Stac Electronics

Stac Electronics was an American technology company founded in 1983 by a group that included Caltech computer-science graduates and industry engineers. It was originally incorporated as State of the Art Consulting and initially pursued a semiconductor-oriented business model, developing application-specific compression technology for tape and disk-drive manufacturers. The company’s work on compression hardware led it to develop software that could transparently compress data written to a personal-computer hard drive and decompress it when read. Because contemporary hard drives were expensive and commonly offered capacities of only a few tens of megabytes, this software approach became commercially more attractive than placing dedicated compression hardware in every drive. Stac’s principal product was Stacker, released in 1990. The DOS utility used lossless compression to increase the apparent capacity of a hard disk, often approximately doubling usable storage depending on the data. It could also improve perceived disk performance because the processor could compress or decompress data faster than the drive could transfer the equivalent uncompressed volume. Stacker benefited from the rapid growth of larger software packages, including graphical operating environments, at a time when storage costs constrained personal-computer users. The product sold several million units during its commercial life and made Stac one of the most visible independent software vendors in the disk-utility market. The company also offered the STAC Coprocessor Card and licensed related acceleration technology for Macintosh expansion products. Stac became involved in one of the period’s most consequential software-patent disputes after Microsoft released MS-DOS 6.0 in 1993 with DoubleSpace, a competing disk-compression feature. Stac alleged that Microsoft had infringed its data-compression patents after discussions concerning a possible technology license and a review of aspects of Stac’s code. Microsoft countersued, alleging misappropriation of a trade secret associated with a pre-loading feature. In 1994, a California jury found Microsoft liable for patent infringement and awarded Stac $120 million, while also awarding Microsoft $13.6 million on its counterclaim. A preliminary injunction temporarily affected sales of certain MS-DOS versions containing DoubleSpace. The dispute was settled later in 1994: Microsoft invested approximately $39.9 million in Stac and agreed to pay additional royalties reported at approximately $43 million. These figures are historical settlement terms, not current financial data. The settlement and an initial public offering gave Stac resources to diversify as the disk-compression market deteriorated. Microsoft’s inclusion of DoubleSpace in MS-DOS, together with the rapid fall in hard-disk prices, reduced the need for standalone compression utilities. Stac acquired ReachOut, a remote-desktop product, and Replica, a server-image backup product. It also developed a network backup offering for workstations and laptops, marketed first as Replica NDM and later as eSupport Essentials. The company’s backup work anticipated capabilities later associated with online backup services. Stac retained a semiconductor operation that became Hifn. Hifn was separated from Stac through a primary public offering in 1998. The remaining utility-software business was subsequently renamed Previo and repositioned around help-desk and support-organization tools. In 2002, management sold the remaining technology assets to Altiris, returned the company’s remaining cash to shareholders, and dissolved the business. Stac Electronics is therefore principally remembered for Stacker, its compression technology, the Microsoft litigation, and the transition from packaged DOS utilities toward remote access, backup, and support software.

Stac Electronics was incorporated in 1983 as State of the Art Consulting. Its founding group included five Caltech computer-science graduate students—Gary Clow, Doug Whiting, John Tanner, Mike Schuster, and William Dally—along with engineers Scott Karns and Robert Monsour and industry-affiliated board members Robert Johnson and Hugh Ness. Bruce Behymer, a Caltech engineering undergraduate, was the company’s first employee. The company was initially based in Pasadena, California, and later moved to Carlsbad. Its venture-backed plan centered on application-specific compression products for the tape-drive industry, with a possible expansion into disk drives. During engineering work intended to adapt compression chips for disk drives, Stac developed a DOS driver that compressed data before it was written to a PC hard disk and decompressed it during reads. The performance difference between a PC processor and a hard drive showed that software could perform the work efficiently, reducing the need for a dedicated compression chip in each drive. The x86 assembly implementation was written under contract by Paul Houle. Stac commercialized this insight with Stacker in 1990. The utility targeted a market in which hard drives commonly had capacities from roughly 20 to 80 megabytes and remained expensive. By compressing data transparently, Stacker often approximately doubled usable capacity and could improve effective performance. It became a major commercial success, selling several million units. Stac also marketed the STAC Coprocessor Card, a hardware product intended to accelerate compression, and licensed acceleration technology to Salient Software for Macintosh expansion cards that used Salient’s own DiskDoubler software. The company’s growth was disrupted by Microsoft’s inclusion of DoubleSpace in MS-DOS 6.0 in 1993. Stac had previously discussed a possible license with Microsoft and alleged that Microsoft had used protected compression technology after reviewing aspects of Stac’s code. Stac sued for patent infringement, while Microsoft filed a counterclaim alleging that Stac had misappropriated a trade secret related to pre-loading. In 1994, a California jury awarded Stac $120 million for patent infringement and Microsoft $13.6 million on its counterclaim. A preliminary injunction temporarily restricted sales of certain MS-DOS versions containing DoubleSpace, after which Microsoft released a version without the feature. The companies settled later in 1994. Under the settlement, Microsoft invested approximately $39.9 million in Stac and agreed to additional royalties of approximately $43 million. The disk-compression business then weakened quickly because DoubleSpace was integrated into MS-DOS and the cost per megabyte of hard-disk storage declined. Stac used proceeds from its 1992 IPO and the Microsoft settlement to diversify. It acquired ReachOut, a remote-desktop product, and Replica, a server-image backup product. The company also developed network backup software for workstations and portable computers, first calling it Replica NDM and later eSupport Essentials. Stac’s remaining semiconductor operation continued to develop compression technology and was separated as Hifn in a 1998 primary public offering. After the Hifn separation, the remaining utility-software company changed its name to Previo and pursued help-desk and support-organization software. This repositioning occurred during the collapse of the dot-com boom. In 2002, management sold the remaining technology assets to Altiris, distributed the company’s remaining cash to shareholders, and dissolved Stac. The company’s legacy rests on Stacker’s role in early PC storage management, its compression algorithm and related hardware work, and the legal precedent and commercial consequences of its dispute with Microsoft.

