Eagle Computer: The rise and fall of an early PC clone

When it comes to 80s computer brands, few flew as high as Eagle Computer flew in 1983. The aptly named company was selling 12,000 computers a month and had been doubling sales every quarter under the leadership of a talented CEO. Then Eagle lost its CEO, Dennis Barnhart, in a crashed Ferrari on the day of its IPO. In this blog post, we’ll explore the reasons Eagle Computer fell, because there was more to it than just the sad story involving its CEO.

History of Eagle Computer

Eagle had been a leading producer of CP/M computers, entering the market somewhat accidentally. They were an offshoot of Audio Visual Labs, who made a product that could double as a general purpose computer. Audio Visual Labs recruited Dennis Barnhart, the vice president of marketing and sales at Commodore, in 1981. Audio Visual Labs spun Eagle off as a separate company soon after, and Barnhart became CEO.

Its first IBM compatible computer became a market leader and led to a $37 million IPO based on that computer’s sales and the expected sales of its followups. But on July 30, 1986, just a little over three years later, Eagle Computer went out of business.

There’s more to how it got there than the common story involving the Ferrari.

Eagle Computer enters the PC clone business

When IBM released its IBM PC 5150 in 1981, Eagle decided to pivot from CP/M to MS-DOS. Its first PC, the Eagle 1600, did not attempt 100% compatibility. Like many early PCs, it tried to do at least one thing a little bit better than IBM.

The Eagle 1600 received mixed reviews, due in part to its inconsistent compatibility.

Eagle was one of the first companies to understand the market really wanted 100% compatibility, rather than every company trying to one-up IBM in different ways that weren’t compatible with IBM or each other.

Eagle PC 2

It wasn’t long before Eagle had an answer in the form of the Eagle PC 2. The Eagle PC 2 was a nearly 100% IBM-compatible desktop computer that worked like an IBM PC while taking up less space on your desk. It didn’t need a fan, so it was quieter than an IBM PC.

It also had a nice keyboard garage under the unit to stash your keyboard in to free up desk space when you weren’t using the computer. That saved you from needing to buy a keyboard drawer.

Eagle PC Spirit XL

Eagle had followups waiting in the wings too. Eagle was set to release a portable model similar to the Compaq portable. It was basically a portable version of the Eagle PC II, with the same 4.77 MHz 8088 CPU as the PC 2 and the IBM PC. But it had a built-in monochrome monitor and it had one additional expansion slot.

I’ve heard people say the Spirit XL didn’t have the build quality of the Compaq Portable. But I’ve also heard it’s much easier to work on than the Compaq Portable.

Eagle Turbo XL

Eagle also had a second desktop model, the Turbo XL. Powered by an 8 MHz 8086 CPU, the Turbo XL ran twice as fast as an IBM PC, while retaining IBM compatibility. The Eagle Turbo XL was one of the first PCs to feature a hardware turbo button on the case, to reduce speed for programs that needed to match the speed of the original IBM PC.

Eagle’s three PCs received generally good reviews. The keyboard layout was a bit different from IBM’s, which some reviewers liked and some didn’t. But if you wanted IBM compatibility at a better price, an Eagle was a good choice in 1983.

The death of Eagle Computer’s CEO, Dennis Barnhart

Eagle Computer’s fortunes changed on June 8, 1983. That was the day Eagle filed for its initial public offering. The valuation made the CEO and other executives instant multi-millionaires. CEO Dennis Barnhart died in a car crash that afternoon under somewhat unclear circumstances.

Contemporary newspaper accounts of the crash vary. The accounts agree Barnhart and a second person, Sheldon Coughey, owner of a yacht sales company, were riding in Barnhart’s Ferrari 308 GTS near Eagle corporate headquarters. The accounts disagree on which of the two men were driving.

There is general agreement the driver took a turn in the road too fast, lost control of the car, the car tore out 20 feet of guardrail, flew into the air, flipped over an embankment, and landed on its roof in a ravine.

Barnhart died in the crash. He was only 39 years old. Coughey sustained critical injuries but survived and recovered. Two weeks later, news broke that Barnhart had a blood alcohol level of 0.14 percent at the time of the crash, above the legal standard of 0.10 in California.

It may seem odd today that it would be unclear which of the two men was driving. But wearing seat belts was not required by California law until 1986.

What really happened in Eagle CEO Dennis Barnhart’s car crash

Some accounts I’ve seen grossly oversimplify the situation and the backstory. Over the years, a few people with inside knowledge of the accident have come forward with some additional detail. And it paints a somewhat different story than the common one-line summaries.

From what I was able to piece together, Barnhart owned a 1982 Porsche 911 and a 1983 Ferrari 308 GTS. He bought the Ferrari about two months before the IPO and put personalized plates on it that read EAGLE B. Barnhart then started trying to sell the Porsche. Coughey visited Barnhart on July 8, 1983 to see the Porsche. Afterward, Barnhart asked if he wanted to take the Ferrari for a drive.

So the accounts that imply or outright say Barnhart celebrated the IPO by shopping for a Ferrari and a yacht, drinking too much, and crashing the Ferrari aren’t accurate. It was more like he got into a Ferrari with someone who wasn’t used to driving a car with that much power, and he wasn’t in the best condition to instruct him.

As for the yacht angle, there isn’t really any indication that Barnhart was shopping for a yacht that day any more than Coughey was shopping for a computer. I would expect Coughey mentioned yachts and Barnhart brought up PCs. That’s what good salespeople do. But they met that day to talk about Barnhart’s 1982 Porsche.

