Digital Microsystems Inc. and Corvus Systems Inc,, both founded less than eight years ago and now successful pioneers in the microcomputer industry, have set their sights on the same local-area network market as corporate giants Xerox, Exxon (through its Zilog affiliate), and, it has been reported, IBM. Both cornpanies doubled their revenues in 1981; the same high-tech engineeririg skills and business-oriented marketing that brought them so far so fast gives the fast-growing but stillmodest Silicon Valley companies an excellent chance of surviving the competition.
Digital Microsystems was founded in 1975 by the husband-and-wife manage ment team of John and Patricia Torode After earning a PhD in computer science at the University of Washington in Seattle, John worked with Gary Kildall (founder of Digital Research Inc.) in designing the first practical floppy disk microcomputer system, for which Kildall wrote an early version of the now-standard CP/M operating system To produce and market CP/M-based hardware was Digital Microsystems's original aim. It succeeded, with more than 10,000 installations worldwide.
With John in charge of engineering and Patricia watching over production and administration, last year their company registered $6 million in wholesale revenues. Although this might seem small compared with Apple Computer Inc.'s $39 million net income in the same period, John Torode has no regrets: "I suppose if we had had someone more aggressive managing the business five years ago, we might have been another Apple. On the other hand, in one sobering year seven of our major competitors all went belly up."
From the beginning, Digital Microsystems has been aggressive in its marketing abroad, with almost 60% of its sales currently coming from overseas. In 1980, its British distributor, a division of the Extel Group PLC conglomerate, proposed equity participation in the Torodes' venture. Extel now retains a 60% interest in Digital Microsystems. The influx of outside cash will help support the expansion of Digtal Microsystems's market, which John Torode expects will hold its own against the well-financed entries of the office equipment giants. "We're going to have to get more involved with mass production and mass marketing," he says, "and that is a risk for us as a company. We saw that Extel would reduce that risk by providing the resources we need for large projects."
Until last year, Corvus Systems was essentially a one-product company, known for its hard-disk memory systems. Today Corvus is not only the top-selling manufacturer of hard-disk drives for personal computers, but it has also introduced a promising professional-style workstation, rivaling the Xerox Star at half the price, and claims a 50% share in units shipped among all local-area network systems. "As of the end of fiscal 1982, Corvus had shipped network interface devices to connect more than 17,000 microcomputers to Corvus local-area networking systems," says Richard M. Brenner, vice-president for finance.
For the fiscal year ended last May, Corvus Systems registered sales of $26.8 million (up 160% from the previous year) and net income of $2.4 million (up 238%). Earnings per share for the company, which went public in October 1981, went from 16 cents in fiscal 1981 to 30 cents in fiscal 1982, although the number of shares oustanding jumped from 4,323,000 to 7,974,000 in that time. The stock, which is traded over the counter (stock symbol: CRVS), was originally offered at $10 and, at this writing, sold at $13.
Corvus Systems was founded in 1979 by two veterans of Silicon Valley computer companies, Michael D'Addio, currently president and chief executive officer; and Mark Hahn, the company's vice-president in charge of research and development. As early as March 1980, in addition to its harddisk drives, Corvus offered primitive networking circuitry based on sharing of a hard disk's files. In mid-1981 the company introduced the Omninet system, and this year it began shipping its Concept Personal Workstation, featuring a full-page, 8 1/2 x 11" display that can be turned vertically for word processing or horizontally for spreadsheets. With plug-in networking circuitry in the offing for most top-selling business microcomputer systems, Omninet can be expected to get a good head start in the local-area network sweepstakes.