History (1990): 2.5, PrairieTek’s Golden Number

All its life PrairieTek Corporation (Longmont, CO) believed in one single product: HDDs, and in one single format: 2.5 inches.

It was incorporated on August 28, 1986 for the purpose of designing and marketing 2.5-inch HDDs for the emerging portable computer market.

The company’s formation is the result of a vision by Terry Johnson, a founder of MiniScribe and Codata Memory Corp. (now Conner Peripherals), of the future growth notebook and laptop computers will undergo within the general computer marketplace.

The firm performed the initial product development over an 18-month period in a garage of a guest house located on Johnson’s ranch in Longmont.

Collectively, the development team has 200 years of experience in the design and development of HDDs. Among the first main executives, including Terry Johnson, COB, (formerly with IBM, Memorex, StorageTek, Codata then MiniScribe), there is James E. Stineheifer (Hewlett-Packard), president and CEO, Steven B. Volk (Tallgrass), VP of marketing, Kenneth J. Jochim (General Electric, HP), VP of engineering, James H. Morehouse (Memorex,. StorageTek, Amcodyne), VP of research and development, Steven Gupta (IBM, Cybernex, Priam), VP of manufacturing. In October 1989, Alan Pagnotta and Gero Uppig completed the management team, respectively as VP of quality assurance and VP of European sales. Leon Maimed, formerly with Qantex, Quantum and Maxtor, was hired in April 1990 as SVP of sales and marketing.

The start-up is a privately-held corporation with initial venture capital funding from Merrill, Pickard, Anderson & Eyre, TA Associates & Hill, Kirby & Washing.

The second round of $10 million in venture financing was shared by the first round investors, Technology Venture Investors, Institutional Venture Partners and Sequoia Capital, to bring the capitalization to $14 million.

The company presently employs 200 people including temporary manufacturing personal and expects to reach a level of 300 employees by year end.

First generation products consist of miniaturized 2.5-inch HDDs with IBM XT/AT compatible controllers for portable computers.

Future applications include on board automotive navigational systems, facsimile machines, plotters and applications requiring small removable HDDs.

Dataquest predicts that the WW market, all manufacturers included, will reach 570,000 units this year, 2.45 million in 1991 and 3.1 million in 1992.

If PrairieTek was the first one to ship these tiny Winchester drives, it’s no longer the alone since Conner Peripherals and JVC of Japan followed.

Conner should ship units to Compaq and should supply IBM.

Other actors are expected in this fast growing market in the next few months: Areal Technology, IBM, Quantum, Rodime, Seagate, etc.

At the end of April 1990, 20,000 drives had been shipped by PrairieTek, according to a company’s spokeman.

Three models
The first product was the Prairie 220, measuring 1.0×2.8×4.3″, 30% the size of a 3.5-inch drive, with a 28ms average seek time, 20MB of storage and an average 1.5W of operating power requirement.

The 240, a 40MB model with the same specifications as the 220, were introduced in September 1989.

In November was announced the Prairie 120, a single platter 21.4MB drive with an average power consumption of less than 1.0W, a 23ms average seek time, weighing just 6.4 ounces, with overall dimensions of 0.6×2.8×4.0″ including the integrated AT/XT interface.

All the drives include a ramp head loading mecanism which automatically parks the head off the media when the drive is powered off. This technology eliminates stiction and head slap.

The Prairie 120 is rated at 250,000 start/stop cycles.

An added design feature is a single source power supply which requires only +5Vs for operation.

Before the end of the year, a same size 40MB version is expected on the market with an SCSI interface.

Next year, the company plans to produce an 80MBe model using a platter with a 100Mb per square inch density. Average access time should drop from 23 to 21ms.

Manufacturing
To facilitate the production of the drives designed, PrairieTek tried to reduce the number of foreign components. According to an executive of the company, only one minute is actually necessary to assemble a drive. Most of the manufacturing is completed in the PrairieTek plant in Longmont.

To reach the much larger amount that the market is requiring, the US company has signed agreements with a Japanese firm and has expanded its Longmont facilities.

This is rather usual, in the HDD business, to see exchanged agreements between American technology and Japanese manufacturing capacities. The joint development and manufacturing agreement with Alps Electronics of Japan provides that Alps will manufacture selected models, and the two companies will cooperate on future products. As part of the agreement, Alps will make an equity investment in PrairieTek, to hold about 10% of its capital. The relationship also provides PrairieTek access to Alps crucial metal-in-gap head technology.

