One More High-Tech Hope : Veteran Entrepreneur Targets Computer Hackers
The lobby at Codercard Inc.’s corporate headquarters in Irvine is so cramped that for two people to enter or exit, both must turn sideways. Mercifully, there is no receptionist to complicate the maneuver.
More than space is tight at the computer security card manufacturer. Sales are almost non-existent, and profits are still only the stuff of dreams.
Still, Codercard founder Robert W. Herman, a weathered, 64-year-old high-tech veteran described as a “dreamer and visionary,” labors on, without benefit of a salary, in hopes that his computer access devices will find the mega market he thinks they deserve.
Herman’s minuscule offices, unpaid status and relatively obscure existence hardly seem fitting rewards for a man characterized by one protege as the “father of high-tech entrepreneurism in Orange County.”
Veterans of Decision Control Inc., the Irvine electronics company Herman founded in 1959, claim that as many as 30 Orange County technology companies can trace their ancestry to DCI.
Roots Traced to DCI
Companies that trace their roots to DCI are a virtual “Who’s Who” of the county’s computer community. They include the Microdata unit of McDonnell Douglas Computer Co., AST Research Inc., General Automation Inc., Computer Automation Inc., Technology Marketing Inc. and Emulex Corp.
That DCI’s second-generation and, even, third-generation offshoots are more financially successful and recognized than his current firm doesn’t faze Herman.
“It’s just the breaks,” he says with a shrug, acknowledging that Codercard is hardly a household name. “If I had wanted to have the biggest company in the world, I wouldn’t have done it the way I did. But I was just having fun, and doing what I wanted to do.”
Now involved with his fifth business venture, Herman is still doing what he wants.
Although he calls it his most difficult undertaking yet, Codercard puts Herman where he has found himself throughout most of his 40-year career--on the cutting edge of technology without much of a financial safety net or even the assurance that a market exists for his product.
“He’s a visionary, a bit of a dreamer,” says David Methvin, a former DCI engineer who founded Computer Automation in the mid-1970s. “At DCI, he kind of smiled a lot and looked spacey. I’d sometimes think he didn’t have both feet on the ground.”
Some might reach the same conclusion today.
Despite its promise of offering government agencies, particularly defense installations, as well as banks and other businesses sorely needed security against computer hackers--people who surreptitiously tap into and wreak havoc with computer systems--Codercard has yet to achieve the market breakthrough Herman believes is imminent.
Codercard’s devices, which resemble credit cards and contain a fingertip-size microcomputer, provide authorized holders with access to computer information through a series of maneuvers called “electronic handshaking.”
In the unlikely event that a would-be hacker tampers with a card--the odds of successfully unraveling the handshake code are said to be 4 billion to 1--police or security personnel are summoned automatically.
Potential customers, including super-secret divisions of the National Security Agency, are said to be interested in the devices, but Codercard has not made a major sale since it began operations in 1983.
For the fiscal year ended June 30, 1986, Codercard reported sales of only $227,000 and a loss of $250,000. For the nine months ended March 31, 1987, the company logged sales of $107,000 and a loss of $151,000.
Herman maintains that a breakthrough is “close.” But he also acknowledges that he made the same prediction two years ago. “I could be wrong,” he freely admits. “I’ve been wrong before.”
He is speaking the truth.
After parlaying his initial $1,000 investment in DCI into a $4.5-million company with 450 employees by 1967, Herman and his partners sold the operation to Varian Associates. For his share of the company, Herman received Varian stock worth about $6.5 million.
From that point, the entrepreneurial going got tougher. His next venture, which involved computerized photocomposition for the printing industry, hit the market a bit ahead of its time and failed. Herman, who had bet his DCI sales proceeds on the venture, was broke.
Herman’s next company, which made automated weather stations, was a modest hit. He sold it in the mid-1970s to Genisco Technology Corp. and plowed the proceeds into New World Computer Inc., which was to make high-speed computer disk drives. But by 1981, New World was on the verge of collapsing, and Herman left.
“He’s a visionary kind of guy,” says Harry Hilker, one of Herman’s original partners at DCI. “He certainly understands technology, but he doesn’t like to get down in the nickels and dimes of it.”
Larry Goshorn, DCI’s chief engineer and later the founder of General Automation, says Herman’s style has been to leave day-to-day operating details to underlings. “He let the inmates run the asylum. It was absentee management, the philosophy that if we were going to make it, we were going to do it ourselves.”
Adds Methvin: “He was out dreaming on the next idea before he had executed the last one. He got bored quickly.”
Although such traits may have contributed to Herman’s spotty record, former employees say Herman’s light hand at the helm offered the kind of training they needed to learn how to become entrepreneurs themselves.
Goshorn, who became a millionaire 20 years ago at the age of 32, says Herman instilled in his team members the belief that they could shoot for the moon and have a good chance of hitting it.
“We all learned to be entrepreneurs by learning how to survive at DCI,” Goshorn says. “There is no doubt in my mind that he is the father of high-tech entrepreneurism in Orange County.”
Herman, who has not kept up with many of his former employees and partners for the last several years, appears indifferent to such accolades. His life, he claims, is hardly the stuff of the high-flying, high-tech entrepreneur.
For most of the last 18 years, Herman, a grandfather with two grown children from his first marriage, has shared a Laguna Beach cliff-top home with his girlfriend, a UC Irvine biochemist. The two enjoy skiing, backpacking and “offbeat traveling,” a term Herman uses to describe their camping trips to Hawaii, Fiji and New Zealand. On domestic backpacking adventures, they are joined by their pet boxer, who carries an eight-pound pack.
Herman says he rarely watches TV, reads only an occasional comic strip in the newspaper and rarely picks up a novel for fear he will become so engrossed that he will not sleep until he has devoured it.
Most of his time, he says, is spent trying to make a success of Codercard and improve his own “financially indeterminate state.”
Herman owns 10 million shares of Codercard stock with a market value of about 25 cents per share for a personal stake of $2.5 million, but it would be difficult to convert his shares into cash unless Codercard becomes successful.
“On paper I look pretty good,” he confides, “but I’ve got to make the company happen before I can get it.”
Despite the struggle staring him in the face, Herman has already picked his next venture-- “something in medical imaging.”
“You know,” he says of Codercard, “this isn’t the best idea I’ve ever had. I just got stuck with it.”
And tapping his balding pate, he adds, “I’ve got better ideas in here.”
