A Conversation with Geowork’s Gordon Mayer

When Apple introduced the Newton, some viewed Casio and Tandy’s Zoomer as a me-too product. Based on the GEOS operating system written by Geoworks, it wasn’t clear to the uninitiated how the small company located across the bay from San Francisco could compete with the marketing mammoth in Cupertino. But compete it did.

Gordon Mayer, president and CEO, came to Geoworks with a varied background that included time in the fields of robotics, wireless local area networks, data compression, and managing venture capital. Prior to the start of his commercial career, Mayer completed both a Bachelor and a Masters degree in Electrical Engineering at Purdue University, and served four years at Wright Patterson Air Force Base in Ohio.

As Mayer put it: “I managed the taxpayer’s money—I was the government version of a venture capitalist which is actually a lot of fun.” In reviewing his career, Mayer noted that: “I don’t have any particular depth in any given industry, it’s not like I’ve spent ten years in the PDA industry, or ten years in software.”

“Rather I’ve spent ten or eleven years in a number of different industries with different channels of distribution, technologies, markets, and customers. I look at that as being all the experience being brought to bear at Geoworks. I think that when you’re trying to manage a technology that is this deep, with a market that is emerging, it’s really a market which is a combination of a lot of pieces.”

Emerging markets can prove to be even more demanding when you have two masters to satisfy. Mayer related: “That’s one of the challenges at Geoworks: that our first customer is really the OEM. But just giving the OEM what they want and treating them well doesn’t mean you win. You’ve got to develop a very compelling product for the end customer.”

To Mayer, Geoworks represented a diamond in the rough. He explained: “I spent a year with a venture capital firm looking at a number of opportunities. I came to believe that I was best suited not for a start-up, but for one that was a little further along—one that had more people and some management challenges.

“I also ideally wanted to join a company where the risk was more marketing-oriented rather than a technology risk. Geoworks kind of fit all that, it was a wonderful situation. It had a hundred people and a technology that was obviously developed so you could go perform due-diligence on that.”

For Mayer, the technology was the attraction. “I was able to see that they clearly had the best technology, but it was a company that traditionally had under-marketed its technology. I’m better suited for that than other things. Here was an opportunity to take the best product and find a way to market it properly.”

Geoworks was in many ways a known quantity for Mayer. He recalled: “I made the physical link-up because the venture capital firm I was with was one of the lead investors in Geoworks. So I was well aware of Geoworks and, in fact, had known the management team and had met with them as part of our management of this as an investment.”

“It got to a point where Brian Dougherty, who had founded the company and had been here ten years, had developed the technology and was looking for a way to expand the management team adding some business and marketing expertise. It was just a good fit.”

The Better Mousetrap

Those with a history in the microcomputer industry will recall that GEOS has already been around the block. Mayer recounted: “The company has been around for ten years but the genesis of the current product started in about 1988 or 1989 with the development of the x86 version of GEOS, which hit the market in 1990.”

“When it hit in late 1990, it got great acclaim, it got a lot of press, and it was universally reviewed as being better than [Microsoft] Windows. And yet, three or six months later it was clear that it had lost out. I think that the company, which had been solely engineering driven, believed that if you build a better mousetrap, they’ll beat a path to your door. That’s typical, I think, of technology companies. Geoworks did a wonderful job of building a better mousetrap and no one cared.”

Of course, before the IBM version, GEOS was available for the Commodore 64, the C128, and the Apple ][ computers. Mayer summed it up by saying: “So, the company has more expertise than any other company in terms of developing operating system technology for the mass market.”

Understanding the Customer

The consumer mass market is one thing; the consumer market is something else. Mayer described how Geoworks leverages the muscle and experience of its corporate partners to best advantage. “We try to work with companies that are renowned in consumer electronics ranging from Toshiba to Casio, to Sharp, HP and Brother. I think they’ve got particular strengths in those areas and they really understand their customer base.”

Mayer also described the shift in perspective needed to understand the needs of everyday consumers. “I think our perspective is a little different than other folks. I think other companies that are competing with us believe that this market is going to come out of the computer industry because of the technology similarities. Our belief is that it isn’t technology that drive markets—it is the customer and what that customer wants.”

Mayer believes that this involves building a relationship with the customer. He noted that: “As a customer, you are more likely to buy something from a name you trust and know, and from a channel of distribution that you trust and know, rather than from someone unknown that happens to have a similar technology. Our belief is that the products we’re working on, the successful ones, will come from companies who have the right brand and the right channel of distribution.”

“I think that our partners have tried various marketing techniques and the ones that have been most successful are companies that have not tried to do revolutionary things. It’s useful to market to an existing customer as a further extension of a known product line.”

