The iPhone Before the Apple iPhone

3/26/12Follow @allegiscapital

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a low-end microcontroller originally designed for fax machines. The trio also wrote some rudimentary but groundbreaking software to allow basic Web browsing and e-mailing.

The end result didn’t look like any sort of product you’d find in a store; instead, it was a collection of bits of electronics laid out on an engineers’ bench. But at least it proved the concept that a new sort of “Internet appliance” could be constructed without the high-end hardware of the like of Sun Microsystems and Silicon Graphics, the companies that were then most commonly associated with the Internet of that time.

Project Mercury might have never been more than an engineering curiosity had I not stumbled across it at National, where I was consulting on innovation, in addition to preparing to launch a small early-stage venture capital firm.

In the middle of 1995, at the end of an otherwise routine meeting at National’s headquarters, my executive host at the company, Demetris Paraskevopoulos, without any fanfare invited me into a lab to take a peek at something a few engineers had been playing around with.

It looked like something my 11-year-old would build by running through the junk yard collecting pieces. When I was told it was a telephone integrated with a Web browser and a screen, I had an “Aha” moment. The ragtag collection of circuit boards lying in front of me had the makings of exactly the sort of post-PC Web-based computer that Silicon Valley’s keenest minds were beginning to predict. And for the project to have any kind of future, it would be clearly need to be rescued from National Semiconductor, which as a behind-the-scenes electronics supplier had no experience marketing products directly to consumers.

Thus was born what would become InfoGear Technology Corporation, the company that had as its goal conquering the world with what was promptly named the iPhone. InfoGear would occupy most of my time for the next several years.

My first task, with the help of Paraskevopoulos, was reaching an agreement with National, as InfoGear needed access not only to the technology associated with the iPhone, but also the engineers who had worked on it. Negotiations dragged on for months, with lawyers for National unwilling to offer any reasonable terms for the technology licenses that would be crucial for the iPhone’s success.

Discussions would have been broken off entirely had it not been for the direct last-minute intervention of National’s then-president Gilbert Amelio, who wanted the deal done and who basically ordered his team to make it happen. (Ironically, Amelio also played a supporting role in the story of the second iPhone, when in 1996, while chief executive at Apple Computer, he bought Steve Jobs’ NeXT Computer, setting off the chain of events that would lead to Jobs’ return to the company he had co-founded.)

By November 1995, structural and ownership issues had been worked out. I brought on board a strategic corporate partner for the project, a Morgan Hill company named CIDCO. The CID in the company’s name stood for “Caller ID;” CIDCO had grown to be a substantial public company by selling small units that attached to home telephones, and displayed the number associated with the incoming call. The devices were extremely popular: CIDCO sales exceeded $200 million a year and its NASDAQ stock traded above $30.

But CIDCO had a problem, because caller ID functionality was slowly being designed directly into phone units, eliminating the need for CIDCO’s separate device. As sales of its original product declined, the company was in search of new business opportunities. It saw the iPhone as a perfect fit, reflecting CIDCO’s legacy in telephony and its extensive ties with phone companies. The phone would be known as the “CIDCO iPhone” and the company would be renamed InfoGear.

While many things about the iPhone would change before the first model hit the market, the core ideas remained constant. First and foremost, this was going to be a consumer product, not something for uber-geeks. My mother had to be able to use it right out of the box. The sales target was … Next Page »

Bob Ackerman Jr. Ackerman is the founder and a managing director of Allegis Capital, an early-stage Silicon Valley venture capital firm that invests heavily in cybersecurity. Follow @allegiscapital

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