Zenith Data Systems

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

~ the eulogy ~

In fiscal 1984 the United States government bought about 37,000 computers. Sixteen percent of them came from Zenith Data Systems, second only to IBM's twenty-seven percent. ZDS lived on federal purchase orders and sold to the public on the side, and when the federal money moved there was nothing underneath it.

The company existed because a television manufacturer went shopping. Zenith Radio Corporation bought the Heath Company from Schlumberger in October 1979, the price usually given as $64.5 million, and what it got was Heathkit: mail-order electronics you soldered together yourself, including computers. Zenith took the kits, finished the assembly at the factory, and sold them as machines. By the middle of the 1980s the Z-100 line and then the IBM-compatible Z-200s were going into government offices in volumes no kit company could have imagined.

Revenue peaked at $1.4 billion in 1988, a figure two independent accounts agree on, and headcount reached about 3,800 by 1990 with roughly 1,800 of those at St. Joseph, Michigan. By 1994 it had more than 700,000 PCs installed across the US government. Laptops were the strongest part of the line: the SupersPort held somewhere around a quarter of the American laptop market in its best years, which for a while made one of the largest portable-computer businesses in the country a subsidiary of a television brand.

A company whose biggest customer by far was the United States government was never going to turn up in a computer shop in Ankara, and it never did. ZDS stopped being an independent company two years before I had a dial tone of my own to worry about. Everything I know about it came out of federal procurement tables. For a company that sold most of its machines to one government, that is probably the correct introduction.

~ the dossier ~

~ the contract that was too big ~

The federal business worked almost too well. Computer Business Review reported in January 1988 that the Pentagon had ordered 225,000 units over the first two years of a laptop contract, against the 90,000 the contract had envisaged for that period, and that orders were frozen while the General Services Administration ruled on whether the Air Force was allowed to blow through the ceiling that badly. Selling too much is an unusual way to get into trouble. It was also a warning written in advance: the revenue was coming from a channel with one customer, and that customer's purchasing rules could turn the tap off without reference to how good the hardware was.

The Desktop II program, which ran from 1986 to 1989, tells it from the other side. Zenith's reputation in Washington was for winning on price in competitions where price carried most of the score.

~ the dealer revolt ~

The retail side failed for a reason that was entirely self-inflicted. ZDS told dealers who wanted to carry its laptops that they had to carry its desktops too. Business Week estimated that about a thousand dealers stopped selling Zenith machines over it, ComputerLand among them, and the requirement was not dropped until 1991. The share numbers afterward are bleak: 3.4 percent of US retail in July 1991, 1.0 percent twelve months later. The relationship with ComputerLand was eventually patched up, by which point the shelf space was gone.

~ passed along ~

Groupe Bull, the French state-backed computer group, bought ZDS in December 1989 for something around $511 million. Figures as high as $635 million get repeated, and the lower number is the one the company histories carry. Bull wanted a position in American personal computers and spent six years failing to make the one it had bought pay.

The end came in February 1996. The International Herald Tribune headlined it "Groupe Bull Quits PCs in 3-Way Deal", which says the important part. The French were getting out of personal computers, and Packard Bell, with NEC alongside it, was taking the operation. Zenith Data Systems stopped existing as a company that month. The badge outlasted it by three years and went when Packard Bell NEC pulled out of the American market in 1999. zds.com today belongs to an architecture and interior-design practice that has never built a computer.

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