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It is one of Europe's greatest technology startup stories. A Young student in 1950s West Germany Motorcycling across the country, offering companies a computer. That young student built an empire from scratch. One of Europe's biggest, most famous computer companies. Then it all came tumbling down. In today's video, one of Europe's most well known computer companies, Nixdorf Computer. This video is brought to you by the Asianometry Patreon Heinz Nixdorf was born in 1925 in Paderborn, a city in the West German state of North Rhine Westphalia. Born to a traveling salesman and a homemaker, he was the eldest of five children. The 1930s were hard times for Germany. Nixdorf's father lost his salesman job, but found work at the railway company. But then, soon after, the elder Nixdorf was drafted into the German army, Heinz had to step up, recalling not being able to go to secondary school because he had to support the family. In 1943, at the age of 18, he too was called to the Luftwaffe school and like many in his situation, enrolled in the Nazi party. However, with the Luftwaffe low on planes and fuel, the school was disbanded and Heinz moved to the Panzer division. After the war's end, he evaded capture and returned to his hometown. Mixdor's father had died on the Eastern front. So now, at just 20 years old, Heinz had to work the farm to support his mother and siblings. He would not be able to enter University until 1947. Enrolling at the University of Frankfurt later in 1951, he, as a student trainee, met the physicist Dr. Walter Sprig, who then worked at the German subsidiary of Brimmington Rand. Rand had hired Sprit to help build West Germany's first electronic calculator. Nixdorf joined with Sprick, who taught him how to build punch card and vacuum tube based calculation machines. But then Rand abruptly pulled out of the project due to rising domestic competition, as well as to focus resources on developing their Univac computer for the US Market. Like many others during the time, Nixdorf came to believe that things were changing. Back in those days, the dominant device for calculating and keeping track of data was the tabulator, an electromechanical tool hardwired to count and sort data sorted on punch cards. The tabulator dominated the first half of the 20th century. However, the rise of stored program computers made it possible to run many different programs and capable of doing more than just adding at speeds that tabulators cannot match. Computers were simply better and Remington Rand, pulling out of Germany changed nothing about that. Nixdorf suggested that he and Sprit together start their own company. But the latter opted to work for IBM where he did pioneering work on automated text readers. So Nixdorf abandoned his university studies and chased the entrepreneurial dream with all the energy and enthusiasm of youth. He motorcycled across West Germany, offering various companies a computer for $8,000. Eventually, he met the man in charge of punch card machines at one of the country's largest power stations, Rwe in the city of Essen. It was a time of optimism and growth in Germany. RWE somehow was convinced to give the young student a room and 30,000 Deutschmarks to build a vacuum tube based calculating machine for them. To Sprick agreed to help Nixdorf, even personally guaranteeing the 30,000 mark sum. Thus, in July 1952, Nixdorf founded the Laboratory for Impulse Technology or LFI and hired his first worker. Together they successfully delivered their first electronic calculating machine to rwe. Nixdorf was a decent enough engineer, but his sweet spot was more on the product and business side. The man saw how computers can revolutionize the way small businesses operated and rode that wave hard. In addition to their business supplying calculating machines, LFI expanded into component supply. One of Europe's major computer companies in the 1950s was the French enterprise Bull. They have long been France's national compute champion. Battling IBM's French subsidiary in the punch card tabulator industry in the 1950s, Bol seized on the growing computer revolution to launch a series of stored program vacuum tube based computers called the Gamma. These offered a compelling upgrade path for bol's existing users of punch card tabulators. To enter the West German market, Bull signed an exclusive distribution deal with a mid sized German company called Xacta. Xacta in turn struck a supplier relationship with Nixdorf to buy certain vacuum tube based electron components for these BOL machines. For Nixdorf, it was a stroke of good luck. Xacta ordered electron tube and multiplier components from LFI for bol's machines. LFI also contributed a transistorized multiplier unit to Exacta's 1958 Multitronic 6000, a very successful electromechanical accounting machine that sold over 2000 units. Xacta's commercial director Hans Bringer also had deep connections to Germany's banking community. Such connections would help open up what would later be a critical space for Nixdorf. By 1957, Nixdorf employed 24 people and produced nearly a million deutsche marks in revenue. A very successful and thriving business. In 1959, Nixdorff relocated LFI from Essen back to his hometown of Paderborn. The company would come to employ 10% of the town's entire population. The Xacta relationship helped lift lfi and thanks to them, Nixdorf did not have to initially spend time and money building a sales network. But being so dependent on a single customer is dangerous. In the late 1950s, another company called Wanderer started buying Xacta