Jack Taub and his companies look like they have a hell of a future -- if they survive the present.
Taub sits at the helm of a company with a product being acclaimed around the country as a development as major as the telephone or radio. But it is also a company that only months ago was poised on the edge of bankruptcy, by Taub's own account.
Taub owns majority interest in Digital Broadcasting Corp. The McLean company's Telecomputing Corp. of America subsidiary markets The Source, the widely acclaimed product.
The Source is a computer information network that offers owners of home computers the UPI newswire; stock exchange, commodity and foreign exchange quotations; electronic mail; ready-made programs for accounting, word-processing or figuring out mortgage payments; restaurant reviews; games and a host of other services -- all for a relatively low cost. And the Source is selling to a market destined to expand.
"Mr. Taub has reason to be excited. His company recently introduced a product that is an overnight sensation among the cognoscenti of the computing world," The Wall Street Journal wrote recently.
So what's the problem? According to Taub, it is the legacy of the ousted management of the company, a group that left in October when Taub took control and began to repair the damages, he said.
"The company was in terrible shape. It was not going to survive. Money was being spent like water," he said. "I think if I had waited another week it would have been too late."
When Taub bought out other shareholders to assume control of the company, a North Carolina bank was calling on the United States government to make good a federal guarantee on a $2.9 million loan to DBC. Another $1.5 million worth of unsecured debts and a payroll were coming due, and the company had $1,000 in the bank, said Taub. Even so, the company was still hiring, he said.
Since then Taub has taken control, cut operating costs by $2.5 million and is renegotiating the company's debt, he said. "It's called life and death," said Taub. Creditors, aware of the changes he is making, have been cooperative, according to the chairman of the board and chief executive officer.
"The future is getting closer, thank God," said Taub in an interview last week. "They did not leave the company in good shape," he said of the previous hierarchy. "We have a tough 45 days or so in front of us, but we've got a tremendous future."
In fact, the enterprise is suffused with future glow. Taub is no technocrat, babbling about learning curves and ICs.He runs a stamp collecting company that publishes stamp catalogues. He has a good product and he is set to successfully market it, he said.
By March, the rapidly growing Telecomputing company, which already has 3,000 subscribers for the Source, will be profitable, according to Taub. "I'm very comfortable -- so comfortable that I'm putting a significant amount of my money in" instead of cutting his losses, he said. "I believe in the business. I believe it will be worth all the problems."
"I think we're building the next utility. It's a shame all these problems had to come up," Taub said. "Up until now the home computer could balance your checkbook and open your garage door. How many times do you want to do that?"
The Source gives people a reason to buy home computers, he said. Telecomputing is negotiating with a Dutch encyclopedia company to put an encyclopedia into the system which would be updated as changes occur in the world. The company is also at work on a nationwide personnel system that would allow a job seeker to look over the opportunities available. Customers using the Source in nonprime time pay only $2.75 an hour to hook into the system. They either can use services provided by the Source or write their own programs.
"It's exciting. It's the challenge a businessman rarely gets," Taub said. "But it's like poker. You have to pay to see the bottom card."
Digital Broadcasting was started by William Von Meister, the chief executive officer who Taub replaced in October. "The company had so many problems when I took over it was an assault on my system," said Taub. "Von Meister is a terrific entreprenuer but he doesn't know when to stop entreprenuering," according to the man who replaced him.
Taub, who was working with the Department of Commerce on problems of inner city employment, read an article about Von Meister and DBC in Business Week that said the company needed money. Taub said he helped arrange the government-guaranteed loan for DBC to finance a terminal-manufacturing facility in North Carolina. The plant would train and hire unemployed workers in Charlotte.
In October Von Meister and other corporate officers left. "I was the major stockholder, and I was very, very unhappy with the amount spent and what it had accomplished," said Taub. "So I bought out the others." Taub now owns 90 percent of Digital Broadcasting.
The changeover was not without consequences. Von Meister went to work for GTE Telenet, a subsidiary of GTE, the nation's second largest telephone company. In the weeks before his departure, Von Meister had been actively discussing a proposal for GTE Telenet to acquire Digital Broadcasting.
In November Taub went to court in Fairfax County asking the court to order Von Meister and other former employees from disclosing confidential Digital Broadcasting information to Telenet. The proceedings revealed that Telenet had in its hands the patent application for Digital Broadcasting's principal product, the Infocast system, although the application had not been filed. Infocast is a system for transmitting digital data by commercial FM broadcast.
Taub said he learned that Telenet had the application only after he went to court. "That leads me to not be able to sleep with both eyes closed."
Von Meister conceded in the court proceedings that Telenet had acquired a copy of the patent application in the normal course of negotiations for the acquistion of Digital Broadcasting and that he was wrongfully terminated by Taub. GTE Telenet signed a consent order agreeing not to use or disclose information from the patent application or information it had acquired about the Source, but Taub's complaint against Von Meister and the other individuals was dismissed.
Taub is also suing Von Meister in federal court in Alexandria, charging him with mismanaging the company.
"The reason the argument ensued between us was that the company did need money, and I wanted to bring in other investors -- either a large company or a venture capital group," said Von Meister, who has started several other successful telecommunications firms. "Taub didn't want any more partners and had enough stock to block that."
The company was not in good shape financially, "but we'd been pursuing additional sources of capital," Von Meister said.
Notwithstanding his problems with Taub over the terms of his departure, Von Meister said he believes the company may succeed. "I think the Source is probably a success and will continue to be a success," he asserted.
Taub said that Digital Broadcasting and its Infocast system are on a back burner for now, although he is seeking a joint venturer to provide the capital that Digital Broadcasting needs. "We're putting our resources into Telecomputing," he explained, adding:
"If we pull it off, it's going to be one of the great business stories of all times."