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History (1991): Firsts Are Not Always Last

Example of HDD manufacturers PrairieTek and Rodime ceasing operations

 

  • PrairieTek, who launched the first 2.5-inch HDD, is ceasing operations because it can no longer finance its development.
  • Rodime originated the 3.5-inch form factor. But the last European manufacturer will no longer produce HDD drives.

Rodime driven out
Rodime Inc. (Boca Raton, FL), the US unit of Rodime Plc (Glenrothes, Scotland), applied for Chapter 11 protection under the US bankruptcy laws. The manufacturing companies of the disk drive maker in Scotland and Singapore are going into receivership.

In short, Rodime is stopping all manufacturing and will only be an IP company, just trying to make a maximum royalties from its 3.5-inch drive patents.

Like PrairieTek, Rodime believes its failure is on account of a lack of money, around $60 to $90 million. The Scottish company had vainly tried to find joint venture partners in Taiwan and South Korea, especially since its main supporter, the Bank of Scotland, that had already refilled Rodime, did not want to start over.

In 1H91, the company posted a loss of $7.6 million on sales of $46 million. The Scottish firm faced with a seventh consecutive year in the red. For FY90, Rodime lost $15.8 million on sales of $93.2 million.

First, Rodime will cut down from 620 to close to half employees in Glenrothes, Boca Raton and Singapore, then it will sell its offices and manufacturing complexes, and this should take about 6 months.

Behind this financial problem and trouble in finding Asian partners, Rodime had to face the counterpart of the drop in prices of HDDs on account of smaller demands and a general over-production, and the delay in producing new 3.5-inch models, especially a one-inch high 200MB model and another 500MB one. At the end of 1990, the company also planned to produce two 2.5-inch HDDs, of 40 and 80MBs, the 2000 T/A Series.

Rodime Plc will now try to make money on its 3.5-inch HDD patents. The company has won suits vs. Alps, Conner Peripherals, Fujitsu, IBM and MiniScribe. No amount has officially been released but according to different sources, IBM would have paid $13 to $15 million, Conner $8 million, and Fujitsu $5 million, on a 2.5% royalty fee basis, that can change if there is an exchange of licenses.

Its first 5 licensees probably won’t be the last ones since Rodime is still aiming another thirty 3.5-inch HDD manufacturers, among which Seagate and Quantum.

Ironically, Rodime Singapore was recently charged to pay $28,600 to Business Software Alliance after BSA accused it of possessing unlicensed software. BSA was formed in Washington in 89 to fight illegal software use and includes Microsoft, Lotus, Aldus, etc.

Rodime (for ROtating Disc MEmory) Plc was founded in 1980 by former employees at Burroughs and incorporated in the U.S. and listed on the New York OTC in 1982. It announced in 81 a 160MB 5.25-inch HDD and in 83 the world’s first 3.5-inch Winchester drive with an unformatted 10MB capacity, the RO 350.

It was one of Apple’s big suppliers for its Macintosh computers. It opened an R&D facility in US HQs in 86 and a Singapore plant the following year.

After financial problems, MD and CEO Peter G. Bailey joined the company after an April 1989 reorganization resulting in the departure of top management.

Last year, the Scottish firm entered a marketing alliance with JVC of Japan. At the same time, it decided to focus on OEM market and to sell its distribution arm, Rodime Syst. to Profit Technology. Following Rodime Inc.’s difficulties, Rodime Systems had to notify its customers that it was still in business.

PrairieTek quits for lack of investors
PrairieTek Corp. (Longmont, CO) ceased its activity and laid off all employees, about 300 workers in Colorado and Singapore.

The company opted for a Chapter 11 bankruptcy filing in US Bankruptcy Court in Denver, CO.

However, one month ago, PrairieTek found some cash from a new investor named Innovation Group Ltd. Liability, but the necessary funds, $40 million, did not come fast enough to mass produce a 40MB drive and to keep on the development of an 80MB unit requested by today’s market.

A few weeks before, the company had to lay off 210 people in the US or two thirds of its Colorado workforce.

Today, only a few executives are still in place to settle the liquidation.

PrairieTek, incorporated on August 28, 1986, was set up by Terry Johnson, COB, a founder of MiniScribe and Codata Memory Corp.; James Stinehelfer (Hewlett-Packard), president and CEO; and Steve Volk (Tallgrass).

Its first 2.5-inch HDD, the Prairie 220, at 20MB, was announced in 1988.

The company had signed a joint development and manufacturing agreement with Alps Electronics of Japan and a marketing agreement with Mitsui & Co. to sell its 40MBe Prairie 240 in Japan. Its first large OEM contract was signed in 1990 with Sharp.

In mid-90, David Riegel joined PrairieTek as new CEO. Shortly after, several executives, among which Stinehelfer, were leaving the company. At end of 90 and beginning 91, twice Kobe Steel of Japan brought fresh cash to the company. But its difficulties are not only investment problems, PrairieTek’s first 2.5-inch HDD did not have the size required by notebook computers and its design had to be studied over. Then, in the new form factor came Conner Peripherals, with whom PrairieTek could not compete.

Finally, it had bad luck when demands rapidly requested capacities higher than 20 and even 40MB.

This article is an abstract of news published on the former paper version of Computer Data Storage Newsletter on issue 44, published on September 1991.