shares. By 1961, Wanderer succeeded in taking over the company, changing the management and taking component business away from LFI. At the same time, Bull in the early 1960s suffered a major downturn due to new competitive products from IBM like the IBM 1401. Thusly, Bull greatly cut their own orders with LFI. A very painful double whammy. Were it not for the success of the multitronic 6000 multiplier, LFI would have collapsed. Nixdorf considered selling to a competitor called Kienzel before agreeing to supply commodants for a new business computer. For that Kienzel was planning. Things then turned around when he managed to lure a talented computer designer named Otto Muller to Paderborn. Muller began his career at the famed German radio and television company Telefunken, working as part of a small team in a small town called Bacnan. In the 1950s, he and his team produced a rather powerful digital general purpose mainframe computer called the TR4 as part of a technical feasibility project relating to the electronic switching industry. Telefunken did not initially intend to sell this computer. Even after West German University saw the TR4 and started buying it for scientific computing. Telefunken never considered themselves a computer company. So when the Bacnang team next designed a medium sized computer for commercial data processing called the TR10, management sort of pooh, poohed it. A Telefunken internal analysis claimed that the TR10's sales can never pay back the investments needed to be made into hardware and software. So they dropped it after only a few prototypes were made. Disappointed, Mueller left to join IBM in research behind. Nixdorff had seen the TR10 at the 1964 Hanover Fair and recruited the designer and his wife to build a version of the TR10 for for Nixdorf. To do this, Nixdorf diverted components originally meant for the Kienzill project. A daring move to hold down a competitor's project while they worked on their own. At the 1965 Hanover Fair, LFI presented their breakthrough computer, the Wanderer Logatronic. The Logatronic was a desktop computer for the small and medium sized business. It essentially created a new category of electronics devices called Mittleere Dattentechnik. This German phrase might be translated as mid range computing. And that phrase might lead you to imagine something like Deck's game changing minicomputers, smaller versions of IBM's Big and Chunk mainframes. But in the context of West German computer history, the concept stands for a bit more than that. Some scholars prefer to translate the phrase as medium data technology, as it sort of better signifies its roots. Since the early 1900s, small and medium sized German businesses used mechanical machines to do their bookkeeping or accounting flows. Notably, they had these special bookkeeping machines with features of both typewriters and calculators called buchaltungmaschina. Clerks spent all day entering invoices, payroll items, receipts and other ledger entries. Then, at the end of the day, they use the bookkeeping machines to print out the ledgers and associated reports for management to review. Let's say a clerk wants to update a transaction ledger. With these older machines, they had to first take a paper journal entry ledger card from the box, check to ensure that it's the right one, and then insert it into the mechanical bookkeeping machine. The accountant then presses a button which causes the machine to move the card to down to a blank space where the next entry should be. After typing in the journal entry, the accountant hits a button to manually eject the card. I like to imagine that sounding like the M1 Garand. Finally, the clerk returns the card back to the proper box. This process was manual and error prone, but in those days no device existed to computerize it like an AIBM. Mainframe was unsuitable. Such computers filled 20-40 square meters entire rooms, and you cannot own it, only rent time on it, and you had to hire an army of expensive programmers to write code for it. Frankly, it's overkill. The Logotronic was the first electronic computer suited to address these medium data office devices and workflows. The device was defined by the use of this nifty magnetic ledger card, which combined a regular paper ledger card with a machine readable magnetic strip. It greatly automated the old process. As former salesman Michael Pine recalled in an oral history, when you inserted a magnetic ledger card into the Logotronic, the machine read data out of the card's magnetic strip and automatically brought up the right blank space for manual entry. The clerk next types in the latest transaction as normal. The machine then updates the balances for this new transaction twice over, first visibly on the card itself and then second on the card's magnetic strip. This unique combination of machine readable and human readable data help reduce clerk errors While also making the computer's output inspectable and verifiable. It is an incremental and rather Germany specific step towards computerization. The Logotronic was not the first product that did this, but theirs was the gold standard. Thanks to the use of transistors and core memories, the Logotronic was small enough to fit inside a desk. It came with peripherals like printers and punch card readers. And very importantly, it did not cost an ARM and a leg. Though LFI designed and built the Logotronic, it was first sold and distributed by a third party, the aforementioned firm Wanderer. But after Wanderer fell into financial turmoil, Nixdorf bought them in April 1968 for about 17.5 million marks. And with