History (1991): HP Close to $800 Million Sales of Mass Storage

The US company is one of the computer manufacturers that sells the most peripherals, more printers in the world, as well as and magnetic storage units.

“30% of Hewlett Packard’s total revenues come from peripheral sales, this amounts to $4 billion. mass storage business reported $750 million to $1 billion, half internal sales, half in internal ones,” unveiled, at a press conference in Bristol (UK), Rich Raimondi, mass storage marketing manager at HPs mass storage business unit in Boise, ID, with the participation of Hoyle Curtis, R& D manager, Greeley storage division in Greeley, CO, and John Gannon, marketing manager, disk mechanism division in Boise, ID.

At last Comdex/Fall in Las Vegas, John Boose, GM of the Greeley storage division, gave a more exact amount of $800 million where half concerned HDDs. These sales cover 6,000 5.25-inch magneto-optical drives, 1,000 optical disk libraries, 15,000 to 20,000 DAT drives and especially 5.25-inch HDD drives.

Today’s population of these disks is close to one quarter of million of the units worldwide, an actual 10,000 unit production per month.

Mass storage business unit
The unit, where Ray Smelek is GM, includes 4 departments: Greeley Mass Storage in Greeley, Computer Peripherals Bristol, Disk Storage Systems and Disk Mechanisms in Boise. There also is a manufacturing site in Brazil that is in charge of 100-300MB CoyoteI low-volume disks.

Bristol’s department has an annual $200 million revenue, 90% in exports. 35% of the drives were sold to external customers in 1989, and almost 40% in 1990. In the 3.5-inch form factor, first shipments of the Wolverine family (200-240MB) are only evaluation units.

For HDDs, HP says to sell to 40 OEMs with 10 in Europe, but also relies on a distribution network (see below). Here the idea is to have 1 or 2 distributors in each country and to depend on each one of its local HP subsidiary.

The OEM customers known are AT &T, Auspex, Netframe, NeXT, NCR, PCS, Sequent and StorageTek (to provide Coyote III 1.6GB HDDs for its future Iceberg disk arrays).

Does the US company believes, like most viewers, that we are going to a WW overproduction of HDDs? “It has to be seen. it depends on which class of products. It will be for certain market segments, not for high capacity 5.25-inch drives. probably more for 3.5-inch ones and that’s not in our actual line of products,” was the answer.

New HDA line in Bristol
In Bristol, HP opened a new manufacturing line for 5.25-inch Coyote II drives with storage capacities ranging from 335MB to 1.3GB. The aim is to manufacture in this site 100% of European disk mechanisms by 1994. The line is the same as the one in Boise and includes a head arm assembly, a head disk assembly, and a mechanism assembly.

Actually, the magneto-optical drive is based on a Sony mechanism. “In 12 months from now. we will have our own product for evaluation, using magneto-optical technology, “said Raimondi.

In this area, HP will use Optotech’s know-how, a Colorado-based company that some $3 million assets was acquired a little more than a year ago.

HP believes to hold 35% of the WW market in 5.25-inch optical disk libraries with its 1,000 unit sales.

Today, the US company totals 9 OEMs for this type of product. In the second quarter of this year,. HP will offer a new library that will hold 144 optical disk cartridges (equivalent to 100GBs) and 4 multifunction magneto-optical drives, with an average exchange per disk of less than 10s. It will cost $65,000 to $75,000 per unit for a 4-drive OEM unit.

Robert Hill, marketing manager at HP Limited Computer Peripherals in Bristol, thinks that the company is already number one in WW DAT drive sales. He says that this year, HP will unveil a 10 to 14 cartridge autochanger with one or several drives.

Bob Tillman GM of HP Bristol, adds: “We are ahead in 4mm OATs and plan to remain there.”

AT&T, Compaq, Digital Equipment and ICL are among HP’s OEMs for these tape drives.

The problem being a computer and peripheral manufacturer
IBM knows what we’re talking about, and its recent announcement to keep on developing OEM sales shows that it hasn’t been successful. Big OEM customers that also manufacture computers, rather deal with independent manufacturers than with their biggest competitors to acquire peripherals.

HP’s best results in this segment come from printers, especially laser printers based on Canon mechanisms, but also from scanners, and a little less from plotters.

It’s been a few years since the company has began manufacturing magnetic peripherals with its own technology. Its first 14-inch disk drive with 32 or 66MB of storage capacity was launched in 1983. It also produces longitudinal recording tape drives, but mostly for its own needs.

Today, its high capacity 5.25-inch disk drives offer excellent specs, but competition is tough with companies like Maxtor, Micropolis or Seagate.

Its first 3.5-inch drives are just coming out but are nevertheless necessary, if only for its own workstations. If you count on a 10,000-unit production per month, which means 120,000 HDDs per year, it’s not that much compared to the 20 million drives produced WW each year. But it looks like HP wants to keep its position in storage peripherals.

To remain in the tape drive industry and offer other models than its longitudinal recording units that are soon going to be outdated, it is making strong efforts to remain in the growing DAT market and is already in a good position, but still far from a mass market.

Competition is stronger on magneto-optical disk drives. In both cases, HP is vigorously trying to establish standards, DDS for DATs and a special rewriting protection method on magneto-optical disks for its multi-function drive. In the two circumstances, the company uses Japanese mechanisms, especially Sony for the moment, which of course doesn’t lead to the same profit margins.

But HP seems to count on another supplier for its 3.5-inch DATs, and especially would like to develop its own technology for magneto-optical units.

Obviously the company is relying on its two HDD manufacturing sources, one in the US, the other one in Europe to control large European OEMs. But these last ones are soon going to have a bigger choice of HDDs since Conner Peripherals, Maxtor, Quantum or Seagate are already manufacturing in Europe or coming there. And it’s not the progressive transfer of production from Rodime plc in Glenrothes, Scotland, to Singapore that is going to basically change the problem. There still is no magneto-optical unit manufacturing in Europe. And for DATs there is only one, but serious competitor, Gigatape.

HP WW HDD distributors

• US national distributors: Anthem Electronics, Lex Electronics (Aka Schweber)
• US distributors: Cranel, Dallas Digital, Datalink, Mesa Technology
• European distributors: Inelco (Belgium), Tallgrass Technologies (Denmark and Norway), Yrel (France), Metrologie, Neumuller GmbH (Germany), Distec (The Netherlands), Wietec (Israel), Hybris,taly), Nextage Systems, Std Storage Tech (UK).

This article is an abstract of news published on the former paper version of Computer Data Storage Newsletter on issue ≠37, published on February 1991.