Spectrum Information Technologies

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

~ the last words ~

Five days after quitting as chief executive of Apple Computer, John Sculley took the top job at a Long Island company that had never had a profitable year in its life. The date was 18 October 1993. He described Spectrum Information Technologies as "a little gem that fell in my lap" and said he expected wireless communications to overtake the personal computer as the main engine of innovation in the 2000s, which was a better prediction than anyone gave him credit for at the time.

An interviewer, the day before he formally started, asked him about Spectrum's 1990 delisting from the Nasdaq for failing capital requirements and about the SEC investigation into its underwriter. Sculley answered: "It sounds like you know more about it than I do at this point." He had told reporters he had lawyers and technical experts go through the company's patent filings and its legal position. Four months later he was gone.

What gets lost in the wreckage is that Spectrum had actually invented something. Founded in late 1983 in Dallas as Spectrum Cellular Communications Corporation, with Dana C. Verrill as its principal founder and first chief executive, it released a product called the Bridge in 1984: the first cellular modem anyone had ever shipped. It was the first company to use a cellular telephone network to carry computer data. Every time you turn on a hotspot from your phone, you are using the idea this company was built on, forty years early and about two decades too soon to make money from it.

~ the record ~

~ the bridge ~

Moving data over an analog cellular network in 1984 was a genuinely hard problem. Cell handoffs dropped the carrier mid-transmission, and the audio channel was noisy in ways landline modems had never been built to survive. The error correction of the day assumed a line that stayed connected. The Bridge existed to paper over all of that between a laptop and a car phone. It worked well enough that Spectrum spent the following decade licensing the patents around it rather than selling very much hardware.

That licensing business is where the trouble started. A patent portfolio with a plausible future and no profitable present is an excellent thing to tell a story about to investors, and Spectrum told it for years. The company moved its headquarters from Texas to Long Island in 1992 and peaked at 170 employees in 1993, the year Sculley arrived, which gives you a sense of the gap between the company's share-price narrative and its actual size.

~ four months ~

Sculley resigned on 7 February 1994 and sued chairman Peter Caserta for $10 million on the way out, accusing him of concealing the company's financial condition and the investigations it was under. Spectrum counter-sued, claiming Sculley had broken his employment contract. The whole thing played out in the business press at exactly the moment Sculley's reputation could least afford it.

He was blunt about it afterward. Speaking in 1998, he said: "It was a terribly embarrassing situation. I was so burned out and so hurt by how I'd been treated by the board at Apple that I just didn't use good judgment. I ended up with a bunch of bad characters." It is a rare thing to find a former Fortune 500 chief executive describing his own hiring decision in those words on the record.

~ the shell that kept going ~

Spectrum filed for Chapter 11 in January 1995 and emerged in August 1996, then went straight back to losing money. In 1999, with the dot-com window wide open, it renamed itself SITI-Sites.com and announced a pivot to e-commerce, which is the single most 1999 sentence it is possible to write about a cellular modem company from Dallas. That did not work either.

On 14 November 2006 the shareholders finally voted to liquidate the assets in full and stop trading. Even then it did not entirely stop: the company continued to exist on paper as a non-practicing entity, collecting licensing fees and filing infringement suits over the patents. The cellular modem work outlived the products and eventually the company itself, surviving as a set of legal documents that still generated invoices.

I was twenty-two and on TTNet broadband in Ankara when the vote happened, and I had never heard the name. Almost nobody had. The reason to remember Spectrum is not the fraud or the famous four months, it is that the thing it built in 1984 is now a switch in a settings menu that nobody thinks about at all.

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