Commodore International

In the succeeding four years Tramiel successfully moved Commodore first into the assembly and marketing of typewriters and mechanical adding machines and then into the manufacture of electromechanical typewriters and adding machines. In February 1962 he changed the company's name to Commodore Business Machines Ltd. Tramiel's initial success was soon overshadowed by controversy about his business methods. In 1965 it was revealed that he and C. Powell Morgan, Commodore's chairman and president of the bankrupt Atlantic Acceptance Corporation, had, according to Forbes, issued misleading financial statements, used inside information to bolster share prices, and profited from dummy companies that borrowed money from Atlantic and re-lent it to Commodore. Tramiel was never indicted and, in response to these charges, which were made in the report of the Canadian Royal Commission investigating the collapse of the Atlantic Acceptance Corporation, he claimed he was merely following orders. Convinced otherwise, however, was Ontario Supreme Court Justice Samuel H. S. Hughes, who wrote, according to Forbes, that Tramiel "was not, and probably never had been the man who appeared, on his own showing, to be the dutiful and helpless instrument of Morgan's schemes." The financial fallout from the Atlantic bankruptcy plunged Commodore itself near bankruptcy. In need of new capital, Tramiel turned to Canadian investor Irving Gould, who in 1966 paid less than &Dollar;500,000 for control of 17.9 percent of Commodore's stock. Once in control, Gould reduced Commodore's debt and sold company assets, including manufacturing facilities. He brought Commodore's designs to low-cost producers in Japan, where he and Tramiel also saw early electronic calculators. Impressed by these devices, he and Tramiel became convinced that the future lay in electronics and subsequently contracted Casio and others to manufacture calculators for sale in North America. Sales and profits increased rapidly in 1968 when Commodore introduced the first of these calculators. Between that year and 1970 sales rose from &Dollar;4.1 million to &Dollar;9.4 million while profits expanded from &Dollar;130,000 to &Dollar;700,000. In 1973 Commodore made &Dollar;1.3 million on sales of &Dollar;32.8 million. Taking advantage of the economic climate, Tramiel and Gould moved to take control of manufacturing and introduce new products. In 1969 they arranged to begin manufacturing calculators using semiconductor chips made by Texas Instruments. In 1971 they introduced the C106, the first mass-market compact electronic calculator for consumers. In 1973, in response to exploding demand, they opened manufacturing plants in Palo Alto, California; Bristol, Virginia; and Eaglescliff, England. By 1974, although sales increased to &Dollar;49.8 million, earning began to fall due to a surplus of calculators on the market. Prices spiralled downward and the glut of products led to massive returns by retailers. The situation worsened in 1975 when the swiftly-evolving electronics industry left Commodore with &Dollar;6.5 million in obsolete inventory. As a result, the company reported losses of &Dollar;4.4 million on sales of &Dollar;55.9 million. To avoid similar future disasters, Tramiel cut costs. He phased out the Bristol plant, moved Japanese headquarters closer to its assemblers' facilities, sold only to volume buyers who paid promptly, and reincorporated as Commodore International Ltd. in the tax-free Bahamas. Most importantly, he decided to tackle the actual manufacturing of chips so that Commodore could govern its own supply. In pursuit of this "vertical integration" he and Gould acquired several small companies, the most important of which proved to be MOS Technology. Unbeknownst to Tramiel or Gould, MOS had developed the 6502 microprocessor--the chip that Commodore used to build its first computer and which Apple and Atari used to build their early home computers. By 1976 management realized