History (1992): Exclusive Interview With Al Shugart

Here is an exclusive interview with Alan Shugart, president, CEO and COO of Seagate Technology. He gave us his opinion on the market’s situation, IBM’s arrival, its fight with Big Blue on MR technology, the Conner/Intel agreement, etc.

Some questions were answered by Garry Garrettson (GG), VP product strategy and engineering at Seagate.

CDSN: Seagate’s last financial quarter was not bad in comparison with the previous one.
Shugart: It was good.

Do you think it’s temporary?
I don’t know, we don’t make those kind of projections. I can tell you that business remains good, and I think it’s good for all disk drive companies. We’re on allocation on all our higher volume products.

Last year was not very good for anybody.
Yes, last year we saw a lot of price pressures but in September, when the prices, not just of disk drives, but also of all components for computers came down, all of a sudden, you could buy a very good desktop computer at a reasonable price, so the market requirementwent up and we had to make a lot more disk drives. Business is good for computer companies and for disk drives and I think it will continue for some time, for how long? I don’t know. I’m cautiously optimistic for Seagate.

Actually, which are your best selling products?
Right now, the highest volume products that we sell are 40MB products. The higher the capacity, the lower the volume, all the way up.

When you speak about 40MB drives, do you think about 2.5-inch drives too?
Yes, but we don’t sell many of those.

Are you afraid of IBM, with their new OEM strategy?
I don’t think you can afford to take IBM lightly. They could be a great power because they have a lot of money. We are facing that potential competition with vigor. We are going to compete and we hope we will win.

It’s not a question of product?
They have a lot of money, they probably have the largest technical capability in disk drive technology than anybody. So if you combine the company with the largest technical capability with the company that has the most amount of money you cannot afford to take it lightly.

In fact that’s frightening, isn’t?
GG: It’s like competing vs. Fujitsu, Hitachi and NEC.

Their best selling products are the 3.5-inch 1GB drive with MR heads. It seems that they sell a lot.
If their 1GB 3.5-inch drive is their best selling product, they’re not doing very well.
GG: They’ve sent a lot of samples out. I don’t know if they have many wins yet.

Who owns the MR head technology?
I don’t think anyone owns it. It’s like saying who owns air and water. It’s a technology that is very very ancient. People have known about it for a long time. Some companies have invested money in perfecting the technology and applying it to disks and we’re one that has done that, and so has IBM, and IBM, I’m sure, has filed for patents and we have a lot of patents. How can you say somebody owns a technology? Nobody owns a technology. We own patents and we have a lot of proprietary knowlege about MR reading, but we don’t own it, IBM doesn’t own it either.

You have filed a counterclaim vs. IBM for a problem with Dr. Bonyhard, a former IBM employee who is working on MR technology. What’s the situation today?
We’re IBM’s biggest competitor in disk drives, and they’ve made a conscious decision to take some anti-competitive efforts towards us, and competitive actions towards us. Their lawsuit was strictly done to harass Seagate and has violated Dr. Bonyhard’s civil rights. And we don’t like it. We filed a cross complaint, accused IBM for harassing us and taking these unlawful anti-competitive measures. And Dr. Bonyhard filed a cross complaint vs. IBM accusing them of violating its civil rights. That lawsuit trial has not been scheduled yet. I’m sure IBM would just as soon never wish to come to trial because the longer it goes, the more money we have to spend, they can afford it but we can’t. They’ve got an injunction to keep Dr. Bonyhard from working, and I don’t know how they did that. The legal system in the United States is crazy. We’ve appealed that decision, we want to get Dr. Bonyhard back on the job, and the results of that appeal we should know in the next few weeks. With Dr. Bonyhard, it’s not a question of Seagate vs. IBM or IBM vs. Seagate, it’s a question about IBM vs. the world, it’s a question of right to work, of anti-slavery and all that sort of thing. I really believe that. IBM shouldn’t get away with this because upset about this too.

Will this injunction from IBM slow you MR development?
Did it hurt us? Obviously. If it didn’t hurt us, it would mean that the guy wasn’t working. He’s been working for us for 6 months and obviously it has hurt us when we had to take him off of the job. Will it slow us down, will it change any plans for when we announce or produce a product, I can’t tell you. We were damaged and we expect them to pay for that.

What is your opinion on flash cards, and on the Conner/Intel agreement?
Let me talk about the Conner/Intel agreement, and I’ll let Garry tell you about flash cards. The Conner/Intel agreement was the craziest press release I’ve ever seen. Everyone knew what they were exactly, that there was a joint venture, and generally that theywere working together on interfacing flash memory. When they made the press release, nobody knew anymore than before they made the press release. When you would try to find out, they wouldn’t tell. So there is no new information, everyone has known about this for 6 months, they made the press release the same day they filed a registration statement to sell $300 million worth of convertible debt and that’s the reason they made the press release. They made it because in their perspectives, their disclosure document that they have to file with the SEC to sell their $300 million worth of debt, they disclosed the fact that they had this joint venture.