that, the Logotronic was then renamed to the Nixdorf 820. The Wanderer acquisition gave Nixdorf a valuable large sales distribution network through which to sell their computers. This all happened at the exact right time. Because medium data computing in Germany began to take off in the late 1960s. Two out of every three small digital computers sold in West Germany were sold by Nixdorf computer, with 15,000 total sold by 1970. But by the early 1970s, the 820 started to show its age. Competitors were coming out with similar devices. An old fashioned core memories were giving way to more capable magnetic hard disk storage. Nixdorf responded with several new products to help businesses input data. They struck a deal with a Massachusetts based company producing data entry systems called entrix. They sold Entrx's data entry products in Germany as the Nixdorf 620. They would later acquire Entrix outright, merging them into their American subsidiary. Then in 1975, Nixdorf brought out its big successor to the 820, the 88 line of magnetic disk drive based computers. The first model of the line was the Nixdorf 8870, a disk based computer with time sharing. It ran a complete business application suite called Comet. Nixdorf Comet handled financial accounting, stock control, order processing and more. Written by a company division based in the Netherlands, Comet was said to be very customizable. It let customers lay out their templates and invoices how they wanted. So any two Comet instances might look very different from each other. Many customers, especially those in medical, banking and retail across Germany, Holland and France, bought Nixdorf's computers. Nixdorf would later claim some 80,000 common instances across the world. Nixdorf produced software like Comet because they wanted to produce everything, not just the hardware, but also the software, applications, integration and maintenance services and even financing. This was a critical business strategy for them. Heinz explained that IBM and other companies were ignoring customers who wanted a turnkey small or medium sized computer from a single vendor they can trust. Nixdorf wanted to be that vendor. One analyst explained it as Nixdorf made its market by providing a safe, reliable, step by step approach to computerizing a company. The president of Nixdorf's American subsidiary, Carl Janssen, told we offer our own operating system, software, peripherals and support the works, the total system. Now when IBM slashes its hardware prices and makes up its margins with software, we'll be able to do the same. So Nixdorf styled itself as the IBM for the small to medium sized business, which meant having a formidable sales organization. Another key reason for the company's success in the early 1970s was that it built out its own internal sales teams, ending cooperation agreements with third parties. Nixdorf's salespeople were go getters. They didn't require permission to do things like borrow a company car to drive off to the client site. The client's needs were what mattered, not bureaucracy. The company paid special attention to trade fairs like cbit. Such big shows were often high stakes affairs. Before each show, both technical and sales staff were relentlessly drilled on key talking points at boot camps. One night before a show, the sales team discovered the stand was missing something. So they, the designer and a hardware technician rented a truck, drove through the night and bribed a security guard to let them in and build the missing stand. The company attended up to 160 shows each year, maintaining its own internal warehouses and stand building department so that they can keep up with the cadence. They worked hard and played hard. Nixdorf was one of the few European companies to challenge IBM right on its home turf in the United States. This entrance began all the way in 1979 when they acquired an American software company called the Computer Software Company, which produced an IBM compatible operating system called Extended DOS in order to provide their trademark fully integrated service. Nickstor spent large sums of money on setting up research centers as well as a nationwide sales and support service in over 120 cities. While they did not garner major market share in the American small business industry, they were able to sell computers to the US Government and big corporations like Phillips Petroleum. They made such a splash that the New York Times wrote about them in 1984. Even so, the Times could not help but lead off the article with a lighthearted jab. A good German computer company, according to popular wisdom here, is about as improbable as a Silicon Valley steel mill. But Nixdorf Computer ag, one of Europe's fastest growing and most profitable computer companies is proving the doubters wrong. As a leader, Nixdorff was brutal and hard driving. The company ran a flat organization that completely revolved around him. One of his employees, Klaus Luers, who worked in hr, recalled in an oral history for Paderborn University that Nixsdorff was a decisive leader who knew what he wanted and moved fast. Once things are decided, the whole company moved without bureaucracy. He inspired fear in his executives who were warned never to repeat the same point more than twice to him. And in a presentation theirs called him a cruel leader of men, openly harsh with direct subordinates screaming and berating them as failures. But at the same time, Heinz was also down to earth, especially with young people. At the company lunch canteen he stood in line like everyone else and after getting his food, he liked to