Since the final consumer sale is ultimately in the hands of the OEM, what are the considerations for Geoworks in selling to the OEM? Mayer explained: “We sell a couple basic things. First of all, on a technology level, our operating system—while it is very feature rich, state of the art in terms of features—is extremely compact and efficient. And that means that it uses very little memory and uses a very low-power and inexpensive CPU.”

Mayer continued: “That means two things: low-cost devices and long battery life. These consumer electronic OEMs know that successful products have got to be at most $499 street price, and ideally in many markets, they’ve got to be $299 and under. So we uniquely offer them the ability to get at that price point, and to get unconscious battery life.”

Mayer stressed: “But there’s another thing that we sell that I think, in the end, is the most important and most differentiates us from our competition: we sell the ability for the OEM to have their own branded user interface. When we talk to the OEMs, what we hear them tell us is that they want to be able to own the user interface.”

“They don’t want a PC kind of business model where the OS [operating system] company owns the user interface and where [a customer] is going out to buy a Windows machine, or a Macintosh machine, or a General Magic machine. We want you to go out and buy a Sony, buy a Sharp, buy a Toshiba. So having their own branded user interface that they control is very important. They also believe that ease of use is one of the most important things to product success. Each of them think that they have unique knowledge in terms of how to design the easiest-to-use interface.”

First Generation Woes

But did any companies really take advantage of this opportunity? Mayer explained that for the first generation of the Zoomer, each vendor used the same device and ROM manufactured by Casio, thereby limiting the variety.

Mayer attributed this to several factors. “I think Tandy sees themselves purely as a distribution arm. They don’t perceive themselves to have that kind of consumer input or knowledge. They don’t have people there that could say ‘Ah, we need to change the user interface in this way.’ And AST, while often mentioned as part of the Zoomer, really got it in a very left-handed way by buying the rest of Tandy’s computer business. So it was really Casio that worked with us to determine the user interface.”

And what about the fact that GEOS is highly optimized for the Intel x86 architecture? While advantageous on one level, could it also be limiting on others. Mayer responded by offering an interesting perspective on the processor question: “I think that some of the things that people have fed back to us is that it could be limiting if there is some breakthrough in the RISC architecture that allows it to delivery better performance and better battery life than the x86 architecture.”

“However, I think there is another possible limitation to the x86 architecture and that is that a lot of these consumer electronic companies have a semiconductor arm. These semiconductor arms have an architecture that they may own. You’ve got a large contingency in Japan that is wedded to the MIPS architecture. So what you find is that our relationships are not quite as pure as we might like them to be.”

Mayer explained: “I mean you go to Motorola and they would certainly like it if you were PowerPC or 68000-based, and so forth. Virtually every company has a processor bent, and I think that is potentially the most limiting.”

The Call for Independence

In response to the issue of processor dependence, Mayer described an internal program underway to develop a processor-independent version of GEOS. He boasted: “I think we have a particular expertise in that we have developed operating systems for three different architectures already and I think we understand how to do that.”

Mayer described the advantages: “We’re now able to lay out a very credible technology path with our [future] processor independent operating system. So that’s an important piece in the sales process. However, at this point in time, there’s just no question about what processor family is best for these devices.”

Mayer also described the importance Geoworks is placing on the handheld, mobile computing market. “We do have an installed base of maybe 100,000 customers [on the desktop] and there is some synergy between the CCD [Consumer Computing Device] stuff. For example, when we developed fax software for a PDA, we can make that fax software available to our desktop installed base.”

“But we are not putting resources strategically behind what you would think of as the traditional desktop. In terms of the other plug-in products, like the dedicated word processors, I would say that ten to fifteen percent of our engineering staff is working on those; the rest are on handheld devices, organizers, communicators, and PDAs.”

A License to Compute

To questions about the actual licensing procedure between an OEM and Geoworks, Mayer offered a very complete answer. “The strict licensing part of it is a license to our operating system and maybe applications. In return, we get a per unit royalty. That per unit royalty is targeted at a percentage of their [the OEM’s] wholesale cost [for the device].”

Mayer continued: “We renegotiate the specific dollar amount on an annual basis. Depending on how many applications we may be licensing to them, and on their unit volume, that royalty rate is in the middle single digits as a percentage of wholesale. So for instance, if there is a device that is going to sell for $500, and has a wholesale cost of $300, we might get in the neighborhood of $12 to $15 per unit. It varies somewhat depending on unit volumes and depending on what applications in addition to the OS we provide.”

“That’s the licensing part of it. In addition, the typical arrangement we have with an OEM has us receiving some NRE [Non-Recurring Engineering] up-front for one-time engineering fees, generally for us to customize the user interface for them and maybe some other customization. We will also typically receive some money that is in the form of prepaid royalties. For instance the first year’s royalty they’ll pay to us in cash.”

