History (1998): StorMedia in Bankruptcy

Component manufacturers for the HDD industry continue to suffer the consequences of the crisis currently hitting their customers.

This time, it’s StorMedia, a maker of thin-film disks and substrates, which is being hard hit and has filed for protection under Chapter XI of the US bankruptcy laws, after 6 consecutive quarters of loss.

During its relatively short lifetime, the company, under CEO and chairman Bill Almon, knew more than its share of difficulties. In 1995, there was Maxtor’s decision to terminate a lucrative purchase agreement of disks, which lead to a flurry of lawsuits.

In December 1997, StorMedia acquired substrate and media maker Akashic Memories, an indirect subsidiary of Kubota, but almost immediately experienced problems in integrating the new activity, particularly due to the different corporate cultures.

The company always had a limited number of customers. The liquidation of Micropolis in 1997 was nearly a fatal blow. StorMedia had passed an accord with the HDD maker to install a facility inside Micropolis’ own facility in Singapore. In 4Q96, sales to Seagate represented 95% of net sales, compared to only 16% for 1Q98 and, in May 1998, Seagate terminated the supply agreement with StorMedia.

During the 6 months ended in June, StorMedia had net losses of $49 million for revenues of $63 million. Samsung represented 52% of its sales, Seagate 19%, SyQuest 17% and Western Digital 2%.

The only positive side to the story is perhaps that it will allow other disk makers, also hurting, to enjoy a slight rise in orders, and to benefit from one less competitor.

This article is an abstract of news published on issue 129 on October 1998 from the former paper version of Computer Data Storage Newsletter.