1957: Digital Equipment scales computers down in size, price
May 12, 1999
by Mary Brandel
(IDG) -- So much lore surrounds Digital Equipment Corp. There's the old mill in Maynard, Mass. The tradition of brilliant engineering that led to the first minicomputer (PDP-8), the first 32-bit computer (VAX) and a superfast semiconductor (Alpha). The development of time-sharing and Ethernet-based networking. The downward spiral of the 1990s. The $9.6 billion purchase by Compaq Computer Corp. And of course, founder Kenneth H. Olsen, who left the company in 1992 after 35 years at the helm.
Olsen has since started another computer company, Advanced Modular Solutions Inc. in Boxboro, Mass. Computerworld spoke with him recently about Digital's early days.
It all began in 1957, when Olsen left MIT to form Digital with his brother Stan and fellow MIT engineer Harlan Anderson. Olsen was inspired by the Whirlwind computer, the first digital computer at MIT, and the TX-0, the first transistor-based computer.
Both were very fast for their time and were interactive -- that is, people could work directly with them through a keyboard or light pen and could read the results of their queries on a CRT monitor.
Olsen and Anderson approached a venture capital firm, American Research & Development Corp. (ARD), and were granted $70,000 in funding. But the idea of building an actual "computer" wasn't in the original proposal.
Olsen: "ARD gave us some advice. They said, 'Promise fast results -- because most of the board is over 80 years old.' And they said, 'Don't use the word "computers" because Fortune magazine said no one is making money in computers.'"
Instead, the business plan proposed two types of printed-circuit modules, digital laboratory modules and digital systems modules to be used by engineers and scientists to test devices they were building or by commercial companies to build systems for their customers.
Olsen: "There were about 30 people making modules and all of them were losing money. We were told we'd be foolish [to enter the business]. But ours were high-speed and thus unique."
Within a year's time, Digital had made $94,000 and turned a small profit. ARD agreed that Digital could incorporate these modules into its first computer, the PDP-1. It hit the market in 1960 with its own keyboard and CRT. Because it used transistors instead of vacuum tubes, it was faster and smaller than other computers. But even the PDP-1 didn't have the word "computer" in its name.
Olsen: "We called it the Programmed Data Processor so we didn't have to go through government constraints [that listed attributes a machine must have to be sold as a computer]."
People had trouble swallowing the idea of a modestly priced computer. The PDP-1 sold for $125,000 to $150,000.
In 1962, Digital got its big break: International Telephone and Telegraph placed a huge order for 15 PDP-1s. By the end of 1962, Digital reported sales of $6.5 million and net profits of $807,000.
Despite its decline in the '90s and eventual sale to Compaq, Digital's impact can't be forgotten. It is largely responsible for bringing computing power to labs, universities and small businesses that wouldn't have been able to afford IBM's gargantuan mainframes.
Brandel is a frequent contributor to Computerworld. Her e-mail address is email@example.com.
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