1. 2002Assets sold and company dissolved

   The Previo-branded utility-software business sold its remaining technology assets to Altiris, returned cash to shareholders, and dissolved.

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2. 1998Hifn spun off

   Stac separated its compression-chip subsidiary Hifn through a primary public offering.

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3. 1994Jury verdict and settlement

   A jury awarded damages to both parties, followed later in the year by a settlement under which Microsoft invested in Stac and agreed to additional royalties.

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4. 1993Microsoft litigation begins

   Stac sued Microsoft after the release of MS-DOS 6.0 and its DoubleSpace compression feature; Microsoft filed a counterclaim.

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5. 1992Initial public offering

   Stac completed an IPO, providing capital for expansion beyond its original disk-compression business.

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6. 1990Stacker launches

   Stac released its DOS disk-compression utility, which increased effective hard-drive capacity through transparent lossless compression.

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7. 1983Company incorporated

   State of the Art Consulting, later shortened to Stac Electronics and Stac, Inc., was founded by a group including Caltech graduates and industry engineers.

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Initially positioned as a developer of compression technology for storage hardware, Stac became a prominent independent PC utility-software company through Stacker. It later repositioned toward remote access, backup, and support-management products as disk compression became less attractive.

• StackerDisk-compression software1990

  A DOS utility released in 1990 that used the Lempel–Ziv–Stac lossless compression algorithm to compress data transparently on PC hard drives. It was designed for a period when hard-drive capacity was limited and expensive, often increasing effective capacity substantially while improving effective transfer performance.

• STAC Coprocessor CardCompression hardware

  A hardware accelerator intended to improve the speed of file compression and decompression. Stac also licensed related acceleration technology for Macintosh expansion products, although those products used third-party software.

• ReachOutRemote-desktop software

  A remote-access and remote-desktop product acquired by Stac during its post-Stacker diversification into utility and support software.

• ReplicaServer-image backup software

  A server-image backup product acquired as part of Stac’s effort to replace declining disk-compression revenue with storage-management and data-protection products.

• Replica NDM / eSupport EssentialsNetwork backup software

  Stac’s internally developed network backup offering for workstations and laptops. It was first marketed as Replica NDM and later as eSupport Essentials, with concepts that anticipated features found in later online-backup services.

• 2002Liquidate remaining operationsStrategy

  The Previo repositioning took place during the collapse of the dot-com boom and did not lead to a durable independent business.

  What changed. Management sold the remaining technology assets to Altiris, returned cash to shareholders, and dissolved the company.

  Aftermath. Stac Electronics ceased operations.

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• 1998Spin off HifnM&A

  Stac’s original compression-chip activity continued to develop separately from the utility-software business.

  What changed. The Hifn chip subsidiary was separated through a primary public offering.

  Aftermath. Stac retained the remaining utility-software operations, which were later renamed Previo.

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• 1994Diversify after the Microsoft settlementStrategy

  The company faced a weakening disk-compression market because DoubleSpace was bundled with MS-DOS and hard-drive prices were falling.

  What changed. Stac used IPO and settlement resources to acquire remote-access and backup products and develop network backup software.

  Aftermath. The company expanded into remote access, backup, and support utilities, although the original compression business did not recover.

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• 1990Commercialize software compression through StackerProduct launch

  Engineering work on compression chips for disk drives demonstrated that a PC processor could perform compression quickly enough in software.

  What changed. Stac launched Stacker as a DOS utility that transparently compressed and decompressed hard-drive data.

  Aftermath. Stacker became the company’s best-known product and sold several million units.

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• 1993Stac–Microsoft DoubleSpace patent disputeControversy

  Stac alleged that Microsoft’s DoubleSpace feature in MS-DOS 6.0 infringed Stac’s compression patents after licensing discussions and technical review. Microsoft counterclaimed over an alleged trade-secret misappropriation. The 1994 verdict awarded Stac $120 million and Microsoft $13.6 million; the dispute was later settled.

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• 2002Stac sells remaining assets and dissolves

  After operating the remaining utility-software business under the Previo name, Stac sold its remaining technology assets to Altiris, returned cash to shareholders, and dissolved.

  M&ABankruptcy
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• 1998Hifn is spun off from Stac

  Stac separated its original compression-chip business as Hifn through a primary public offering.

  M&A
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• 1990Stac releases Stacker disk-compression utility

  Stac introduced Stacker, a DOS utility that used lossless compression to increase the effective capacity of personal-computer hard drives.

  Product launchProduct generation
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1. Stac Electronics