The once beleaguered Western Digital Corp is back in profit and expanding in the hard drive market – which now accounts for 80% of its business – with two new additions to its Caviar line, introduced this September. They are the 2.5 170Mb Caviar Lite AL2170 and 1.8 40Mb Caviar UltraLite CU140. The latter, co-developed with Nippon Steel Corp (CI No 2,037) will begin shipping in the first quarter of 1993. Designed for sub-notebook and hand-held computers, it is 0.41 high, weighs 3.17oz and features a PCMCIA Type III interface. It has a seek time under 19mS, needs 5V and can withstand 100 G shock. The company says it has aroused interest from automotive manufacturers wishing to use it in the mapping and engine management systems in cars. The 2.5 Caviar Lite is for laptop and notebook computers. It is designed to provide performance similar to that of a 3.5 drive at lower power consumption modes. It runs off 5V, is 0.59 high and weighs 5.65oz. It features EISA/Direct Memory Access support and Western Digital’s CacheFlow2 disk catching system. Samples of the product are shipping now with volume production planned for January 1993. Prices are not available as yet – though it is said that the UltraLite CU140 will come in at around $6 to $7 a Megabyte.
Like the Caviar AC2340 – which the company claimed to be the world’s first inch-high, two platter 3.5 340Mb drive – the new offerings use the Architecture 1 chip set. This combines a WD61C23 Buffer Manager and Controller, WD61C12 Servo and Motor Controller and WD10C27 Data Separator and ENDEC. Architecture 1 provides Western Digital with a common low cost, high capacity design base that it can swiftly adapt across a spectrum of products. Dataquest speculated that it could be used in an inch high, 1Gb 3.5 drive, suggesting that it brought a level of commonality between microcode and board designs on multiple products that most drive companies have been yearning to achieve for years. This ability to combine expertise in microelectronic and board technologies, Western Digital believes, is an important competitive advantage. In view of this strategic importance, Architecture 1 will not be available to other manufacturers for another year – though certain elements of it are available now. The company started out as a semiconductor manufacturer in 1970 and did not enter the drive business until 1988 when it bought Tandon Corp’s Singapore facility. It now produces 80Mb to 340Mb 3.5, 170Mb 2.5 and 40Mb 1.8 drives, of which it ships around 1m a quarter. Its drive business generated $668m turnover in the last financial year. The remainder of its business, which includes video chips, storage chips, Core Logic chips, and the Paradise graphics boards generated $271m. The picture has not always looked so rosy though. The company sustained losses of $212.7m over six consecutive quarters during 1991-2 while it implemented a radical two-year restructuring programme, begun late 1990, to bring about a turnaround.
Western Digital was particularly poorly placed at the end of 1990; it was a player in an ageing storage and video board business, and its entry into the drive business, with an outmoded product line, coincided with a recession-driven disk industry price war. Sweeping changes to staff levels, products and strategy were necessary for its survival. It stopped manufacturing boards; closed three plants in Ireland, Puerto Rico and the US; wrote off its older products; sold off its local network adaptor business to Standard Microsystems (CI No 1,783) – a decision it has some cause to regret now given its success; cut its sales and administrative staff by 30% and cut its entire workforce to 6,300 from 7,800. To improve the quality and reputation of its products, it maintained its investment in research and development and focussed more selectively on its reseller and quality OEM base. It also refinanced its $200m bank debt and implemented a number of senior staff changes. Scott Mercer was brought in a year ago as senior vice-president and chief fina
ncial officer; Chuck Haggerty, with a 28-year career at IBM Corp behind him, arrived six months ago as president and chief operating officer; and a new general manager for the chip business is to be announced within the next six weeks. The company returned to profitability in the fourth quarter of 1992 – its financial year runs to June 30 – success that has continued into 1993. It recently reported first quarter net profit of $4.2m on $271.1m sales. The Caviar AC2340 was cited in the company report as, an important factor in our Q1 profitability as we shipped 16,000 units in September. More than a dozen systems manufacturers have placed orders for the 2340, including AST Research, Dell Computer, Gateway 2000, and Tandy, and an equal number are in the final stages of qualifying the drive for their systems. Megabytage shipped has steadily increased to 120m in the first quarter of 1993 from just over 100m in the fourth quarter of 1992 and its has made $226m savings from improved efficiency. It has recruited extra technical staff bringing its total workforce to 7,300. It now reckons to have an 18.1% market share behind Conner Peripherals Inc with 27.1% and Seagate Technology Corp at 24.5%, and ahead of Maxtor Corp at 17.8% and Quantum Corp at 12.5%. Architecture One it believes puts it four to six months ahead of the comptetition too. But it cannot afford to rest on its laurels and will continue with its strategy of cost management, debt removal and adaptability to market trends.
It is adamant that it will not participate in the current price war and is anxious not to be caught out by rapidly changing markets either; knowing when to phase products in and out remains key. For example, it sees the personal computer market splitting into home and more advanced ‘feature and function’ business-sectors and will adjust its products accordingly. Its core logic lines, which generated just $8,900 last quarter compared with $12,300 before are next to be phased out. It is keen to promote its presence in Europe and sees distribution channels such as consumer electronics retailers and direct marketeers becoming increasingly important as personal computer dealers and direct sales decline. It envisages that the graphics market will continue to be important, boding well for its Paradise VGA boards and for a new graphics chip – its answer to the Tseng Labs Inc ET/4000/W32 – to be announced at Comdex. As for the drive market, it reckons 3.5 disks will likely be around for another eight to 10 years but that they will eventually be eclipsed by drives of multiple smaller disks. It reckons 2.5 disks will be around for another three years but will be overtaken by 1.8 disks too. Already it is planning a 3.3V version of its 1.8 CaviarLite which is likely to become increasingly important if the forecasts by International Data Corp and other industry analysts that the portable personal computer market will come close to doubling between 1993 and 1995 are to be believed.