Mayer also described some of the marketing consideration they receive with a license. “We tend to get pack-in rights so that we can put our literature in their consumer boxes, we get our logo on their device, and any registered names we get passed on to us. So there are other marketing provisions.”

This is Not Your Father’s Personal Computer

Though PDAs and handheld communicators certainly compute, they are a giant leap away from the current computer market. Mayer presented an interesting analysis of this by describing how Geoworks approaches the market. “What we try to do is to segment our market. We think one of the big differences in this market versus the computer market is the degree of segmentation.”

Mayer described that: “In the PC market, there is little if any segmentation, I mean it’s very monolithic. There’s basically one operating system—Cupertino would disagree—but fundamentally there is one operating system and one architecture for the PC. The PC industry moves in relative lockstep from technology to technology: from 386 to 486, from 5 1/4 to 3 1/2 inch disks, including [or not including] a CD-ROM in the package.”

“There are, right now, three natural price points for PCs: $999, $1499, and $1999. That’s not a very wide variation. So there’s very little segmentation in that industry. In the industry that we’re going after, there’s a lot of segmentation. There are devices like organizers, cellular telephones, PDAs, and mobile companions. And within those segments, we think there will be a lot of variation, far more than within the PC industry today.”

Mayer agrees that this is likely to change over time as market segments begin adopting features from other devices. Mayer conceded: “The segments will blur, I think that’s right. It’s going to be hard to tell one device from another in time because they’ll start to take on each other’s attributes. However if you look at the VCR industry where you can go buy a low-end, plain-vanilla VCR for $150, and then you can go get the high-end unit for $600, that’s a four times price variation versus two times in the PC industry.”

“So, while there will be a blurring of the segments, even the eventual market will likely have more price and feature variation. You might want to get, at the low end, a device that doesn’t communicate using wireless and, at the high-end, something that communicates using wireless, has a big screen, color, and maybe a built-in printer.”

“I think that our partners have tried various marketing techniques and the ones that have been most successful are companies that have not tried to do revolutionary things. It’s useful to market to an existing customer as a further extension of a known product line.”

Position, Position, and Position

In retailing, the often-told story is that success depends on three things: location, location, and location. Paraphrasing, one could argue that positioning may be the key for consumer success. Mayer described the efforts thus far: “I think that our partners have tried various marketing techniques and the ones that have been most successful are companies that have not tried to do revolutionary things.”

He continued: “It’s useful to market to an existing customer as a further extension of a known product line. It’s important that these products are marketed in a way that the customer understands. I think the Zoomer would have been more successful had it been marketed as a high-end organizer than as a PDA.”

Mayer explained in more concrete terms: “Casio is known in the organizer community. There are six million people walking down the street that are going to buy organizers and, of those who would have walked into a store and saw “organizer,” “Casio,” “pen-based,” and “high-end,” there’s a bunch that would have bought one.”

However, the question then becomes: how many people are interested in a $500 organizer? Mayer defended by reminding that: “there is a $499 high-end Sharp and Casio, and Sharp just introduced a keyboard-based organizer, the Zaurus, at $749. So there is a high-end. Now it’s not the volume of the market, but ten percent of the organizer category is still 600,000 units a year versus the less than one percent that PDAs have penetrated. So I would argue that the penetration would have been higher if done that way.”

Mayer continued to describe this strategy. “I think the companies that you’ll see are successful are the ones that have success in existing categories today and market a GEOS-based device as an extension of their current product line.”

Does less revolutionary mean that the devices bear physical similarities or is it again a question of positioning? Mayer thinks that the answer is both. He noted: “I think they will look similar, they will have similar form factors and there’s a reason for that. The form factors today have evolved to things with which people are comfortable.”

Finding the Right Partner

How does Geoworks position and market itself to its customers, the OEMs? Mayer explained that Geoworks is keenly interested in locating the industry leaders for a category and then targeting them head-on. Mayer described that: “We believe that there are leaders and there are followers, and we have tried to identify the one, two, or at most three leaders in any given segment because, the fact is, if you get those leaders and they do a product with you, the other people will follow.”

“And yet, you could go get the top three followers and somehow convince them to be leaders and the real leaders don’t care. They’re not looking back over their shoulder. They’re going to do it because they believe that they should do it, not because the second tier decided to do it.”

“So the first thing we do is identify the likely targets. Our sales cycle really starts out with us talking to them about the market. It’s not about GEOS, it’s not about our technology, and it’s not about how we can work together, it’s about a product opportunity for them. In the organizer category, it is the opportunity to take the organizer—which today is not integrated with the PC, has very poor data entry, and its pen, if it exists, is terrible—it’s the opportunity to take that and add those features to it and go after a much broader opportunity than the six million units.”

