Computer History Museum

Zilog was founded by Intel veterans Federico Faggin and Ralph Ungermann in 1974.* Their first microprocessor, the Z80, was a hit. Intel's products, the company's Dave House admitted, "kind of got stomped on by Zilog with their Z80." But Zilog's success brought trouble in an unlikely form: Exxon.

First, Exxon made a large investment in exchange for 51 percent of the company. Then, they bought Zilog clean out, despite its next-generation 16-bit microprocessor, the Z8000, not having tremendous success. It was downhill from there. And by 1985, having invested a billion dollars, Exxon sold the company back to some of its employees and the investment firm Warburg Pincus.

I ran across this story while reporting on the history of Intel, and in those key days during the early 1980s, right before IBM decided to use Intel chips, Zilog was providing legitimate competition for the now giant company.

What I soon discovered, though, was that Exxon was not alone in trying to make money off the computing boom. As Forbes recalled in 1997, many companies went chasing tech growth and came up empty-handed or worse.

It seemed like a good idea at the time. Schlumberger was flush with cash from its oil well logging business. Fairchild Camera & Instrument was a pioneer in the semiconductor industry and in need of capital. Semiconductor chips didn't seem too far afield from Schlumberger's expertise. Didn't oil well measuring tools use electronics heavily? Schlumberger wrote out a check for $425 million to purchase Fairchild. This was in 1979, just before the great boom in personal computers got underway. Schlumberger should have made billions of dollars from its acquisition. But it didn't. In 1987 it sold Fairchild at a $220 million loss to National Semiconductor. You could make a long list of merger fiascos in computers and electronics: Xerox paying $900 million for mainframe manufacturer Scientific Data Systems in 1969. Exxon buying Zilog, a microprocessor company, and then some word processor companies, into which it sank $1 billion before selling and writing off the businesses. AT&T losing $4 billion on NCR during a bull market.

There was something about the way these companies managed their businesses that seemed destined to run highly innovative chip companies into the ground.