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U.S. Robotics Inc. Business Information, Profile, and History

company modems modem market

8100 North McCormick Blvd.
Skokie, Illinois 60076-2999
U.S.A.

History of U.S. Robotics Inc.

U.S. Robotics is one of America's most promising manufacturers of high-tech equipment for computers. In the early 1980s, U.S. Robotics was involved in the manufacture of modems--devices that translate digital computer signals into analog signals for transmission over conventional telephone lines. Once considered a minor part of the computer, modems enable users to communicate with other computers, including large data bases and mainframes--in effect, giving the simple desktop device computing capabilities well beyond its own capacity. U.S. Robotics eventually evolved from being mainly a modem manufacturer to an important maker of internetworking equipment. It established a strategic partnership with Advantis (a joint venture between Sears Technology Services, Inc., and IBM) to supply Wide Area Network (WAN) this technology.

U.S. Robotics was started principally by Casey Cowell, a native of Detroit who completed his degree in economics at the University of Chicago in 1975. He then pursued a doctorate in economics at the University of Rochester, where a friend informed him that after he graduated he'd be the only person in the unemployment line who knew exactly why he was there.

Cowell, age 23, dropped out of the doctoral program, moved back to Chicago, and re-established contact with former classmates Paul Collard and Steve Muka, who had an interest in computers. Eventually, the group grew to five men who pooled $200 and laid out plans to build a keyboard and acoustic coupler for communication over phone lines.

At the time, computers consisted of huge mainframes, and four-function calculators were expensive novelties. FCC regulations would not permit direct connection of any device not built by AT&T into the telephone network. While modems could translate digital signals into tones, these tones could only be fed mechanically into an AT&T handset.

In need of a name for the enterprise, one of Cowell's partners suggested a moniker from Isaac Asimov's 1950 science fiction novel I, Robot, which featured a company called U.S. Robot and Mechanical Men, Inc. Dropping the reference to mechanical men, the group settled simply on U.S. Robotics. Initially, the name was problematic, proving unfamiliar and therefore difficult for many people to spell. Furthermore, the name suggested that the company made robots.

Nevertheless, Cowell liked the name because it connoted advanced technology at a time when he and his partners were unsure what product the company would eventually produce. As it turned out, they perfected an acoustic coupler before the keyboard and, in need of cash, decided to begin marketing the device immediately.

Cowell later told the Chicago paper the Reader that, to his surprise, the city was replete with small factories that supplied plastic compounds, vacuum molding materials, electronic parts, and people willing to share their expertise with him. The first couplers were cast in mahogany molds, and the assembly line was located in Cowell's tiny Hyde Park apartment.

U.S. Robotics garnered sales initially through word of mouth. In time, customers started inquiring which terminal systems were recommended for use with the coupler. It soon occurred to Cowell that the company could generate additional revenue by distributing terminal connections made by other companies.

A range of equipment made by DEC, Teletype, General Electric, Applied Digital Data Televideo, and Perkin-Elmer was added to the U.S. Robotics product line. By the end of the first year, the company cleared $50,000 in sales, about half of which resulted from its distribution business.

The company launched its second product, a modem, in 1979, after FCC regulations were changed to allow non-AT&T equipment to be connected directly with the telephone network. The modem was operated by homemade circuit boards, created by silk screening paint over a copper-plated board, then immersing the board in an acid bath where all but the painted surfaces were dissolved. Cowell took out a classified ad in Byte magazine, and soon orders for the modems began rolling in. With its increased cash flow, Cowell rented manufacturing space west of Chicago's Loop.

In the early 1980s Cowell approached the investment community for the first time in search of capital, most importantly for a new manufacturing facility. In addition to being small, the west Loop facility had no shipping door, forcing workers to hand boxes through doorways and pack palettes on a makeshift loading dock. The search for funding was successful, and in 1984 U.S. Robotics relocated to a large factory space, formerly a pharmaceutical building, in Skokie, a suburb north of Chicago. The modem became U.S. Robotics' only product. Through research and development, modems were by now eight times faster than they had been only a few years earlier. Rather than sending a page of text every minute, the devices could shuttle through nearly ten.