sit next to ordinary employees and ask them about their work. He often walked the production floor shaking the workers hands and learning their names. One time he took off his jacket and got hands on with a product right alongside a factory worker. Heinz's efforts helped create a high performing yet fiercely loyal family atmosphere. Unfortunately, I think that also set the company up for its future decline. In 1971, intel produced the 8bit Intel 8008 microprocessor which they marketed as a computer on a chip. Microprocessors were then an emerging category, so intel wanted to get a sense of how it might sell. Thus, in the summer of 1971, 8008 designer Federico Fagin went to Europe with colleague Hank Smith on a fact finding mission showing the 8008 and its predecessors to potential customers under NDA and getting their feedback. Fajin told the Computer History Museum in an oral history how the customers with actual problems to solve were happy to have found the a solution to those problems. A great sign. But the customers who made new computers reacted very negatively. Perhaps they were irritated that a mere semiconductor company thought it could muscle into their world. Fajin recalled, where the people like Nixdorf I went to Nixdorf Computer. They crucified me because the 8008 was not fast enough and it didn't have this, it didn't have that. You call this a computer? It wasn't a real computer. To be clear, their feedback did help. Fagin and intel incorporated some of it into the follow up Intel 8080. But it also illustrates how Nixdorf Computer missed both the microprocessor and the PC revolution it later enabled. Looking back, one can find reasons. The first PCs were seen in Germany as toys for consumers. Nixdorf sold data processing tools and services to businesses when Asked about making PCs, Heinz was reported to have said, we are not building gogglemobiles. Gogglemobile being a reference to a line of German microcars being made at the time. Later, oral histories from Nixdorf Co. Employees noted that the company's success in the 1970s and highly founder centric structure cultivated a rigid yes man culture. If Heinz was not for it, then woe be to the one who spoke up against that. Or maybe Hines and management knew that pursuing the PC would require radical and painful changes. Nixdorf's entire system, hardware, operating systems, software, applications was closed and proprietary. One did not work without the other, and it made them a lot of money. Whatever the reason was, and was probably a little bit of everything, Nickdorff remained almost entirely focused on their closed systems and large 88 series minicomputers. And initially this did not affect the company's financial performance. Nickdorf enjoyed rising revenues and profits throughout the early 1980s. In 1984, with Nixdorf generating nearly a billion dollars in revenue, Heinz finally allowed the company to go public. At the time, it was West Germany's largest IPO and valued the company at about $1.2 billion. One major reason they did this IPO was to raise capital for new products to address the company's existing threats. IBM was by then selling plenty of PCs to small and medium businesses in Europe. In 1984, IDC calculated that Big Blue held about 15% of the overall European market. Nixdorf, by comparison, had just 6%. In the company's core market of West Germany, Nixdorf held just 15% market share, compared to IBM's 11%. Other European companies, like Italy's Olivetti, were making and selling PCs. Nixdorf, on the other hand, was still selling the 88 Series minicomputers, then a decade old. The massively growing PC, with its Ms. DOS operating system was getting large enough to pry open Nixdorf's closed ecosystem. PCs were sold through a wide number of channels and their architectures broadly standardized, knocking down prices and pressuring margins. In 1985, Nixdorf Computer released a Nixdorf 8810, an IBM compatible PC. It looked a bit like the compact portable PC, sporting an integrated hard disk drive, floppy and monitor. The 8810 and its derivatives were designed by third parties, and you can kinda tell that Heinz's heart wasn't in it. They made it simply because their customers demanded it, and it actually sold pretty well. Over the next few years, though, making these smaller computers radically changed Nixdorf's factory shop floor. Workers now had to make These very small circuit boards requiring them to don lab coats and gloves. Rising alongside the PC were these open systems, often based on the operating system Unix. These systems allowed customers to port their unique software applications from one piece of hardware to another. It removed Nixdorf's software and ecosystem lock in so that customers can now buy from a wide variety of hardware vendors. In response, Nixdorf decided that his future would be in producing and selling decentralized and distributed networks to of computers running Unix. Such computers can share data and compute load with one another. In 1984, Nixdorf joined XOpen, a consortium of European UNIX standards with members like AT&T Dec, Sun, Olivetti and Bull. They then developed a new operating system based on Unix called Targon, initially created for a fault tolerant computer they were building internally referred to as the Nixdorf 8832. Fault tolerance refers to a computer that stays running even when parts of its software or hardware break. The canonical company in this space was Tandem, which produced computers for banks and companies that cannot tolerate any downtime. They renamed the 8832 to the Targon 32 and plan to transition all their hardware to the