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November 3, 1995

WESTERN DIGITAL RETREATS INTO DISK DRIVE BUSINESS, SELLS MULTIMEDIA PRODUCTS TO PHILIPS SEMICONDUCTORS

By CBR Staff Writer

Irvine, California-based Western Digital Corp’s sale of its Multimedia Products Unit to the Philips Semiconductors arm of Philips Electronics NV (CI No 2,759) is part of an attempt to retrench itself, primarily as a disk drive maker. After a series of quarters in which the company appeared to be haemorrhaging cash, Western Digital has at last found some stability and is not about to rock the boat with products outside its core expertise, it said. But this plan flies in the face of what other disk drive makers have been doing in diversifying beyond the bsic drive market, changes brought about by the perception that the market is a volatile one with continual pressure on margins; indeed, Western Digital recently gave a profit warning for this quarter’s figures and cited margin pressure on its two newest products, the 1.6Gb Caviar drive and the PCI-SCSI board, at both distribution and OEM levels (CI No 2,758), and the figures were less than sparkling. But chairman, president and chief executive Chuck Haggerty said We can win in the marketplace much more effectively if we’re focused. In the past, part of the company’s problem was that it wasn’t focused and dabbled in other things. He said the disk drive market was no longer as volatile as it had once been – fewer companies were active in the field than 10 years ago and Seagate Technology Inc’s acquisition of Conner Peripherals Inc would reduce that number again, creating an opportunity for Western Digital among potential customers that wanted an alternative to the very large Seagate and pretty big Quantum Corp. Haggerty said improved capacity and reducing costs of disk drives made them more attractive than ever. He believed they had even reached a price point where personal computers could be equipped with two hard disk drives, with one acting as back-up storage. Increasingly powerful personal computers were also good news for the industry and he predicted that 1Gb drives would be the entry level for machines equipped with the Pentium Pro. But he admitted that the company’s 1.6Gb drive has not taken off as fast as the company had expected among higher end OEM customers, and as for the PCI-SCSI board, Western Digital was having difficulty shifting people away from their alliegances to Adaptec Inc. But Haggerty said that as a smaller company, Western Digital was more flexible than its bigger rivals. Its close partnerships with a variety of companies meant it had a range of technologies from which to choose. The latest technology it is using is TriPad Head Technology, where a specially developed coating of the disk’s platter enables the head actually to rest on the disk rather than having to fly at a height of microns above the platter. And he said to expect several ‘big’ OEM announcements in the next 30 to 50 days. Although the emphasis will be on disk drives, the company will keep hold of its input-output devices and continue to develop them. Next year there will be Fibre Channel Arbitrated Loop products. Also, next year it will commit $16m to a new research and development centre and will be taking on more engineers.

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