“It is anticipated that the hard drive industry will experiment a shortage of MIG heads in the 1990 time frame“, said Jim Stinhelfer.

Alps manufactures over one million MIG heads at its facility in Nagaoka, Japan. In fact, the Japanese HDD production will only begin in July this year.

Last month, the US firm began a substantial expansion of its existing facility in Longmont to bring the total area to 90,000 square feet. In addition to providing more space for R&D, the new 60,000 square-foot expansion will allow PrairieTek to double its manufacturing capacity. Completion of the building is scheduled for July 1, with drive production to begin on July 15, 1990.

Like several US HDD manufacturers, PrairieTek intends to open a plant in Europe to be able to start producing in 1991, with an European partner it is actually looking for. The French company Sagem has been contacted.

Marketing
Last November, it was announced that Mitsui & Co., a Japanese trading firm, will begin selling the Prairie 240 in Japan.

PrairieTek has set up a European HQ in Frankfurt, West Germany, and has dealers notably in France (Stordata), UK (Phase IV Systems), Italy (ASSE SPA), Korea (Aujo0), Taiwan (Weikeng) and Hong Kong (Novel).

But of course, the largest part of small HDD manufacturers is formed by big computer manufacturers, especially those who are -, or are trying – to sell notebook computers that require little drives, smaller than the 3.5-inch one-inch high ones.

Last April 11, PrairieTek announced the signing of its first major OEM contract with Sharp Electronics to supply the Japanese manufacturer of the PC-6220 laptop with the Prairie 120 drive.

“This multi-million dollar contract represents the first of several that PrairieTek plans to announce within the next few months,” said Steve Volk.

Among the coming official announcements, names of several notebook computer manufacturers are expected to be heard: Nixdorf, Agilis, Grid, Philips (on PCl 203 and 204 models), Siemens and three Taiwanese that could be Copam, Quanta and Modern Computer. Let’s keep one eye on Sanyo and Toshiba.

One of the biggest problems with 2.5-inch drives is their high cost.

“At the beginning of 1992, their price will be the same as 3.5-inch ones, and already this year, they will be the cheapest 20MBe drives, all form factors included,” said a PrairieTek’s spokesman.

After 14, 12, 10, 8, 5.25, 3.5 and 2.5 inches, what will be the next form factor? According to Jean-Michel Guillou, president of Stordata, it ought to be 1.8 inches, half the size surface taking advantage of technical improvements that can double densities.

Partnering strategy in Japan
As advanced storage systems continue to shrink in size, US HDD makers must learn how to negotiate and nurture successful business relationships with Japanese companies, where most of today’s IBM compatible laptop computers are built, according to Jim Stine Helfer, president and CEO of PrairieTek. He spoke to 200 disk industry executives on May 21, at a dinner program sponsored by the International Disk Equipment and Materials Association (IDEMA).

Demand for the small drives is directly tied to the laptop computer market, the primary end users of 2.5-inch drives. 88% of the IBM compatible laptop market is controlled by 8 companies, according to the market research firm International Data Corp. Seven of those companies manufacture in Japan, Stine Heifer said.

Selling to these manufacturing operations in Japan presents a variety of cultural and business challenges for US-based companies. As an example, Stineheifer said that the standard US payment schedule of 30 days after receipt of an invoice is unheard of in Japan. Instead, Japanese computer companies operate under a 35-day “acceptance period” before they even acknowledge that a shipment has been received. Then, it is common for customers to wait an additional 150 days before paying for the shipment.

To overcome such basic difference in US and Japanese business cultures, Stinehelfer emphasized that US companies must be well versed in the Japanese concepts of vendor/user relationships before trying to sell in Japan.

The same is true for international partnerships with Japanese companies, he said. Close, personal relationships between senior level managers from both companies must be comfortably established if a US-Japan business partnership is to be successful, Stinehelfer advised.

“There is no such thing as successful, arms-length relationship,” with a Japanese partner, he said.

While the potential rewards of partnering in Japan are great, the low success rate demonstrates the difficulty factor. “Three out of four US-Japan business partnerships fail in the first year,” said Stinehelfer.

This article is an abstract of news published on the former paper version of Computer Data Storage Newsletter on issue ≠29, published on June 1990.

Note: PrairieTek was closed in 1991. The bidding war for its patent portfolio in 1992 rose to an astounding price of $18 million, paid by Conner Peripherals and Alps Electric.