History (1998): SyQuest Collapses

A reorganization that came too late, products sold at a loss, excessive advertising expenditures, strong competition from !omega and erasable optical disk drives, a sluggish storage market, dependence on the Apple market which has been shrinking like the ozone layer, the refusal of OEMs to integrate drives in their PCs – these are the most often-cited reasons behind the following press release, dated November 2: “SyQuest technology has suspended operations and is considering alternatives including filing a Chapter XI petition under the Bankruptcy Code. The company plans to maintain limited support to its customers.”

Basically, this is the end, unless the company stages a spectacular turnaround. Even the Web site was shut down.

For the removable HDD drive market, only Iomega remains. Avatar never quite managed to penetrate the 2.5-inch market.

It is odd that SyQuest’s demise corresponds with the arrival of brand new start-up Castlewood Systems. The irony no doubt did not escape Castlewood’s founder, Syed Iftikar, who also founded SyQuest, a company from which he was rather summarily dismissed.

The worst aspect of SyQuest’s unravelling is that the company has not managed to find a buyer, after several weeks of looking. Does no one want the firm? True, the company’s financial situation is grave. Last year, SyQuest lost $69 million on sales of $123 million. For the first 9 months of 1998, revenues were $124 million vs. losses of $97 million. Its stock was valued at 34 cents, down from $4 a year ago and $19 in August 1995.

Nevertheless, the San Jose Mercury News wrote: “Analysts said another company might buy SyQuest’s assets at fire-sale prices during bankruptcy proceedings. Possible purchasers are Sony and Imation.”

It is very likely that Iomega will, at the very least, pick up a good portion of SyQuest’s customers, and thus will face less pressure to reduce prices.

Note: Some assets sold to Iomega

SyQuest in brief
1982 – founded in February by Syed Iftikar, co-founder and VP of engineering at Seagate – the first company to offer small diameter removable disk drives for PCs
1983 – first product a 5MB 3.9-inch drive
1988 – release of the SQ555, which would be manufactured through 1995, a 44MB 5.25-inch drive that proved an enormous success, particularly among the Apple set, enough to encourage the release of an 88MB big brother, 3 years later
1991 – established SyDOS division for the PC market, only to be eliminated later
1992 – goes public
1993 – Nomaï takes advantage of SyQuest’s weak patent protection on its cartridges by starting production of compatible media, with the ensuing legal battles lasting through
1997 – launches a 1.8-inch removable disk drive, a product that leads no where, like any number of other SyQuest announcements in the 1.3- and 2.5-inch form factor
1995 – Kim Edwards becomes head of Iomega (up until then, Ricoh, at first, and then Iomega were the only – minor – competitors) – ends FY with all-time record sales of $300 million but with a $12 million loss
1996 – for 2Q96, net loss is greater than sales – Iftikar is fired, replaced by Edwin Harper as president and CEO, Ed Marinaro as chairman
1997 – manufacturing transferred from Singapore to Penang, Malaysia
1998 – workforce cut in half (by 950) in August – suspends operations in November

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