Anyhow, it’s curious to see a disk drive manufacturer going into flash cards?
Tell me what they’re going to do. Are they going to make it? Are they going to sell it? Are they going to add value? Are they putting money together?

When you sell disk drives, you can sell flash cards too.
They didn’t say what they were going to do. They didn’t say anything. GG: flash memory is a good choice for hand-held devices if the amount of memory you need is rather small, it has good ruggedness and a relative low power consumption, the R/W performance isn’t particularly great but it’s OK. The main thing is power and weight and ruggedness. However today it costs about $40/MB, so anything you’re going to put into your pocket you won’t want to spend more than $1,000 on it which means you’re limited to 3 or 4MB for that price unless you want to spend a lot of money. If the application you have only requires that amount of R/W memory then it’s fine, it’s a good choice. If you require more than that then you probably need something like a disk drive. As time goes on, the price of flash memory will come down maybe $5 to $10/MB by 1995 which means that then you can afford maybe 15 to 20MB. We envision the minimum capacity of disk drive increasing. It’s now down from 20 to 40 and the next step we will be going from 40 to 80 mostly driven by the OS memory requirements and the application software memory requirements. So I think that the typical entry level capacity of a disk drive will move up and stay out of reach of flash cards for quite some time.

Which means that Seagate will not go into this technology?
We’re not going to make flash card wafers, we’re not going into that semiconductor business. I believe that Intel’s implementation of flash memory technology is inferior to some disk implementation.

Will you go into 1.8-inch disk form factor?
We have 1.8-inch disk drives, we’ve never announced them.

Which capacity?
What do you want? The problem is there no market. Maybe 1.8-inch is the wrong form factor. Who knows? A 1.8-inch drive is more expensive than a 2.5-inch drive because there are twice as many disks and twice as many heads, so an OEM prefers the 2.5 because it’s small enough. Some day there will be a market, maybe not for 1.8, maybe tor 1.0 or 1.9. That’s a 60MB drive. (Shugart pulls a 1.8-inch drive out of his pocket).

Is it a prototype?
Yes, we’ve never announced it.

Does it work?
Yes. We don’t sell them. There’s no market. It’s an AT interface.
GG: HP is out trying to peddle a 1.3-inch drive to OEMs. I think there is a lot of confusion in this market IBM has just shown a 1.8-inch drive. IBM is not always right on form factor by the way. They’re the ones who made 4.9-inch minifloppy. Obviously it didn’t fly, everyone went 5.25.

What about the RAID market?
We supply disk drives to lots of companies that are selling or making arrays. We ourselves have started and stopped two array programs. Imprimis had an array program when we bought it, we didn’t take the array program with us. It’s never proven yet to be an economically good venture for us. It doesn’t mean we won’t do it.

Do you have development on arrays at Seagate?
I have no idea. We have such a large organization. Some place in our development lab somebody is doing something, I guarantee you. They won’t tell me.
GG: We have some of the pieces. Seagate owns the basic parity path.

So you don’t believe so much in flash cards and arrays.
No. There’s a very large market for flash cards and we think they’re complementary to disk drives. We don’t plan to make them.

It seems that you believe in DAT technology. Why have you invested in R-Byte?
We didn’t invest in R-Byte. We had a DAT program a long time ago and we cancelled it in 1988 and the people that were working on that program bought it over.

But you personally?
I’m on the board of directors. But I don’t have an investment.

What does it mean?
In the United States, a corporation is a legal entity and the shareholders own the corporation, but they can’t run the corporation. So they vote every year for a board of directors. The board of directors meet and elect officers to run the company.

When did you speak for the last time with Finis Conner?
(He checks his engagement book) A week ago, Wednesday.

What did you speak about?
He told me he was going to a tour to sell $300 million of convertible bonds. I met him at a cocktail party. It must have been the 25th.

Do you think it’s possible to imagine a merger between Seagate and Conner?
Anything in the world is possible. I think it’s highly doubtful.

Your line of products are complementary.
I don’t think so.

They are strong in 2.5-inch drives.
There’s no 2.5-inch market. And we have all the 2.5-inch products they have. I think that there are no complementary products.

This article is an abstract of news published on the former paper version of Computer Data Storage Newsletter on issue ≠50, published on March 1992.

Note: Shugart died on December 12, 2006 in Monterey, CA, of complications from heart surgery he had undergone 6 weeks earlier.