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Before the Web · Era 1 · Boards, networks and online services

1977–1999bankruptcy, brand to Zoom · 1999

Hayes Microcomputer Products

An Atlanta company that invented the Smartmodem and the AT command set, which became the language every modem in the world spoke for decades. The patent on this technology turned into a legal war with the entire industry; Hayes won it, but the market still overtook the company on speed and price, and it went through bankruptcy twice before Zoom Telephonics bought the brand in 1999.

Founders Dennis Hayes · Dale Heatherington
Domains —
hardwarestandard-settingpatent-licensing

In brief

Hayes Microcomputer Products came up with a modem that obeyed commands typed at the keyboard rather than switches on its case, and its AT command set (type "ATDT" and a number, and the modem places the call) became, for twenty-odd years, the language spoken by practically every modem in the world. The company did not hide the patent on a key part of that language: it licensed it to nearly the whole industry and took the matter to court once, winning outright. But the win in court did not save it from the market: U.S. Robotics, faster and cheaper as a matter of engineering, overtook Hayes on speed and price, and the company's own management failures drove it into two bankruptcies. In 1999 Zoom Telephonics bought the Hayes modem assets and brand at a bankruptcy auction for about $5 million.

How it started (the founders)

Dennis Hayes and Dale Heatherington met in the 1970s while working together at National Data Corp in Atlanta. Before that, Hayes had spent five years at Georgia Tech without graduating and had worked at Financial Data Sciences in Florida, a company that made cash machines for savings banks out of converted bank ATMs. It was there that he picked up the niche strategy he later put into words in a 1990 interview: "They had a targeted market and a very specific product for that market," instead of competing on every front. Heatherington was the engineer and Hayes the business person: by agreement the company was named after Hayes alone, because he was the one who would deal with customers, but Heatherington still owned exactly half of the firm.

In April 1977 the two of them built their first modem, the 80-103A, 300 baud, for the S-100 bus, literally on a dining table in Spartanburg, South Carolina, together with friends, by hand, a few units a day. In the first year they sold $125,000 worth and had already attracted 20 imitators. The formal incorporation, as D.C. Hayes Associates, Inc., came only in January 1978, by which time they were in Atlanta. The second product, the Micromodem II for the Apple II (1978), became the first modem to connect directly to the phone line without an acoustic coupler; the third, the Micromodem 100 for the S-100 (1979, $399 by mail order), combined a modem, auto-dialing, and a serial/parallel interface on a single board, something that had previously required three separate devices.

Year-by-year timeline

Lesser-known but significant facts

  1. The Micromodem 100 was a three-in-one single board. Before it, dialing out from an S-100 computer took a separate modem, a separate dialer, and a separate interface; Hayes put all of it on one board for $399.
  2. Hayes announced 1984 revenue of $120 million, while analysts' estimates put it at about $25 million, almost five times less. Both numbers were published; the sources do not show which one is closer to the truth estimate.
  3. The term "Hayes-compatible" was coined not by Hayes itself but by its competitor Novation, the company that began advertising its clones of the AT commands that way.
  4. A patent that supposedly anticipated Heatherington's invention was ruled invalid in court: Michael Eaton filed an application for an escape sequence in 1980 through the company Bizcomp and received his patent before Hayes did (June 1983 against October 1985), but later, in a separate case, U.S. Robotics against Bizcomp itself, the court ruled that patent invalid.
  5. Dale Heatherington left the business at 36 with a payout of about $20 million, and for the rest of his life (he died in 2021) he spent his time on amateur radio, homemade cat trackers, and combat robots, often winning at local tournaments.

Legend vs. the record

The first growth lever

The Hayes growth lever was not the Smartmodem itself but the decision to make it programmable and then open to copying on profitable terms. Before 1981 a modem's mode was controlled by physical switches on the case; the Smartmodem turned this into text commands with the prefix AT that any software could send. Competitors almost immediately began releasing "Hayes-compatible" devices (the term was introduced by Novation, not by Hayes itself), and instead of blocking the copying, Hayes turned the key technical component into a patent and from 1986 began licensing it to nearly the whole industry: letters demanding a license went out to about 170 modem makers. Most of the big players (U.S. Robotics, Bizcomp, Microcom, Prometheus) preferred to pay and sign a license rather than fight to the end in court; only a handful of companies (Ven-Tel, Everex, OmniTel) took the matter to trial, and they lost, with damages awarded and a finding of willful infringement. As a result Hayes got a double effect: compatibility with its interface became a condition of survival in the modem market (so demand grew for the whole market, not just for Hayes products), and the company itself collected royalties from its licensees. Hayes had won the market before the licensing campaign: by 1984–1985 it held almost 60% of the market for 300- and 1200-baud modems. Licensing locked in the standard: the lever was not a ban on copying but a fee for it.

The paired story (Hayes + U.S. Robotics)

The two companies were born almost at the same time and in almost the same way: Hayes on a dining table in South Carolina (April 1977), U.S. Robotics in Chicago, where in 1976 five people who knew each other from their studies put in $200 each (see the U.S. Robotics dossier), and both grew on the wave of FCC deregulation that allowed equipment other than AT&T's to be connected to the phone network. From there their stories diverge at exactly the point that makes the pair interesting: Hayes won the battle for the interface (the AT commands became the language every modem understood, USR modems included), and USR won the battle for speed, because it made its own "data pump" chip instead of relying on the off-the-shelf Rockwell parts that Hayes depended on. Through the 1980s and the early 1990s this looked like a division of the market, with compatibility from one company and speed from the other, until in 1993 USR combined both advantages in the cheap Sportster line, built on the architecture of the high-speed Courier, and began squeezing Hayes on price as well. By the mid-1990s their paths had parted for good: Hayes went through Chapter 11 twice and was sold off in pieces in 1999, while USR was bought in 1997 by the networking giant 3Com in a deal announced at $6.6 billion in stock, so the company exited not through bankruptcy but through a sale at its peak (see the U.S. Robotics dossier).

Parallels today (projects from the catalog)

What a builder can take from this in 2026

  1. Don't block copying of your interface; sell a license to it. Hayes could have sued for an outright ban, but instead it sent out license offers and took a cut from every competitor: the market grew faster, and Hayes grew along with it.
  2. A win in court is no substitute for a win in engineering. Hayes beat everyone who went to court over the patent but lost the market anyway, because it did not make its own key component (the chip), as its faster competitor did.
  3. The head of a company admitting management mistakes does not save anything by itself if it comes too late. Dennis Hayes publicly admitted the failures in inventory management and technology transitions during the bankruptcy, not before it.
  4. A niche strategy carried over from past experience can become a playbook for decades ahead. The very idea of taking a narrow segment that is your own came to Hayes from his earlier job at a niche ATM maker and became the foundation of the whole Hayes strategy.

Discrepancies and what we could not verify

Sources (primary first)

Secondary (context, cross-check):

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