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San Diego Firm Misses 'Window' for Top-Notch Mini-Supercomputer

March 30, 1989|CHRIS KRAUL | San Diego County Business Editor

SAN DIEGO — Scientific Computer Systems, a manufacturer of mini-supercomputers, has made the painful discovery that building a better mousetrap doesn't always attract a world of customers to your doorstep.

Earlier this month, Scientific Computer discontinued its mini-supercomputer, the technical features of which had been lauded by industry observers. The announcement put an end to an effort that consumed 5 years and $50 million in venture capital and caused layoffs of 70 of the company's 100 employees.

Stephen R. Campbell, vice president of marketing, maintained Monday that the company is still a going concern with a valuable asset: powerful networking software technology called VectorNet. Company officials insist that they intend to continue developing and marketing the software but concede that an infusion of new venture capital totaling "less than $5 million" is needed in the next several months if the effort is to stay alive.

'Market Window'

Industry observers say the failure of Scientific Computers provides several object lessons, the most obvious being the high risk inherent in any high-technology venture. Others are the critical importance of introducing a product during the timely "market window," and how industry pundits can be dead wrong in projecting market demand for a given product.

Moreover, the problems of Scientific Computer System illustrate how a company's fortunes--and employees' jobs--can hinge on events beyond the control of its executives, even those with an abundance of market and technical savvy.

Scientific Computer was founded in 1983 by Bob Schuhmann, formerly an executive with Floating Point Systems, another pioneering supercomputer manufacturer, and proceeded to attract venture capital from 2 dozen of the brightest lights in the investment community including J. H. Whitney & Co., TA Associates, Adler & Co., and TVI. Local venture firms Henry & Co. and CFB Ventures, a division of California First Bank, also chipped in.

In 1986, the company brought out its SCS-40 mini-supercomputer on time and just as powerful as promised. Between a Cray supercomputer and a Digital Equipment or International Business Machines mainframe in processing power, the SCS-40 could process data at 40 megaflops--40 million floating point operations or calculations--per second. That's 10 times faster than a top-performing IBM mainframe and 1/20th the speed of a Cray.

Measure of Success

Scientific Computer had some measure of success, selling 10 units its first year of sales and 40 all told, at an average price of $550,000. Like other computers in its class, the SCS-40 was marketed to research institutions and companies that needed to process vast amounts of data, such as calculations used in aerodynamic modeling and oil field exploration, but which either could not afford or didn't need Cray-level computing power.

What distinguished Scientific Computer from its dozen or so competitors was that it billed its machine as "Cray-compatible" or designed to operate off the same "compiler" or operating software called COS that drove the giant Cray machines, said Christopher Willard, senior industry analyst with Dataquest, a market research firm in San Jose.

(Operating software translates instructions contained in applications programming into specific data-processing commands.)

The company believed early that it could persuade Cray Research of Minneapolis to share its operating software. Cray would see the benefit because SCS-40 customers would eventually move up to more powerful Cray machines, suffering minimal pain in adapting their expensive applications software in the process, the reasoning went.

At first, Cray's agreeing to "play ball" with SCS was not needed because the Minneapolis-based company had released an early version of COS to the public domain, meaning that anyone could design a computer system around it. But, soon after the SCS-40 was introduced, Cray brought out an advanced version of COS that it kept proprietary.

Scientific Computer was thus stuck with an outdated Cray compiler that applications software publishers were reluctant to support, a fact that reduced the appeal of the SCS-40.

"Cray did not show any favoritism with SCS by cooperating or providing software," said Jeffry Canin, an independent technology analyst based in San Francisco who formerly worked at Hambrecht & Quist investment bankers. "Cray did not perceive it to be in their interest to help start-up companies like SCS."

SCS then retrenched by developing its own version of COS in cooperation with Boeing, a system based on another Cray operating software package also in the public domain called CTSS. At the same time, Boeing bought a number of SCS-40s and agreed to market the SCS machine. But the partnership fell short of generating the sales that SCS had hoped for, partly because the Cray-compatible marketplace was too small a niche and thus unattractive to software publishers.

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