A Conversation with EO’s Alain Rossmann

On August 13, 1993, President and CEO of EO, Inc., Alain Rossmann, stepped into the spotlight once again with the announcement of GO Corporation’s merger with EO and AT&T. Mr. Rossmann’s career reveals an uncanny pattern of being in the right place at the right time. I had the opportunity to speak with Mr. Rossmann on two occasions at the company’s Mountain View, CA headquarters earlier this month to learn more about EO and GO, it’s new shared vision with AT&T, and a bit about Mr. Rossmann himself.

Rossmann bought into the microcomputer vision early when, in 1976, he started a software company in his native France to build game software for the next-generation computers of the day — the Commodore PET, Apple II, and TRS-80. After selling the company, Rossmann came to the United States to study at Stanford University and joined the Macintosh group at Apple in 1983. At Apple, he worked closely with many of the early Mac ISVs helping to ignite the Macintosh revolution.

In 1986, Rossmann left Apple with three colleagues to start Radius, a manufacturer of high-quality video products for Macintosh computers. “We started it in July 12, 1986 in Burrell Smith’s third floor attic on his ping-pong table where we designed the prototype.” Constantly looking for a new challenge, Rossmann was later one of the original members of C-Cube, a company developing advanced video compression technology. However, feeling the pull of his roots, Rossmann was interested in returning to a company developing end-user products.

Exploring the emerging world of PenPoint, Rossmann quickly discovered what he thought had incredible potential. He joined EO one month after the formal spin-off from GO Corp. and became the company’s first marketing person. As is common for many new start-ups, EO began an executive search around its first anniversary to strengthen its management team, leading Rossmann to capture the top spot within the company.

What the Merger Means

Realizing that developers and customers are concerned about the GO/EO merger, Rossmann began by addressing this issue. “In general terms, the merger means that we are trying to enhance our ability to deliver an integrated product at the highest level of end-user functionality and quality at the lowest cost possible.” He categorized the deal as a classic merger of the asset of two companies, with EO holding the assets, employees, and intellectual properties of the previous two companies.

Rossmann stressed that some type of realignment was essential to foster a successful market for personal communicators. In his view, the ultimate goal is to produce the absolutely best product. “The kinds of machines we are trying to build are communication intensive, pen-driven machines. They really are not hardware machines or software machines; they are integrated hardware and software devices. You need the integration to be very, very tight, which at the end of the day means that the engineers who do this stuff need to be one cubicle from each other.”

From his point of view, the merger seemed to be a natural. Most of us will recall that EO was originally formed when the hardware development effort broke off from GO Corp. AT&T later purchased a minority stake that they subsequently expanded into a majority holding. Rossmann stated that “AT&T always had the option to expand to a majority, so what they did is use an accelerated option sometime about six months ago.” After bringing the EO 440 successfully to market, they quickly realized that the potential size of the market required more marketing muscle than a start-up could afford. Rossmann confirmed this by observing that “the AT&T logo helps a lot in that market because of the recognition and the quality connotations. So from our side it was a no-brainer.”

But wasn’t there some desire to maintain a degree of independence from the company that many people refer to simply as “Telephone?” Rossmann felt that as long as AT&T’s equity stake was already close to 50%, it’s almost impossible to tell the difference before and after the AT&T acquisition. However, Rossmann listed several advantages of the new arrangement including wider distribution channels, access to the AT&T patent portfolio, and Bell Labs.

Tapping Bell Labs

Indeed, Bell Labs is a great synergy that Rossmann soon identified. “They have more technology in there than they know what to do with. It’s a national treasure, it really is a national asset. It is the most unbelievable place for research that I’ve been to. So the upside is tremendous.” He continued by noting that “they have very innovative technologies — beyond what a small start-up can even filter.”

According to Rossmann, EO is still trying to figure out how best to leverage this new resource. He described how EO engineers are visiting Bell Labs to perform briefings focused on getting the researchers to think about new applications of their technology. In particular, Rossmann sees incredible potential in voice recognition. Without giving details, he predicted that EO’s next generation products will include an important feature straight out of Bell Labs that EO couldn’t haven’t developed itself.

Synergy or no synergy, EO and AT&T now own all the crown jewels including the processor, the operating system, and the hardware. Rossmann stressed his understanding of the discipline and responsibility this position placed on his company by pledging active support for external hardware and software developers. “We have to do a very good job convincing them that we are totally unbiased, that we are going to give them releases the same minute internal and external.”