Mayer listed Geowork’s OEMs, consisting of Casio, Sharp, Canon, IBM, Hewlett-Packard, Toshiba, Brother, and Hyundai. Mayer also hinted of an additional OEM that is still unannounced, and described networking giant Novell as an equity investor and partner.

Hewlett-Packard and Novell

From this list, Novell and HP nearly jump off the page and beg for more details. Mayer took time to describe both. “HP sees themselves as a supplier of open hardware systems. I think the PC is one of those and I think they see other hardware as potentially fitting that mold. They look at the existing organizer, calculator, and handheld category—they’re the leaders with the HP 100 LX and 200 LX—and see the opportunity to broaden that proprietary closed platform to an open platform.”

Mayer continued: “At the same time, they don’t like what they’ve seen in the PC industry. If you look at their margins, HP’s margins on their PC products are under 25% while their margin on their calculator business is something approaching 50%. And the reason for that is that you go to the store to buy an HP calculator, you don’t go to buy an HP computer—you go to buy a Windows computer.”

“So I think they believe strategically that they need to supply open systems, but that there needs to be competition in the OS category, which describes fully both why they’re developing a product with us and why they invested in us. They want to make sure that this is more than a one horse race.”

And what about Novell? Mayer explained: “Novell’s goal is to have a billion NetWare connects by the year 2000, up from 50 million NetWare connects today. And the only way they’re going to get that is through growth in categories they’re not in today. They’re in the desktop market, and maybe that will give them 100 million connects by the year 2000, but not a billion—they’re off by an order of magnitude.”

“So things like interactive television boxes, PDAs, handheld devices, that’s what will drive their network connect rate up. They see us as an operating system than can enable the mass market by virtue of price point. And they want to make sure that all of our devices are NetWare capable.”

Commenting on the Verticals

Mayer is more than skeptical of Apple’s new-found focus on vertical markets. “Personally I think that’s going to be an ill-fated effort on their part.” While admitting that it’s in Apple’s interest to make the Newton increasingly viable, he noted that: “The challenge they’re going to face is that there are platform changes that need to be made in order to support third-parties doing those things.”

Mayer continued: “Can the Newton be successful at that? Technically yes. From a marketing standpoint, it’s going to take some time. Therefore, what we’ll likely do is follow our strategy and work directly with the people that are the leaders in those segments.”

Mayer described his preferred approach. “Rather than go to Casio and ask them to take the Zoomer and do what Apple’s doing going after the vertical, I’d rather go OEM directly to Symbol or Telxon.”

Matching Expectations

Either way, Mayer has mixed opinions concerning the overall success of his industry. He reflected: “I think that based on 90% of the metrics out there, both of them [Newton and Zoomer] failed. Under the metric that says relative to other first generation consumer electronics products, they did not fail. They have both been very successful as first generation products.”

Mayer attributes some of this to the design trade-offs that necessarily had to be made. “I think we made good trade-offs in getting battery life that was unconscious and getting costs down. I think that we made a bad trade-off in one critical area that really hurt, and this is where some complexity enters this whole idea of a design center. It’s not as simple and uncluttered as people would like to believe.”

Mayer elaborated: “The problem was that in order for the product to be successful, it had to be picked up by the retailers, it had to be actively marketed, and it had to be picked up by the trade press. Because even people who haven’t used a computer read the trade press.”

“What we failed to realize is that the trade press are a bunch of computer users, and they’re going to evaluate it from that perspective. In one critical area, at least, the Zoomer falls short—performance. It is too slow. For the average person using it—when I hand it to my wife who’s not a computer user—she has no problem with the performance. I have a problem with it because I know what I expect from my desktop. I think that’s a design trade-off that we made incorrectly. We could have lowered the battery life and increased the performance and we should have done that.”

The Future of GEOS

Mayer described new versions of GEOS, some already announced and others still in development. “GEOS 2.1 was a release that we announced and made available to our OEMs in October [1994]. It included several things, most notable among them however was that it vastly increases performance when switching applications. It also halves the amount of minimum RAM required.”

“We went from a megabyte to a half a megabyte and that’s a huge difference in the mass market. So version 2.1 halved the amount of RAM, further distancing ourselves from the competition, and further improving performance. I think it’s the first time an OS company has brought out a new revision of the software that’s been smaller and faster than its previous version.”

“[GEOS] version 2.1 halved the amount of RAM, further distancing ourselves from the competition, and further improving performance. I think it’s the first time an OS company has brought out a new revision of the software that’s been smaller and faster than its previous version.”

Mayer is optimistic for the for the coming year. He beamed: “I think 1995 is going to be a great year.” The difference? “The price point. The Newton and the Zoomer came out at $699. There’s a big difference between that and $299 where we’re going to see them this year.”