platform. This would be mighty tricky. Can Unix, an academic and scientific phenomena, work in the office? Will moving to Unix accidentally break down Nixdorf's proprietary moats and collapse their margins? It would have taken Heinz at the peak of his powers and all his product and sales savvy to pull off this transition. Unfortunately, by then, the heralded founder was suffering from failing health. In 1978, Heinz suffered his first heart attack, after which his attention shifted to health. He instituted a rigorous training regimen for himself and his employees, letting them train on company time and building a public sports park on company grounds. And perhaps sensing mortality, Heinz stepped back somewhat, working to groom various successors in the business, most visibly Vice Chairman Klaus Luft, who first joined back in 1967. But as the longtime HR executive Lurce noted, Heinz's successors tried to emulate Heinz's leadership style. Without his credentials, it only worsened the company's yes man culture and gridlock. Then, in early April 1986, Heinz succumbed to his failing health, dying at the young age of 60. While attending a trade show at Hanover, he suffered a heart attack while dancing at a party and passed before he could be taken to a hospital. So after Heinz's tragic death, Klaus Luft took over the company. In 1986, Nixdorf Computer generated almost 4 billion marks, or about $1.75 billion in revenue. So the company seemed strong at the time. Revenue and profits were both growing. By then, Nixdorf had 23,000 employees in hundreds of offices across 40 countries. And despite over half of the sprawling company's workforce being salespeople, Luft kept hiring until mid-1988. The company added over 5,000 new employees, chasing growth at perhaps the wrong time. The company's 8810 line of PCs sold well, generating hundreds of millions of marks. But Nyxdoor failed to properly transition the users of its important 88 series minicomputers to the new Targon based machines. And competitor PCs were getting more powerful by the year, encroaching ever closer to minicomputer territory. Meanwhile, the company's financial structure sank from all the new hires, plus a horrifically uneconomic cost structure thanks to multiple factories in high cost locations across Europe and Singapore. I think anyone would have had a hard time stepping into Heinz's massive shoes, facing the severe issues that the company was facing. But by expanding for growth that never came, Luft put the company on the path to grave danger. By the end of the decade, rumors began circulating that Nixdorf was in trouble. 1988 saw Nixdorf turn an operating loss of 59.8 million marks. That was a substantial drop from the previous year when the company reported an operating gain of 330 million marks. It was only through property sales that they managed to turn a net profit that year. No property sales to save things the next year. The newspaper Der Spiegel reported that the company may lose a billion marks, or roughly 267 million USD in 1989 due to compressing margins and intensifying competition. Hardware prices in some areas had collapsed 20% year over year. The company halted dividends on special shares of stock and buyout rumors began to circulate. In 1989, they announced that they would cut at least 1,600 jobs. In my opinion, too few, too late. Luft had told Der Spiegel that Nixdorff can beat IBM and had to fight like never before. Then in November of that year, he unexpectedly resigned, perhaps recognizing that he had lost the confidence of the board. In 1990, Nixdorf Computer announced that that they would sell to Siemens, the only plausible German acquirer, for about $350 million. The resulting Siemens Nixdorf company was Europe's second largest computer company after IBM. For the folks at Nixdorf, it came as a brutal culture shock. Nixdorf ran a familial culture where people helped each other out without thinking about the cost. Siemens changed all that, imposing strict project billing and rigid hierarchies. Before we conclude I want to point you to the work done by the Heinz Nixdorf Forum in the man's hometown of Paderborn. They have done amazing work in documenting his legacy and life's work. So what happened afterwards? Siemens quickly realized that the idea of owning Europe's second largest computer company sounded far better than actually owning it. Integration studies and the transition away from minicomputers led to heavy financial losses. So in the late 1990s, Siemens decided to split the company into three. In 1999, they merged their hardware operations into that of the Japanese giant Fujitsu, which contained the remnants of the PC divisions of Nokia, Ericsson and others, to create Fujitsu. Siemens Nextdoor's retail and ATM banking operations, which date back to a landmark Swedish bank terminal project in the 1970s, were spun out as a separate company. The private equity group KKR bought them in 1999 and renamed them to Wincor Nixdorf. They then took that company public in 2004, eventually earning $750 million on a $200 million investment. Siemens kept the IT services part of the business for itself, later selling IT in late December 2010 to the European IT company ATOS. In 2016, Wincor Nixdorf was taken over by the American company diebold for about $1.8 billion. The resulting combination, called Diebold Nixdorf, continues on as the world's largest ATM company. The Nixdorf name thusly lives on in the hundreds of ATMs around the world. Alright everyone, that's it for tonight. Thanks for watching. Subscribe to the channel, sign up for the Patreon and I'll see you guys next time.