Rossmann emphasized the advantages of having a tight integration between the components of a personal communicator. Since device manufacturers need an OS, the MIL (Machine Interface Layer), the ASIC and board designs, he felt that many manufacturers may have been spending valuable time reinventing the wheel. “It was very important for us to have a one-stop shopping strategy, where as an OEM, companies like Toshiba, Sony, Motorola, and IBM can call us and get everything that they need to build a compelling device, which we couldn’t do before.”

Wither PenPoint and Intel?

Rossmann stressed that optimization is the key. “It is hard to optimize for multiple things, so the inclination is going to be to focus heavily on RISC processors because that’s the best play for the future.” He also categorized this new focus as it relates to EO’s business plan: “EO’s [goal] was to do the world’s best device; now EO will do the world’s best platform.” Lockstep with this is EO’s plan to license everything very broadly to create the greatest effect in the personal communicator market.

Of course, the $64,000 question centers around EO’s future support for processors other than AT&T’s Hobbit. Rossmann was clear in stating EO’s intention to support existing customers. However, he also emphasized that the current plan is to heavily focus on the RISC architecture and not to move the Intel platform forward. “We want to simplify the business as much as we can, so one of the things under consideration now is should we support two or more CPUs. It doesn’t seem so wise to us right now. [Supporting multiple processors] ends up being a complicated business to run, in the sense that you have to give up both at the same time all the time, test all the time, a lot of overhead and a lot of energy which is better spent improving the OS and building better applications for the end-user.” He summarized by saying that “you end up doing an average job on both [processors], and that’s not what the customer wants, the customer wants the best.”

Perhaps one of the problems in the early personal communicator market is that a clear market maker never fully emerged. In many cases, pen-based communicators were simply part of an OEM’s strategy, but rarely the primary focus. Rossmann wants to turn that around. “EO as a device company will be the market maker. The main charter of EO as a device company is to create the market which helps the other OEMs.”

What’s In It For AT&T

Rossmann also had an interesting perspective when speculating about AT&T’s interest in EO and personal communicators. He explained that AT&T has the belief that unless they understand the object end-users have in their hands, they can’t build the right network. He described a company that is afraid of becoming disconnected from the user and then not understanding what the user is doing with the service. “That’s why they sell phones. It’s not a big margin business to sell phones, but they want to have that connection to the user. Because to the user, the AT&T network which is billions of dollars of hardware is the phone, that’s their view of it.”

So what can developer’s expect from the new EO? Rossmann was slightly reluctant to discuss in detail the next generation release of the PenPoint operating system codenamed Amstel. However, he announced that John McGill had recently joined EO from Taligent (the Apple/IBM joint effort) to take leadership in addressing the needs of the ISV developer community. Rossmann stressed that creating this position at the Director level was one of the indications that EO is committed to improving developer relations and communicating new features and services.

Without going into detail, Rossmann hinted that “you can expect us to engage in an aggressive disclosure and seeding program with our developers [one on one under nondisclosure] in the next four weeks [before COMDEX].” He also confirmed that EO is working on a high-level development tool that, while not as flexible as C, will offer a highly visual, graphic environment with scripting capabilities. He predicted that we can expect some announcement of this around second quarter in 1994. Rossmann also confirmed that EO is working on a new device code-named LOKI but offered absolutely no insight on this.

In the meantime, efforts will continue on the 440. “We’re looking at everything that we can do to improve and enhance the 440. From the software standpoint, when we get the next generation OS, we will make that available to all our customers. From the hardware standpoint, we can get faster clocks, faster processors, and higher storage density.” In addition, Rossmann predicted that newer machines will make use of the DSP in more interesting ways. However, not until 1994.

At this stage, Rossmann views the communicator market as very price elastic. He noted that “in the early phase, when people are learning about the concepts and why they need the device, lower price encourages experimentation. If the device is low price, you’ll try it. When the device matures, the need is well understood and it’s a different deal. People will pay two thousand dollars for a notebook because it’s well understood what they get.”

And how important is communications to this market? Rossmann described their mild surprise when 60% of 440 customers purchased the cellular unit as an option, a threefold increase from their initial projection of 20%. However, Rossmann doesn’t see much immediate demand for other wireless options, stating that customers want the option to place voice and data calls, along with sending faxes. He does predict a bright future for the upcoming Cellular Digital Packet Data (CDPD) standard. “CDPD will play a big role, because it’s a direct leverage of our investment and of the infrastructure investment.”

However, most promising of all was news of the changing trend in customer purchasing. Rossmann enthusiastically described the recent price reductions of EO hardware by saying: “It puts it at a price point where we’re starting to see corporations where the decisions are done bottom up. One person decides to buy three and just expenses it without the extremely long process. This is key to creating momentum.”