Did you get any information about WD's enterprise business? They focus all discussion on desktop.
Is the WD/IBM drive late? Seems like they should have had a product sooner than the now projected mid 99 ramp and qualification. They mentioned using over 50% of heads supplied by IBM in March quarter in the attached article. Do you think this has stayed the same, or declined? I hear RDRT is supplying heads to make the new 4.3 gig drive.
When they say the business is now 100% MR, does that mean they have no GMR programs, or that they simply lump GMR and MR into the same catagory?
Of course, we need to know more about the exact nature of the TFI head drive problem. Is it a quality issue stemming from something WD did, or APM, or some other supplier or perhaps a bonding issues or other equipment process?
Can this problem carry forward into MR based programs?
Regards,
Mark
PS Just for fun, here's a walk thru the past, minus Kathy Braun and if you are right, soon to be minus Chuck.
Chuck Haggerty's Remarks on Proposed Component Supply and Technology Licensing Agreement with IBM
These remarks contain forward-looking statements based on current management expectations, including statements related to the proposed broad-based hard disk drive component supply and technology licensing agreement with IBM, the range of options to be included in the agreement, the introduction of desktop hard drives based on the technology transferred pursuant to the agreement, future opportunities and challenges in the data storage industry, the competitive advantages of IBM technology and the effect of the agreement on Western Digital's future products and technology. Actual results may differ materially as a result of several factors, including: when and if a definitive agreement is entered into; successful transfer of the technology pursuant to the agreement and successful incorporation of such technology in Western Digital's future products; future technology developments and other competitive factors in the hard drive industry; business conditions and growth in the personal computing industry; and other factors discussed in Western Digital's form 10-K for the year ended June 28, 1997, its recent form 10-Qs, its other SEC filings and the press release issued today. Western Digital does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Good morning everyone. Thank you very much for joining us on such short notice today. With me in Irvine, California are Kathy Braun, president and chief operating officer of our Personal Storage Division; Keith Plant, vice president of strategic planning; Duston Williams, our chief financial officer; and Bob Blair, VP of investor relations.
We told you last October we were going to change the game! I think with today's announcement, it's fair to say we're changing the playing field big time!
We were very pleased to announce earlier this morning a letter of intent with IBM to significantly expand our relationship with this industry leader through a broad-based technology licensing and component supply agreement. The agreement pertains to our desktop drive business, the Personal Storage Division. As the competition for research and development resources intensifies in the years ahead in the already notoriously competitive drive industry, the successful implementation of this relationship I think holds the promise of tangible benefits for both companies. Put in simpler words, we're "redefining" the industry!
Due to the extremely critical strategic importance of the proposed agreement to WD and IBM—and due to the fact that we are on our way to signing a definitive agreement—I ask that you bear with us this morning in understanding that there are aspects of this relationship we will simply be unwilling to talk about.
Having said that, we understand that it is also of tremendous importance to inform our shareholder base of the significance of this move. As I indicated to you, over the last six months we have spoken with you about our efforts to "change the game." Today's announcement is a major step in changing the game. Last fall we rolled up our sleeves, did a lot of soul searching and seriously examined our business model. We concluded that pursuing a significantly expanded relationship with IBM—the world's inventor of recording heads and unrivaled investor in the development of future recording technologies—was in the best interests of our company, our employees and shareholders.
The expanded relationship with IBM will significantly expand our Giant MR head capability, our supply and provide what we believe will be an advantageous and sustainable time-to-market advantage in the desktop business. As we indicated in our conference call last week, time to market and time to volume are key success factors. You will note from the announcement that our desktop business will obtain special access to IBM's Giant MR heads and head technologies simultaneous with IBM's development of these future platforms.
The beauty of the proposed agreement with IBM is that it enables WD to remain non-vertically integrated in the most capital intensive part of the business, aligned with the industry leader in areal density. The current industry cycle notwithstanding, we continue to believe that the virtual vertically integrated approach is a powerful model—especially in the desktop segment and especially in the most competitive part of the market.
Intentionally, the agreement has tremendous flexibility and a myriad of options in terms of how WD can decide to implement IBM technology in future WD Caviar desktop drive designs. The agreement does not pertain to all of our desktop designs in the future—which will enable us to more fully leverage our ongoing R&D investment in the desktop business to create a broader, even more robust product roadmap for our OEM and reseller customers.
I should also point out and emphasize that the IBM agreement does not preclude other head suppliers from competing on future non-IBM desktop programs at WD, as well as on all ESG programs. In terms of our desktop media, it is business as usual with a blend of WD internal supply and our current partners. With semiconductors, the IBM agreement does not preclude other semiconductor suppliers from competing on future IBM and non-IBM programs.
In addition to maintaining our own independent desktop development effort, WD will continue to invest substantially in our growing and profitable Enterprise storage business. In fact, our employee population in Rochester, Minnesota where those drives are developed will rise to more than 400 by the end of June.
Obviously, we are extremely excited about today's announcement. Both WD and IBM are very committed to making this an enduring, profitable relationship for both companies. The key will be in the execution. In that regard, the track record has already begun! In recent quarters, IBM has become our largest supplier of MR heads…. They supplied about 50% of our MR heads in the March quarter and with this agreement that share could rise depending on the success of this relationship.
The initial term of the proposed agreement is three years during which time we will have ample opportunity to decide which pieces of IBM's vaunted technology are best suited to the high volume desktop business. That will be one of the primary challenges to WD's desktop business in the years ahead—successfully implementing the most attractive features of IBM's technologies with one of our greatest value adds—high-volume manufacturing efficiency. There is a great deal of mutual vested interest at stake in focusing on the successful execution of this relationship. Jim Vanderslice of IBM and I are both personally dedicated to making this a success. |
