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History (1997): MKE Majority Holder in MR Heads Joint Venture With Quantum

Bringing $200 million in cash, $90 million for Quantum, $110 million for new venture

Matsushita-Kotobuki Electronics (Kagawa, Japan) will be the major holder in a new, as yet unnamed joint venture it is forming with Quantum to design, develop and manufacture recording heads for HSSs.

MKE will hold 51% and Quantum 49%,” said Jean-Charles Herpeux, Quantum’s VP of European operations. “We bring our patents and our technology. MKE brings $200 million in cash, $90 million is for Quantum, $110 for the new venture.”

Quantum had acquired the MR heads activity when it purchased DEC’s storage business unit.

While this activity was never profitable before, Quantum is counting on MKE’s manufacturing process expertise to reverse this trend.

The new company will employ all current employees of Quantum’s existing recording head operations, and will maintain its current sites in Shrewsbury, MA, Louisville, CO, and Batam, Indonesia.

Mark Jackson, now president and GM of Quantum’s recording heads group, will be president of the joint venture. At the moment, there are no plans to sell the MR heads externally.

Our only customer is MKE, for drive assembly. We currently meet 20% of our MR head needs. Our goal is to get to 40%.”

Relations between Quantum and MKE have reached the point where it’s difficult to imagine one without the other. Quantum tried in vain to manufacture its own high-capacity drives, but ended up passing the baton to MKE, which now manufactures nearly all of the former’s units. The same now holds for its MR heads.

Such a relationship, between two large enterprises, one Japanese, the other American, is rare. Until now, both firms, with comparable financial means, have always gotten along well, mutually profiting from the relationship, with one in charge of R&D, marketing and sales, the other handling production. There is, nonetheless, the risk of a possible falling out, but that would be disastrous for both parties.

In the unlikely event of serious financial difficulties at Quantum, MKE would find itself in a privileged position to purchase Quantum at the best possible price.

What is the California company’s value, after all, without its partner? The reverse situation would be less dramatic, to the extent that MKE, a subsidiary of Japanese giant Matsushita, has other thoroughbreds in its stable.

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