Hayes Microcomputer Products - Decline and Fall

Decline and Fall

Hayes realized that changes in the telephone networks would eventually render the modem, in its current form, obsolete. As early as 1985 he started efforts to produce consumer-ready ISDN "modems", betting the company on ISDN becoming a widespread standard — which was widely believed at the time. By the early 1990s, this was a major focus of the company.

However, ISDN simply never happened. The whole model was based on end-to-end digital communications, and was thus limited to the speed of the long-distance carrier lines, either 56 or 64 kbit/s. The Bell companies were interested in deploying ISDN, but doing so required customer-end installations to make their conventional telephones work, which made the system unattractive for wide-scale deployment.

Additionally, the rise of the Internet in the mid-1990s made point-to-point communications far less interesting. After dialing their local Internet service provider, the user could "call out" at high speed to services around the world, so the need for long-distance data calls was generally eliminated. As a result of this shift, there was no real need to limit the user to the speed of the long-distance lines, giving the Bell companies flexibility in terms of what to install at the user's site. Their attention turned to ADSL, which ran over the existing wiring and did not use up a phone line in the process. The end-user was offered much higher speeds while still being able to use their existing phones, with the added "benefit" of helping tie the user to the telephone company's own ISP.

Hayes, having bet the company on a system that was never actually deployed, had no new products in the pipeline. In an attempt at diversification in January 1991 it had acquired most of the assets of local area network software developer Waterloo Microsystems Inc of Waterloo, Ontario and belatedly entered the operating system (OS) market in June 1991 with LANstep, a network OS for small offices, but this was subsequently abandoned in 1994 in the face of stiff competition particularly from Novell NetWare. An effort was started to move into the market for ADSL and cable modems, but this was a multi-year effort during a period when USR increasingly took over the market. They entered Chapter 11 protection in November 1994, exiting in October 1995 as Hayes Corp. after selling 49% of the company to Nortel and a Singapore-based venture capital firm. In 1997 they merged with Access Beyond, a builder of ISP rack-mount modems and terminal servers, and changed the company name again, this time to Hayes Communications. The merger was primarily a way to take the company public. The stock started crashing over the next year, from around US$12 in early 1998 to pennies in October, when they once again filed for Chapter 11 protection. No new funding could be found, and in 1999 the company assets were liquidated.

The brand name was purchased and revived by onetime rival Zoom Technologies in July 1999. Zoom continues to use the Hayes name on some of their products.