its plans in January 1999, it was reselling Cisco and Bay hardware itself and had not decided what it would build in-house.

~ the name went first ~

The 1998 sale is the death on this stone because the product stopped carrying the name that day. Milgo Solutions kept about 800 people in the United States and 220 in Britain after cutting 30 UK jobs, and it kept pushing into services, which had already reached half of revenue and was being targeted at 60 percent by the end of 1999. Selling services around other people's boxes is what a hardware company does when it no longer has a hardware answer.

The rest is ownership. Platinum Equity later bought Motorola's Internet and Networking Group, the old Codex business, and folded the two of them together as Vanguard Managed Solutions in 2001. Codex and Milgo had spent the 1970s and 1980s trying to take the American modem market off each other. They ended up in the same building under the same private equity owner, and neither name went on the door.

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