Goodbye, Radio Shack

Thoughts on the bankruptancy of Radio Shack on February 5th, 2015 from a former 10+ year employee of Tandy Corporation, today known simply as RadioShack - Frank Durda IV
(Last updated 10-Feb-2015)

"So this is it, we're all going to die" was a line from the Douglas Adams four-book trilogy, "The Hitchhikers Guide to the Galaxy". Today, that appears to be an appropriate phrase for the remaining employees of Radio Shack to be using, as their company is about six feet away from being six feet underground. Today, Radio Shack (known as "RadioShack" since a 1999 re-branding effort) has entered bankruptcy. Trading has been suspended on the stock on February 2nd, and up to that point the stock had lost 90% of its value over the past year. The stock symbol was delisted from the New York Stock Exchange the same day, and late on the 5th, Radio Shack filed for bankuptancy protection, under chapter 11.

During most of my tenure with Tandy Corporation (1982-1993), Tandy owned roughly twenty other divisions, along with Radio Shack. By the end of the 1990s, every division except Radio Shack had been closed or sold, and Tandy elected to rename itself after the one division that was still operating. Selling or closing those divisions was among the many mistakes that Tandy and then Radio Shack made over the years.

When did the march towards the end begin? I can give you the exact date: November 4th, 1978, when Charles Tandy died. There were thousands of bad decisions that followed that created this demise, but the buck stops in the CEO seat, and no CEO that came to the post after Mr. Tandy had the drive, intelligence, the BS-detector, and enthusiasm to make Tandy Corporation work and work well. Those that followed Mr. Tandy in the CEO/Chairman posts all directly contributed or passively permitted the actions that led to the demise of what Mr. Tandy created. Some CEOs did far more long-term damage than others, but all helped dig the grave.

Let's walk back to right after Mr. Tandy died and see some of the key events that got Radio Shack where it is today.

For the four or five years immediately after his death, Tandy Corp. ran on auto-pilot, executing as many of the plans that Charles Tandy had written down on "the list", or ideas that someone remembered him talking about, or they thought they heard him talking about, or was vaguely like something that he might have talked about.

Computers were the new hot thing when Mr. Tandy died, and that's where much of the focus was. By 1984, a good portion of the Tandy Towers office complex in Fort Worth Texas was filled with people designing computers, writing software, testing software, providing customer support for the computers, marketing and selling computers, international computer marketing, and more.

The Tandy computer business saw its most creative (and profitable) years while Mr. Tandy was alive and in the five years after his death, because management was still working from "the list" (and not yet making IBM PC clones). Starting around late 1983, it was external events, occasional bursts of luck, good timing, or all three that were the only things that kept Tandy Corporation going a bit longer.

It is certainly true that Tandy Corp sold far more computers between 1988 and 1992 than they did between 1978 and 1984, but those later clone computers were sold with a fraction of the profit margin that the earlier systems and their add-on purchases had brought to the company.

By making clones of what everybody else was making, it was getting to the point that the competitive "advantage" was frequently just which set of desktop speakers or electronic dictionary software got included with the computer. Beyond that, their computer might not have been any better or worse than the Tandy computer, but the other guys might have a brand name that had been nurtured and defended a better reputation. (At one point, Tandy was losing corporate bulk computer sales to identical computers made in the same Tandy factory, but that didn't have the Tandy name on them, and probably cost that client more.)

Between 1973 and 1976, Mr. Tandy recognized what became the Citizen Band radio craze and made that market one that Radio Shack owned. This was a new product area, sold to a largely new audience that weren't just the kit builders, experimenters, and those willing to bring the vacuum tubes from their TV into the Radio Shack, test them on the free-to-use tube tester, and buy some new ones which they would replace themselves, all examples of the bulk of Radio Shack customers that existed at that time. The CB market greatly expanded Radio Shack, but the CB radio market didn't have much depth. Once you had sold someone all the pieces they needed to get their radio on the air, they probably didn't make too many more high value purchases from anybody, including Radio Shack.

In the late-1970s, as the CB fad was peaking, Mr. Tandy saw the start of the home computer (the phrase "personal computer" had not arrived on the scene yet) revolution, and following the original trial Model I success, he launched a number of parallel computer model development projects, uncertain of which was best but willing to bet that one or some would be successful. (All had the prospect of having repeat purchases to buy software to make these computers do different things. Software could also have high profit margins, the very thing that CB Radio had largely lacked.) As it turned out, Mr. Tandy didn't live to see most of these models make it to the stores, but almost all were very successful and they or their successors were made and sold for another five or more years.

