Chris, I walked the floor at Diskcon yesterday from open to close.
mark.
stupendous post! i'm printing this puppy, and if my girlfriend will let me, putting it under my pillow tonight. narco-nocturnal osmosis is the only hope for me to absorb all of this one (whatever that means).
here's the latest on finis conner. maxtor ipo and now this private venture in a year the HDD industry implodes. gotta be enough business to go 'round or perhaps he's just got elephantine-sized 'nads. with a name like conner, the isles must've hooked him up with a swell tax exemption (parent company incorporated in ireland). shit, for all we know, maybe he's just looking for a loss to write off.
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"I started looking at the low-cost PC market, and it became very clear to me that one of the capabilities of that product is a low-cost storage solution."
--Finis Conner
New Drive Maker Challenges Seagate, Quantum
(09/23/98; 5:05 p.m. ET)
By Mark Hachman, EDTN
As former Seagate Technology CEO Al Shugart ponders life after his abrupt departure from the disk-drive maker, his one-time partner, Finis Conner, will take center stage Wednesday as the chief of a new disk-drive company.
Conner Technology will compete against larger entrenched players such as Scotts Valley, Calif.-based Seagate, which acquired Finis Conner's previous company, Conner Peripherals, in February 1996. Focused specifically on a low-cost business model, Conner said it expects to ship its first magnetic disk-drive products by the second quarter of 1999.
The entrance of Conner Technology into the disk-drive arena is not only unusual because of the trend toward market consolidation, but also because the move toward low-cost PCs has forced drive makers to also cut costs. Peter Knight, the company's president, will formally announce the company at DiskCon '98 in San Jose, Calif.
"I started looking at the low-cost PC market, and it became very clear to me that one of the capabilities of that product is a low-cost storage solution," Conner said in an interview. "Intel's done a good job of selling processors, and [Bill] Gates has sold software to anything that moves, but in storage, there didn't seem to be a real valid product offering.
"The $100 disk drive has been done before, but it's been extra inventory, or an end-of-life product," he said. "There's been a drive sold for $100, but it cost $130 to make."
The problem for Conner and the entire disk-drive industry is PC makers are asking drive vendors for lower cost at the same time they require increasing storage capacities and higher performance. The storage industry's version of chip makers' Moore's Law says storage capacity per disk must increase 60 percent on average each year.
The squeeze has proved fatal for a number of players. In 1988, 62 drive makers combined for 15.8 million units that sold for an average of $740 each, according to San Jose, Calif.-based research company Dataquest. In 1997, 15 manufacturers sold 128.3 million drives for about $208 each. During that time, the price per megabyte of storage plunged from $8.43 to less than a dime.
"It's a fine line between offering incredible value and a going-out-of-business proposition," said John Monroe, disk-drive analyst at Dataquest. "And too often, it's a going-out-of-business proposition."
Instead, Conner's 45 employees will place even more emphasis than its competitors at working with its suppliers in developing high-yield products, depending upon contract manufacturers to do most of the subassembly work.
Incorporated in Ireland to place it closer to the European market, Conner Technology's outsourcing partners will also help to develop new products in Colorado, and manufacture the company's drives in China.
The components within each Conner disk drive will be designed and sourced from suppliers Conner Technology works with as partners.
That will eliminate the need to devote company resources on manufacturing its own components, a vertical integration strategy that helped drive Seagate's success during the boom year of 1996.
In the leaner times of 1997 and 1998, disk-drive companies like Quantum have asked their manufacturing partners to procure their products; Western Digital uses some drives designed by a competitor, IBM.
Conner actually sat out those two years, thanks to a two-year noncompete clause he signed when his company was purchased by Seagate. During that time, he formed The Conner Group, investing in online travel and Web-hosting company Virtual Visits and Adams Golf.
"The basic difference is how one cuts costs in the company," Conner said. "One area is materials. We'll still purchase components that are leading-edge in nature -- we're very concerned with that."
Factory costs and capital overhead can add significantly to the value-add cost; operating expenses, sales, marketing, and R&D together can total 10 percent to 17 percent of a company's sales, Conner said. Staffing a research team to compete against a drive maker's component suppliers is "redundant," he said.
To counter, Conner said it plans to offer one- and two-platter versions of its disk drives, letting the company's suppliers compete to supply it with higher-capacity disk media. Conner did not say whether his company's drives would be 3.5 inches in diameter or larger, such as the 5.25-inch Bigfoot drives marketed by Milpitas, Calif.-based competitor Quantum. |