The story of Dennis Barnhart often gets repeated as a cautionary tale to young executives of startup companies. Often the story gets some details wrong. If it helps people make different decisions and save lives, that’s a good thing overall. But the stories sometimes include or imply things that didn’t happen.

The aftermath of Eagle losing its CEO

His contemporaries remember Barnhart as a talented electrical engineer and a very gifted team builder. The IPO valuation of $37 million was partly based on the company having doubled sales each quarter under Barnhart’s leadership. At the time, Eagle was selling about 12,000 computers per month.

The underwriter canceled the IPO, and Eagle conducted a second IPO a couple of weeks later, at a much lower valuation.

Executive Vice President Ronald Mickwee succeeded Barnhart as CEO.

The IBM lawsuit

Then, in February 1984, IBM sued, claiming Eagle had violated IBM’s copyright on its BIOS. The two companies immediately settled and no money changed hands. Eagle did not have to recall any of the units it had already sold, but withdrew its machines from the market until it could replace the BIOS with a non-infringing version. Eagle had reverse engineered the IBM BIOS, but had not done so in a clean room fashion the way some other companies did.

Like the stories of CEO Dennis Barnhart’s death, the stories of the IBM lawsuit have taken a life of their own. IBM didn’t sue and win. And IBM didn’t sue Eagle out of business.  The legal action from IBM was one of a series of events that led to Eagle’s demise.

Eagle Computer’s losses piling up

Two months later, Eagle posted a loss of $7 to $9 million, the first time they had ever lost money in a quarter. Eagle attributed the loss to delays in shipping the revised products and decreased demand due to the legal question.

Unfortunately for Eagle, the losses kept coming, and it never turned a profitable quarter again. Eagle’s portable PC and Turbo XL did reach the market, but weren’t enough to turn things around. Its PCs generally received good reviews and its revised BIOS retained a very good level of IBM PC compatibility.

But the legal action from IBM cast a cloud over the operation, and perhaps the buying public lost confidence in Eagle. Between the loss of Barnhart as CEO, the IBM lawsuit, and resulting executive shakeups, Eagle was in the news regularly in 1984 and 1985. But the news talked more about the company than about its products.

New competition

In July 1984, Phoenix Technologies released its non-infringing BIOS, which lowered the barrier of entry. At that point, anyone who could read a schematic and could come up with a $290,000 license fee could introduce an IBM-compatible computer. Within a year, dozens of other companies were doing just that, and with no legal cloud over them. Phoenix made sure everyone knew their BIOS was a clean room implementation and took out a $2 million insurance policy to back it up.

By the end of 1985, the PC to get was a Leading Edge Model D or one of the Tandy 1000 series. Both Leading Edge and Tandy used a Phoenix BIOS. As did a legion of others. Most of the new competitors undercut Eagle’s price, forcing Eagle to sell computers at or below cost to compete.

IBM wasn’t standing still either. Big Blue aggressively cut prices itself as all of this was happening.

What happened to Eagle Computer and its employees

Eagle attempted to cut costs throughout 1984 but couldn’t turn things around. The summer of 1984 was particularly brutal. In July, cofounders Charles and Gary Kappenman and four other executives resigned, and Eagle laid off 85 employees. Further layoffs followed, and by September 1984, Eagle had shrunk from 330 employees to 65. In September 1985, it moved manufacturing to South Korea and announced plans to move upmarket into multiuser systems, which it hoped would be more profitable than PCs. That system, the Eagle Concorde, never reached the market.

Mickwee resigned as CEO in late 1984 and left the company entirely in February 1985. Cofounder Gary Kappenman returned to replace Mickwee as CEO.

Between January 1984 and June 1986, Eagle lost more than $40 million. Eagle filed for Chapter 11 bankruptcy in June 1986. At the time of its filing, Eagle had $200,000 in assets and $7.2 million in debt. When its creditors wouldn’t restructure its debt, on July 30, 1986, Eagle filed for Chapter 7 bankruptcy and liquidated.

Ultimately it was a combination of three or even four things that felled Eagle. The loss of Dennis Barnhart meant a smaller cash infusion when Eagle conducted its second IPO. Eagle lost momentum at a critical time in 1984 due to the IBM lawsuit. And these two things made it harder for Eagle to compete when the barrier for entry into the PC market suddenly got lower in mid 1984. Finally, the Eagle Concorde multi-user computer was a drain on resources that never produced revenue.

What would Dennis Barnhart have done?

It’s easy to imagine that with Dennis Barnhart still piloting, Eagle Computer would have survived the storm. He may have handled certain situations differently than Ronald Mickwee or Gary Kappenman did. But critically, he would have had more resources to work with as well.

Barnhart came to Eagle from Commodore, a company who specialized in low-cost computers. Presumably Barnhart would have been faster to move production overseas and less inclined to try to undertake the costly Eagle Concorde project. Sadly, we’ll never know.

Eagle Computer is one of the more interesting stories to come out of the 1980s computer market. It’s also probably the most tragic.

Wilkinson Software and its connection to Eagle Computer

As Eagle came to an end, several former employees formed a new company, Wilkinson Software, to provide an upgraded BIOS. Wilkinson also sold other replacement parts like power supplies. Today when you find an Eagle PC with a BIOS bearing a Wilkinson copyright, or any other parts with Wilkinson’s name on it, that’s the connection. Wilkinson also sold software to emulate CGA on a monochrome monitor. That product worked on any PC.

PC magazines were still referring readers to Wilkinson Software in their Q&A columns as late as 1989, so Wilkinson seems to have had a reasonably long run.