ComByte’s collapse traced to tardiness in reaching market

FORT COLLINS — Trade publications across the nation called ComByte Inc.’s internal tape drive for personal computers one of the most innovative products of 1995, on par with the hugely popular Iomega Zip Drive.

But by the time 1996 rolled around, the Windows-compatible Doubleplay drive, which allowed PC users to install a quarter-inch tape cartridge drive in their computers without sacrificing a floppy disk port, was six months late to market and by then, was not keeping pace with its memory capacity.

“We had started to market the product in February of 1994, and I believe, at that point in time, the capacity and price were perfect,´ said Bruce Roemmich, a ComByte boardmember and vice president of marketing. “But our lab got a little behind the eightball. We were six months late in delivering, and by the time we got to market, our capacity was on the trailing edge of the technology, and the cost of manufacturing had not been reduced.”

ComByte had been actively soliciting the sale of Doubleplay technology, but was unable to locate a buyer or additional investors, and on March 1, at the direction of its board of directors, ceased operations.

The company is now in the process of liquidating its assets, though according to one investor, there has been little interest in the technology.

“It has been offered, but we have not seen any significant interest in it,´ said Carl Carman, general partner in the Boulder-based venture-capital firm Hill, Carman Ventures.

Privately-owned ComByte opened in June 1993, with former Colorado Memory Systems Inc. executives Edwin L. Harper and John Moinester as chief executive and chief financial officer respectively. At its high point, the company employed 50 at an Innovation Drive manufacturing and product-development facility.

Doubleplay provided up to 800 megabytes of storage capacity to PC users, in either an internal drive that easily plugged into the hard-drive expansion bay, or an external version, that boasted a parallel port allowing users to access their printers without disconnecting the tape drive.

“We got a lot of press and a number of awards; we were selling lots and lots of product,” Roemmich said. “But it is a tough market for a startup company to enter, from a margin standpoint.”

ComByte’s board included three venture-capital investors. Roemmich said that although the company did have cash on hand, the investors were unwilling to make further infusions to a company that promised slow, steady growth.

“Typical venture guys expect a 15-to-1 return on their investment,” Roemmich said. “The product wasn’t going to return what they’re used to.”

“We had a little different view of it,” Carman said. Hill, Carman was ComByte’s first investor.

“We thought that the market conditions for the product had changed immensely,” Carman said. “They did a good job of building what they set out to build. The problem was that the original business proposition was to sell a combination floppy and tape drive for a cost considerably less than the combined price of a floppy drive and a tape drive.”

Carman said that by the time Doubleplay reached the market, the price of floppy and tape drives had collapsed to the point that the combo product “had to sell for more than the price of the combined price of the two units.

“The market conditions had changed, and the premise for the company’s existence was no longer there.”

Carman said the investors based their decision to close ComByte on the strong likelihood that the computer peripheral market will remain static.

“We did have quite a bit of money left, but we chose to close the company and return the money that we had to creditors,” Carman said. “We felt it was the proper thing to do, since there was other people’s money at risk.”

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