Hayes’ Influence Failed to Bring Lasting Success
A year ago this week, Hayes Corp. was planning parties to celebrate its historic 20th year in the computer modem business it almost single-handedly created. The company even issued a 20th anniversary commemorative modem, signed by founder Dennis Hayes himself.
But the legendary Atlanta company was unceremoniously unplugged this week, logged off for good after two decades of building devices that paved the way for today’s Internet, and cultivating a brand that became synonymous with modem technology.
Hayes was once such a dominant force in modems that it owned 50% of the market, and many other brands advertised their products as “Hayes compatible.”
But Hayes was often more influential than successful. The company’s shutdown this week followed its second trip to U.S. Bankruptcy Court in the 1990s and years of turmoil that included patent disputes, executive infighting and gradual surrender to competitors who could build modems faster and cheaper.
“It’s been just a tragic time,” said Ron Howard, chief executive of Hayes. “We worked so hard to restructure the company and came so close.” Asked to describe Hayes’ legacy, he said, “In the beginning there were three companies: Microsoft in software, Apple in hardware and Hayes in communications.”
Forced by creditors who had run out of patience, Howard shuttered Hayes’ operations on Monday, laying off about 250 employees and leaving only a skeleton crew to prepare the company for liquidation.
Howard said Hayes owes more than $62 million to creditors and an additional $50 million to preferred shareholders. The company had filed for Chapter 11 bankruptcy protection in October, and its stock, which traded as high as $13.125 early last year, has since plummeted to pennies in over-the-counter trading.
Analysts said Hayes’ demise is a consequence of the ongoing consolidation of the fiercely competitive modem business. Motorola Corp. bowed out of the industry 18 months ago, joined by Global Village, once a prominent maker of modems for Apple computers.
“When Hayes was in its heyday, modems were expensive and there weren’t a lot of players,” said Lisa Pelgrim, an analyst at Dataquest Corp. “Now it’s much more of a commodity business, and Hayes was not able to keep up with bigger players or the Taiwanese manufacturers who undercut them.”
Hayes’ share of the $5.1-billion dollar PC modem market shrank to 3.1% last year, Pelgrim said, compared with nearly 40% for U.S. Robotics, a unit of Santa Clara-based 3Com Corp. Still, even executives at 3Com say Hayes deserves a prominent place in computer industry history.
“When I think of Hayes, I think of them as creating and popularizing communications,” said Neil Clemmons, vice president of marketing at 3Com. “They played a big role in defining an industry.”
Like many technology legends, Hayes had humble beginnings. The company was started on Dennis Hayes’ dining room table in Spartanburg, S.C., where he and partner Dale Heatherington built their first, 300-baud modem.
More importantly, in 1981 they created the Hayes AT command set, common instructions for computers to make telephone calls. It quickly became the industry standard, meaning that no matter what kind of software you had, or which brand of modem, your computer could communicate with others as long as they were Hayes compatible.
By 1985, Hayes’ sales had hit $120 million, fueled by the surging popularity of home computers. Sales peaked at $250 million in the 1990s, when employment reached 1,200.
But, ironically, the Internet age has been brutal to Hayes. Competitors flocked to the industry and, in 1993, U.S. Robotics dropped prices by 40%, turning a once-profitable business into a high-volume, low-margin scramble.
Hayes entered bankruptcy in 1994, casting a pall over its reputation just as PC makers began bundling modems in almost every product. Hamstrung by its finances, it fell behind technologically as other companies rolled out faster modems.
Hayes rebounded briefly in 1996, but the company’s founder, who remained chairman until recently, is said to have been too proud to take necessary steps. He resisted an IPO until it was too late, critics say, refused to shut down the company’s inefficient Atlanta plant, and spurned lucrative buyout offers.
Hayes couldn’t be reached for comment. In a recent article in the Atlanta Journal, he conceded mistakes, but said, “We built the onramp to the Internet that everybody’s using. I feel very good about that.”
* CISCO TO ENTER HOME MARKET: Cisco Systems is set to unveil a new cable modem, the first to offer regular voice connections. C1
