Connecting the Dot.Coms

A Big Reward

It worked. With a license from Data General and by using accessible parts, ROLM’s computers cost the military a fraction of what it had been paying and still earned the company a large profit on each sale. At first, ROLM didn’t have huge revenues, but the business plan was so solid that it was profitable by the end of its first year of operation—a stunning achievement.

Later, nervous about the stability of the military computer business, ROLM expanded into telecommunications by developing a computer-controlled business telephone system, or PBX. The move put the company in direct competition with AT&T, a strategy that initially terrified some of ROLM’s investors. “The conventional wisdom,” explains Maxfield, “was that you couldn’t compete with AT&T.”

But ROLM’s founders applied the same principles to PBX that they had to military computers: they produced a product that was smarter. And they flourished. Through the mid- and late 1970s, the company enjoyed explosive growth. The four founders used its success to create a different kind of workplace culture from the button-down, conservative atmosphere they had experienced as young engineers. It was a goal the founders shared at the inception of ROLM. Says Oshman, “We had our own ideas about giving people freedom to do their own thing and make their own mistakes and creating an environment where people felt free to do that.”

The laid-back, creative workplace has become almost a cliché of today’s Silicon Valley: at the height of the Internet boom, every day was casual Friday, and foosball tables, catered meals, and personal shoppers were the norm. But when ROLM was expanding, it was unique, even extraordinary. The company had its own campus, complete with elaborate landscaping, basketball and tennis courts, and a restaurant-quality cafeteria. Even more unusual, it allowed all its employees a three-month, fully paid sabbatical after seven years of service. The company also offered employees stock options long before it became vogue in the high-tech business.

By 1980, ROLM had revenues of $200 million and had become the second-largest player in the PBX market. Its success made it an attractive target for acquisition, and in 1983 IBM bought a 15 percent stake in the company. Just a year later, IBM opted to purchase ROLM outright for a valuation of $1.3 billion. As IBM ingested ROLM, the four founders recognized it was time to step aside. By 1988, they all were gone, using the financial freedom they earned through the company’s success to pursue different ventures.

Loewenstern moved to Colorado and has been a strong supporter of the Union of Concerned Scientists, which works to stop the proliferation of nuclear weapons. Richeson helped launch Beyond War, a foundation dedicated to disseminating the ideas of people who are committed to moving the world beyond war. Maxfield, who, along with Dunlevie, is a Rice trustee, worked for a time with a venture capital firm and continues to personally invest in companies he believes have potential. He also has been a consulting professor at Stanford, teaching a course, appropriately, on business management for engineering students.

Of the four ROLM founders, Oshman has remained the most heavily involved in the technology sector. In 1988, he became the first CEO of Echelon Corp., a company that links everyday devices to each other and the Internet through networks. The experience of building Echelon has been very different from that of ROLM. “At ROLM we were working within an existing market; lots of people were buying computers when we started,” he says. “At Echelon, what we’ve done is create not just new technology but also a new market. That’s a lot harder.” Yet Oshman has managed again to build another successful technology company.