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News, opinion, and links from Editor in Chief Harry McCracken.

The Man Who Jump-Started Apple

Posted by Harry McCracken | Thursday, August 23, 2007 10:59 PM PT

We're working on a feature on rare and collectible PCs, and it's no shocker that it'll include the Apple-1--the obscure 1976 machine from an obscure outfit run by two guys named Steve. (A year later, they'd release the Apple II and their company would start to go places.)

As part of our research, I talked via e-mail with Paul Terrell, the founder of The Byte Shop--one of the very first computer stores on the planet. (I never visited a Byte Shop, but I remember hearing about them when I was hanging out in similar stores in Boston back in the late 1970s.)

Terrell holds the distinction of being the first retailer to sell Apple computers, and his recounting of the experience is too good not to share in more detail than we'll be able to do in the story.

Terrell, who opened the first Byte Shop in Mountain View, California in 1975, had been selling early microcomputers such as MITS' pioneering Altair. He was a member of Silicon Valley's Homebrew Computer Club, eventually to become legendary as the epicenter of the personal computer revolution, and whose other members included Steve Jobs and Steve Wozniak.

The two Steves demonstrated a prototype of their Apple computer at a Homebrew meeting in 1976, but it was far from a ready-to-use personal computer. Actually, it was a naked circuit board--the idea was that customers would solder their own chips into place.

"They were trying to get club members to buy the blank boards with little success, so the next day Steve Jobs came into my Byte Shop in Mountain View and tried to sell me a kit which included the printed circuit board and all the components to put it together," Terrell rememers. "The problem was I had computer kits coming at me from everywhere and my partner and I had a sales rep company that represented MITS with their Altair 8800--so I didn't need another kit."

Terrell continues:

"I needed an assembled and tested microcomputer that I could sell to all the programmers who were storming my stores for a taste of the hobby computer. In those days, if you didn't have an electronic technician buddy that could solder and troubleshoot the computer kits that were out there, you were out of luck. It took MITS 4 months to deliver me an assembled Altair and I paid cash in advance.

Steve was hungry for an order, and knew he could get Woz and some of their buddies to put this order together in their garage...and I knew where they lived. So we did the deal [for 50 Apple-1 units] and that got Apple Computer started.

I don't think Steve ever got enough credit for how clever he was with this transaction, though. He had me give him a purchase order from Byte Shop for the 50 units at the magic price of $666 payable COD. He then took that purchase order to Kramer Electronics and told their controller that Byte Shop would stand behind their component purchases, because if Byte Shop paid him COD and if Kramer would sell him components on 30 terms, he and his friends would have 30 days to build the 50 units and collect the money from Byte Shop to pay Kramer Electronics. I got the call from the Kramer accountant so I knew what was going on and confirmed to Kramer that I was all right with that arrangement. Little did the world know that we were providing Apple with their first financing.

The Apple-1 arrived on schedule and Steve got paid and the rest is history. And even Steve with his enormous ego credits me with forcing him to build those kits and giving [Apple] an edge in the marketplace. It wasn't long after that that all kits were going to have to be assembled and the price point for an assembled computer was going to be around $1000.

The Apple II [came] hot on the heels for the Apple 1 because Apple wasn't supplying a case, keyboard or power transformer with the unit. It was just the assembled board and it wasn't long before the retailers were tired of sourcing separate components. We found a guy locally that made a wooden case with a nice walnut stain that we could mount the mother board and transformer in, and put a Key Tronic keyboard in the keyboard cut out. It had a flat top behind the keyboard and above the motherboard where you could set a 12 inch B&W; Hitachi TV.

Also, both Steves realized the importance of color. The Byte Shop became the testing ground for the Apple II because color monitors were too expensive for the average individual but standard demo equipment in a computer store. The Kaleidoscope program for the Cromemco Dazzler S-100 board [the first color graphics card] was written in the Byte Shop showroom for the same reason.

Back to the Apple-1: Another reason the Apple-1 had a niche in the market was because of the choice of processor chip. Chuck Peddle of Commodore fame was working for MOS Technology at the time and had just introduced their processor design the 6502 Processor at WESCON in San Francisco at a trial price of $35. Every hobbyst in Silicon Valley left that show with one. Most of the computer kits at the time were Intel designs, and of course Bill Gates and Paul Allen had written a BASIC language program for MITS that would work with the Intel processor. Apple had another challenge with the Apple-1 in having to have a higher level language for its customers other than the assembler language provided by the chip manufacturer.

Steve [Wozniak] was unhappy with the performance of the cassette interface at the time of introduction because of speed and reliability and fortunately had designed it with microcode in a prom so he could tweak the design to get the performance he wanted. I believe his final design was about 1200 baud and 4 times faster than the 300 baud designs of the S-100 buss in the Altair and IMSAI.

It became obvious to Apple that a more reliable storage media was going to be needed in the Apple II design. The other problem with cassette storage was the variety of recorders from Asia and the uncertainty of what worked and what didn't. Tandy provided their own design with the TRS-80 and Commodore built their own design into the Pet computer. Thank God for Shugart and the 5-1/4 inch floppy, which Apple introduced with the Apple II and got away from cassette forever.

The Apple-1 was a great machine for the technically savvy [users] of the time in learning about the personal computer from both a hardware and software standpoint, and to learn about the shortcomings and demands required to become proficient in the use of PCs. [And it] was the perfect first step for Apple Computer Corp. in defining what the market needed and wanted and got with the Apple II. It wasn't a runaway success that the Apple II was, which gave the two Steves the opportunity to get their act together. They got the opportunity to find out exactly what the market needed without costing the company anything except sweat equity, and they got enough recognition that when they needed the serious investment and seasoned management it would be available for them.

The Apple-1 probably had more significance for the company than the customer. It was the right product at the right time, and Apple II did the same for Mac."

Interesting stuff. If you were to compile a list of the most significant moments in computer history--hey, good idea for a story!--Terrell telling Steve Jobs that he needed fully-assembled PCs, not kits, would surely deserve to be on it. And that order for 50 Apple-1 units was what gave Apple the financial wherewithal to bootstrap itself into business.

Considering Steve Wozniak's technical brilliance and Steve Jobs's marketing genius, you gotta think that Apple probably would have turned into Apple--sooner or later--even if Paul Terrell hadn't placed that order. But you never know. Without the Byte Shop, the Apple-1 might have flopped. Without the Apple-1, there wouldn't have been an Apple II; without the II, there wouldn't have been a Mac. No Mac, no iPod; no iPod, no iPhone. It's all possible.

Anyhow, the next time I stroll into a gleaming Apple Store here in the Bay Area, I'll certainly be thinking about Paul Terrell, his Mountain View shop, and the vision he showed when he decided he might be able to sell as many as fifty computers from an unknown company named after a piece of fruit...

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