That brings us to around 1983 when the list of ideas that Charles Tandy left behind was unable to keep helping his company, because everything on the list had been done. Tandy management initially did nothing for what seemed like a year, then tried to innovate by merely making minor cosmetic changes to existing products, and then resorted to copying what others in the industry were doing. This copying of the competition started small, such as duplicating the style and layout used in Apple II computer manuals for the Radio Shack computer manuals, and even counting the number of colors of ink that Apple used and using as many colors as Apple did, up to what you could do within the fixed manufacturing cost that Radio Shack mandated. (Radio Shack would say that for next fall, they wanted a new computer model for their stores that would sell for $1,999 and the engineers had to work backwards through fixed minimum profit margins for the stores, shipping, warehouse and factory, and the number you ended up with was the maximum cost of the bill of materials for that not-yet-designed computer. Now, you could design a computer that fit within that price limit in its first production run, as well as define what features that computer would probably have. Yes, that is really how it worked at Tandy. Delivery schedules worked the same way, with the price and availability date defined before anybody knew what type of computer could be built for that price in the allotted time.)

Later, the copying of features and packaging of other computer makers evolved into copying/cloning IBM PC computers, and in a few cases, going to the extreme of using the same names and numbers on the option jumpers and plugs inside the computer. Sadly, this new least path of resistance was to be the future of Tandy computer design, which involved seeing what the other guys produced, then make a copy as fast as possible. Creating something new or unique was frowned on. Eventually, the only approved projects were those that copied something that was already successful in the marketplace, and for some years that was IBM, until IBM slipped up with the PS/2 designs, and then Compaq was the one that Tandy copied.

Those that had known Mr. Tandy always said he would never have played this losing reactionary game where you are never first, never out front, but those that ran the company and its divisions after his death largely stuck to this losing tactic in one market or another until the end.

Despite itself, by 1990/1991, Tandy had grown to be the worlds biggest manufacturer of personal computers. These machines were a far cry from the "Trash-80s" days of computers a decade earlier that suffered from loose wiring, cold solder joints, manufacturer recalled and fall-out parts and overloaded power supplies, and which were built with almost no quality controls. At the heights of production, just one Tandy factory was producing over 2,000 computers a day, was qualifying for ISO 9000 quality certifications, and was making machines that were sold under the name Digital Equipment Corporation, GRiD, Olivetti, AST Computer, Panasonic, and others. These computers were sold through a dozen different national store chains, not counting the sales via those thousands of Radio Shack, Tandy, Computer City, Incredible Universe, and Mc Duff stores that Tandy did own. And in about two years, it would all be gone.

The problem was that many of these divisions were run by, or their products were controlled by, well, idiots, morons, and in a few cases, probably persons who should have been prosecuted as criminals. There were few that could cause vast damage (which they did), but hundreds of other lower-level idiots/morons/criminals contributed to the rot.

When something went wrong, Tandy executives got in the habit of selling or closing entire divisions (without just getting rid of the idiots, and frequently, keeping the idiots and placing them in a currently healthy division within Tandy). More than once, business units were sold without even understanding how that business unit produced goods for other units, which must now be obtained elsewhere at higher costs. Combined with a profit center accounting model that Tandy Corp never really was able to manage, it meant that while every unit appeared to be making profits (including the free subway), the higher-ups couldn't even tell which divisions were bleeding money and which were doing fine. Quite often it wasn't until they separated the books as part of selling a unit that the truth came out about how that part of the company was doing, and what the negative impact would be on other business units.

In 1993, Tandy really got into the selling mode, and started selling off divisions and factories that made all the personal computers, then the factories that made TV antennas, wire and cable, store fixtures, and audio and video tape, and on and on. The hardware and software engineering groups went too, as did the house brand products, which meant that Radio Shack now had products in their stores that were the exact same brand you could buy elsewhere, and had to be sold without the enormous mark-ups the Tandy warehouse, shipping and retail stores previously added to the price of the Radio-Shack branded products.

By the time Radio Shack was closing the last of their manufacturing divisions (those that made wire and cables), the reality of the situation finally started to register with the management of the day. For years, Radio Shack stores had avoided direct comparison by selling unique products or ones different enough that the difference in cost could be explained-away or too hard to compare. By eliminating this organically grown ability to have unique products in their stores, the sale opportunity was now all down to price, and Radio Shack rarely did well in price comparisons.

Faced with the inability to compete head to head on the products that the traditional Radio Shack customer would buy or being successful but with a fraction of the profit margin that had been enjoyed in the past, Radio Shack started selling space in their stores to cell phone companies, to give them "instant storefront" space in markets where it was not worth it to have a store of their own. That, combined with initially good contractual agreements for residual payments for phones sold in those stores, helped keep Radio Shack going. Of course, in a not-that-uncommon moment of insanity for the company, one day Radio Shack demanded that these contracts be renegotiated, and lost the recurring payments that they were getting previously, pushing Radio Shack that much closer to the end.

In more recent years, Radio Shack also inflicted injuries on themselves by picking executives who falsified resumes' and got caught by the public, while another CEO refused to talk to the press at all during their tenure (a great way to get no or poor articles written about your company). Meanwhile, the bad decisions continued.

Another area where things got dumb was the real-estate department, building a brand new "we'll show ya, Compaq" (then the competitor to copy) seven story technology building (with every high-tech thing they could think of included) for a final total cost of $45 million (much higher than shareholders were told), and then sold the entire thing less than ten years later to the county, for $25 million. At that point, Radio Shack also built an entirely new campus a block away for the remaining company offices and abandoned their 1978-era buildings, then sold that new campus and immediately leased it all back. Later, Radio Shack gave back more and more of the campus space as the company shrank and they needed someplace to reduce costs, after getting rid of the plant watering service and finding that this also didn't save enough money.