The company encountered a market dominated by three major competitors, Hayes Microcomputer Products and Motorola's Codex and UDS divisions. Nevertheless, U.S. Robotics held several advantages over these competitors. Most importantly, the company manufactured its own "data pump," the computer chip that controlled the modem's transmission features. As a result, U.S. Robotics modems were built to its own specifications, not those of Rockwell and other chip manufacturers that supplied Hayes and Motorola. This allowed U.S. Robotics to develop faster modems and get them to market more quickly than its competitors.

While modems operating at a rate of 1,200 baud (signal variations per second) were once considered fast, by 1990 rates of 9,600 bits per second were becoming common. These systems multiplied the number of variations by using different forms of modulation on the signal. In 1990 the standard was known as V.32, or "V-dot 32." During this time, U.S. Robotics began development of a much faster modem system that could deliver 14.4 kilobits per second. Nevertheless, when the international standard, called "V.32bis," was adopted, U.S. Robotics also had a product meeting these specifications ready for manufacture.

The modem made it possible to send and receive information much more quickly, which was both a convenience for the computer user and, more importantly, a cost savings, involving less time that a user needed to keep expensive long distance telephone lines engaged. For many, the new modem represented a tremendous savings in operating expenses. While maintaining third place in the general modem market, with an 8.3 percent share, U.S. Robotics dominated the high-speed sector of the market, capturing a 43 percent share.

The risky but successful coup in the high end of the market did much to further the legitimacy of the U.S. Robotics name. Companies previously unfamiliar with U.S. Robotics became customers and, in doing so, identified themselves for future marketing efforts.

U.S. Robotics has also expanded into foreign markets; its first acquisition was Miracom Technology, Ltd. (later called U.S. Robotics Ltd. UK), with which the company established EEC sales and manufacturing capabilities, in 1989. In 1991, U.S. Robotics' sales and marketing concern, U.S. Robotics, s.a., was established in Europe. Two years later, the company acquired P.N.B., s.a., a designer and manufacturer of data communications products for IBM-compatible personal computers and workstations and other pcmcia products. This overseas presence not only gave U.S. Robotics access to international market intelligence and standards, but enabled the company to maintain the same level of local market support worldwide that it had in North America.

In 1993 U.S. Robotics changed the face of the personal communications market through aggressive pricing moves and an expanded retail presence with its Sportster line of modems. Capitalizing on the low-cost digital signal processor (DSP)-based architecture--developed for the company's line of Courier organizational modems--the company's brand image as a technical leader and its well-known quality, allowed U.S. Robotics to become the dominant modem supplier to the personal communications market.

U.S. Robotics also serves its worldwide corporate customers with three product lines: Courier organizational desktop modems; Shard Access local area network (LAN) communications servers; and Total Control, analog and digital WAN Hubs.

Courier was the first modem on the market to include industry-standard V.32bis 14,000 bps data transmission. U.S. Robotics motherboard/daughterboard architecture enhances the Courier's functionally, and allows the company to offer the first modem with a field upgrade to the upcoming V.34 28, 800 bps architecture.

U.S. Robotics' two WAN hubs serve distinct markets. The Enterprise Network Hub serves the corporate market, which requires high-speed, error-free data transmission for applications such as file transfer and electronic mail. The Transaction Processing Hub provides the quick connections and multiple protocols needed for applications such as credit card verification, point of sale terminals and inquiry response.

Additional areas in which U.S. Robotics planned for future product introduction in 1994 included an even faster modem system run on the "V.Fast" protocol, and a cellular modem system called HST Cellular (for "high speed technology"). This system would allow data transmissions over a cellular telephone network, again with adaptive speed leveling, even while traveling between cell sites at 60 miles per hour.

U.S. Robotics raised $28.3 million through an initial public offering, in which 2,380,000 shares of common stock were offered by the company. U.S. Robotics hoped to avoid excessive debt, keep a lean operation centered on customer needs, and maintain a generous research and development budget. The company planned to go private in 1994.

Principal Subsidiaries: U.S. Robotics, Ltd. (UK); U.S. Robotics S.A. (France); P.N.B., s.a. (France).

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