What happened to Commodore?

Commodore was an American manufacturer of home computers and electronics. The company, which was founded by Jack Tramiel and Manfred Kapp, was a major player during the burgeoning PC market of the 70s, 80s, and early 90s. Commodore failed to keep pace with advancements in personal computing, which opened the door for IBM and Apple. This lack of innovation was no doubt caused by the appointment of a CEO who cut research and development funds to almost nothing.

Background

Commodore was an American manufacturer of home computers and electronics. The company, which was founded by Jack Tramiel and Manfred Kapp, was a major player during the burgeoning PC market of the 70s, 80s, and early 90s.

The company is best known for the Commodore 64. With over 17 million units sold, it is regarded as the most popular single computer model of all time. Commodore was also headed by the somewhat enigmatic Tramiel, who recognized the potential of the home computing industry before most others.

Commodore declared bankruptcy on April 29, 1994, with its trademarks sold to Escom and then Tulip Computers – both of which are now defunct.

Below is a look at the interesting story of this once-pioneering company.

Leadership

Jack Tramiel, who was a Holocaust survivor, founded Commodore in 1955. He had an aggressive leadership style and approach to business that frequently landed him in trouble.

After becoming embroiled in a scandal with a Canadian finance company, Tramiel was forced to sell a large portion of Commodore to Irving Gould. The two worked together harmoniously for a time, but Gould quickly tired of Tramiel’s one-man management style which also offended Commodore’s suppliers and resellers. 

After a series of disagreements, Gould forced Tramiel to resign from the company in 1984. Without Tramiel, Commodore became a rudderless ship akin to Apple when Steve Jobs resigned. The company had lost Tramiel’s strategic vision while retaining his aggressive style of leadership.

Gould later embarked on a “hire and fire” campaign as the company struggled to find coherent and stable leadership. This unsettled the company as each incoming CEO had a different vision for Commodore. What’s more, many were unqualified or inexperienced in computing and had no desire to learn. 

Commodore 64 succession

As successful as the Commodore 64 had been, the 8-bit machine was beginning to show its age in the late 1980s.

The problem for Commodore was that its successor, the 16-bit Amiga, was not ready to go on the market. When it was released, it failed to achieve the same access as the 64. The Amiga didn’t offer enough business software to appeal to enterprise customers, but at $1,000 was too expensive to appeal to younger gamers. 

The A500 was eventually released and sold well, but subsequent updates to the Amiga range failed to keep pace with advancements in personal computing. Commodore was also unable to shake its public image as a producer of cheap computers at a time when IBM and Apple were starting to dominate the PC market.

New CEO appointment

With deteriorating company finances, Gould paid millions to a management consulting firm to find a new CEO. Yale graduate and former GM and Pepsi executive Mehdi Ali was appointed in 1989 – a hiring many consider to be the beginning of the end for Commodore.

Ali’s reign was characterized by costly strategic errors. He cut funds for essential research and development while increasing his own compensation. In fact, in 1990, Ali received a $2 million salary not including bonuses, while IBM CEO John Akers received $713,000.

Ali twice sabotaged a lucrative deal with Sun Microsystems which wanted to license Commodore hardware. He was also responsible for one of the worst Amiga products ever released – the Amiga 600. He doubled down on its manufacture instead of creating more of the A500s and A1200s people wanted.

Perhaps his greatest indiscretion as leader was the continual cutting of R&D funding to almost zero. Early Amigas were years ahead of their time, with a color GUI, pre-emptive multitasking, and advanced sound acceleration and hardware graphics. When the research team created an updated version of Amiga’s chipset, Commodore chose to shelve it. Instead, they opted for a much less powerful upgrade to the Amiga 500 and 2000.

Commodore did begin work on a major revamp in 1988 named the Advanced Amiga Architecture (AAA). Due to a lack of funding, however, only one engineer was working on it by the time the company went bankrupt six years later. A stopgap solution was rushed into production, but it was not ready for market and only highlighted how far the company had fallen.

Key takeaways:

  • Commodore was an American manufacturer of home computers and electronics. The company was a significant part of the burgeoning personal computer market but filed for bankruptcy in 1994.
  • Commodore founder Jack Tramiel employed an autocratic leadership style which ended in his forced resignation from the company. Commodore then lost its strategic direction and hired a series of underqualified and inexperienced CEOs.
  • Commodore failed to keep pace with advancements in personal computing, which opened the door for IBM and Apple. This lack of innovation was no doubt caused by the appointment of a CEO who cut research and development funds to almost nothing.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"