This tactic of selling and leasing back means that Radio Shack doesn't really own much real estate today, so there won't be much for the bankruptcy court to sell-off, other than store inventory and fixtures.

Eventually luck had to run out, bringing no more big hits like "Zip Zap Cars", or "Instant cell-phone kiosks" opportunities to save and carry the company on for another three or four years. The part of the original Radio Shack customer base that still visits the stores can't find what they want in the parts bin in the back of the store (which are rarely stocked), and the rest of those customers have moved on, away from the build-it or fix-it-yourself world.

Radio Shack now finds itself selling phone chargers and cases (things you can get at Walmart or Bed Bath and Beyond), and has finally figured out that there isn't enough sales and margin in those items to pay the bills. Which brings us to today.

That's the short version of the decline and fall of the Tandy empire, and a more complete story about the events and people who delayed the end or pushed Radio Shack that much closer to the grave will be told one day.

As of this writing, Radio Shack will continue to exist as a sub-brand and occupy the back of the store at roughly half the stores that exist today, with the front of the store being occupied by Sprint, selling cell phones and associated items. The remaining stores will be closed. The claim is that the surviving stores will be co-branded, with both Sprint and RadioShack names, but Sprint will get top billing. I suspect that the RadioShack name will eventually be just a branding name, like Memorex or Realistic.

Now, all the above may make it sound like Tandy and Radio Shack was one giant waste of space, and its loss should not be mourned. Not so. I will point out that Tandy (particularly prior to 1999 or so) was a great benefactor of all sorts of charities and foundations, supporting public television, and a host of other non-profit organizations. Thousands of "Tandy Scholars" helped move that much closer to college and a better life thanks to that program. While Tandy did not pay the bulk of their employees well (store managers and corporate VPs and higher on the organizational chart got the gravy), at one time Tandy/Radio Shack had a huge work force, and in Fort Worth they were a major employer. Benefits to the community came in a variety of ways, such as keeping the old Leonards subway and associated parking lots open for free to the general public. As a result tens of thousands got to park free in downtown Fort Worth for many years, a courtesy that benefited untold thousands of county residents called in for jury duty at the nearby courthouses and would otherwise have had to spend far more to pay to park than the amount of money the jury duty payment would cover.

On a personal note, I may not have gotten as deeply into the world of electronics and computers if not for those blue cards hanging on the pegs at the local Radio Shack stores, selling me Texas Instruments SN7400, SN7402, SN7404 and other TTL parts in the early 1970s with prices ranging from $0.99(US) to $2.99(US), each (insanely expensive prices for the teenager of that day, working out to four or more mowed lawns per chip), but at least these magical things were available just a few miles away by bicycle.

Years later, I learned that many of these parts I had been buying with hard-earned money were actually fall-out parts that did not meet the manufacturers specifications, but Tandy retested and packaged the "less bad" ones and sold them. This certainly explains why some of my home-brew projects never quite worked right, and after a few of these incidents, I started making the then-costly investment of using sockets in the things I was making, so the bad chips could be replaced without risking more damage to my project. So, despite selling me so-so parts, at least they were being made available. Radio Shack got me through more than one science fair competition, and all of that made a difference in my life, long before I ended up being employed by Tandy.

I suspect that other kids (or kids-at-heart) growing up in the 1960s, 1970s and 1980s that were experimenters have similar stories, particularly those who could boast of having the first computer in the entire neighborhood, in a day when most people who had any contact with a computer knew it as a giant beast sitting in an air-conditioned building, that could be used by few and was never ever treated as something that you just could play with. The ability to own a computer in your own home was certainly a revolutionary thing, even if the original TRS-80 did crash rather a lot (Cass?) and sometimes jammed your neighbors TV.

So, Tandy Corporation was responsible for good things in addition to the bad and stupid things. What we have here is a case of the bad just not being addressed and it eventually ended up destroying the good.

I will miss having the instant solution of being able to run over to Radio Shack to get a RCA or DIN connector, a capacitor or some other electronic part in five minutes (vs waiting a couple of days when I buy such items over the Internet), but I will get over it. I will have to, as it certainly looks like none of us will have any choice. The end is indeed near. So long, Tandy aka Radio Shack.

Frank Durda IV was a Senior Project Software Engineer with the Tandy Electronics System Software division of Tandy Corporation, and worked on the TRS-80 Model 16, Model 100, Model 4, Model 12, Model 4P, Tandy Models 4D, 2000, 6000, 3000, 4000, numerous Tandy 1000 SL, TL and RSX versions, the Tandy Sensation!, the Tandy VIS home entertainment system, and numerous other computer systems designed and manufactured by Tandy Corp. Since leaving Tandy in 1993, he has been a Staff Engineer with AST Computer, the Chief Technologist with Internet America, and is currently the Principal Network and Product Architect at Hypercube, a telecommunications service provider.

Copyright 2015, All Rights Reserved.

Visit the home page and index