Maxtor Corporation, founded in 1982 and acquired by Seagate Technology in 2006, was an American manufacturer of computer hard disk drives, the third largest in the world immediately prior to acquisition. It now operates as a subsidiary of Seagate.
Maxtor targeted both the server and desktop market, concentrating on disk capacity more than disk speed for desktops.
Maxtor Corporation is one of the world's leading manufacturers of computer disk drives. Along with Conner Peripherals, Quantum Corporation, Seagate Technology, Western Digital, and Micropolis, Maxtor shares in dominating the 1.8 to 5.25 magnetic and optical disk drive market. However, due to the cyclical nature of the disk drive market, a failure to introduce new products in a timely fashion, and poor management decisions, Maxtor has been plagued by severe financial problems for most of its existence.
Established in 1982 by a group of computer and computer-marketing whiz kids, Maxtor was soon dominated by co-founder James McCoy, who became the central figure in Maxtor's early development and success. McCoy, who had held positions at Verbatim and Exabyte and had been a marketing manager at Shugart Corporation and a vice president at Quantum Corporation, possessed valuable experience in the computer storage device industry. He immediately set out to make Maxtor a leader in the magnetic disk drive market by engineering and manufacturing 1.8-inch (105MB) to 5.25 (1.2GB-1.7GB) Winchester magnetic disk drives.
The company's sales increased rapidly and soon Maxtor was competing with the biggest names in the computer disk drive industry. By 1984, it was in direct competition with Seagate Technology over the introduction and market share of high-capacity 5.25-inch Winchester rigid-disk drives. However, the competition took place in the realm of company press releases rather than in the marketplace. Seagate, the originator and leading manufacturer of 5.25 Winchesters, boasted that it would soon introduce the ST412 High Performance interface, which would make it easier for high-volume computer manufacturers to enhance their disk drives in a shorter period of time. Maxtor responded by publicizing that it would soon introduce its Enhanced Small Disk Interface, which would transfer high-rate data in large memory systems. With the demand for 5.25 high-capacity Winchesters increasing, it seemed as though the first company to ship its product in volume would be declared the victor.
Yet even with such high stakes, Maxtor could not avoid delayed production shipments of the high-capacity 5.25 Winchesters and allowed Seagate to reach the market first with its product. Maxtor's shipment problem originated with its decision to contract Read/Rite Corporation, a components manufacturer and supplier for the computer disk drive industry. Read/Rite was experiencing financial, production, and management difficulties that prevented the company from supplying Maxtor's order according to the schedule stipulated in the contract. As time elapsed, and no product was yet in sight, Maxtor began to suffer severe financial losses. Once the management at Maxtor ironed out its problems with Read/Rite and contracted other suppliers, the company reversed its losses.
From 1985 through 1987, Maxtor held undisputed dominance in the disk drive market above 100MB. The company's gross profits, which approximated 19 percent of total revenues, jumped to nearly 30 percent by the end of 1986. During these years, Maxtor had developed into a market leader primarily because it was able to identify industry trends quickly and improve its manufacturing efficiency. These two factors gave the company an edge over its closest competitors. However, after 1987, Maxtor's success began to unravel once again. Manufacturing problems with its most recent SCSI and ESDI drives plagued the company, and an increase in both domestic and foreign competition crowded the disk drive industry. Compounding the company's problems was the retirement of almost all of the founding management, and the discontinuity in both strategy and financial management that this departure caused.
By the middle of 1988, Maxtor was losing its market position within the industry. The company's continuing dependence on five-year-old products, its inability to solve its supplier problems, and its involvement in a price war contributed to plunging profits. At the end of the fiscal year, Maxtor's gross profits had dramatically decreased to a mere 3.4 percent of total revenues. Yet the new president and chief executive officer of Maxtor, a 17-year management veteran of Advanced Micro Devices named George M. Scalise, was optimistic that economies of scale in manufacturing products could return the company to the profitability of earlier years.
The Maxtor founders, James McCoy, Jack Swartz, and Raymond Niedzwiecki --- graduates of the San José State University School of Engineering and former employees of IBM --- began the search for funding in 1981. In early 1982, B.J. Cassin and Chuck Hazel (Bay Partners) provided the initial $3 million funding and the company officially began operations on July 1, 1982. It shipped its first product in February 1983 to Convergent Technology and immediately received an additional $5.5 million in its second round of funding. The company also began negotiations with the EDB (Economic Development Board) of Singapore for favorable terms before committing to Singapore as its offshore manufacturing location. The DBS (Development Bank of Singapore) agreed to provide financing to help grow the company in Singapore. In 1983, the company established a liaison and procurement office in Tokyo, headed by Tatsuya Yamamoto.
Maxtor's product architecture used eight disks; 15 surfaces recorded data and the final surface was where the servo track information was located. The company developed its own spindle motor, which was fitted within the casting containing the disks. This was a major departure, the motor usually being mounted external to the disks. The first product was designed to provide 190 MB of storage, but delays in getting magnetic heads to the Maxtor design resulted in the company taking what was available and the first drives were shipped with a capacity of only 140 MB. The company received an additional round of financing of approximately $37 million in 1984 before going public in 1985, with Goldman Sachs as the prime underwriter.
Scalise resigned in January of 1991, after receiving a poor performance review by Maxtor's board of directors. Scalise, and most of the upper-level positions that he had filled upon his arrival at the company, were replaced by many members of the old management team, including James McCoy. McCoy was immediately appointed chairman of the board, and Lawrence R. Hootnick, a former president of the embedded controller and memory division at Intel Corporation, was chosen as the new president and chief executive officer. Together McCoy and Hootnick devised a strategy to stop Maxtor's financial hemorrhaging by introducing new products and by selling some of the firm's assets.
Maxtor's new management quickly introduced Tahiti II, the company's 1-gigabyte erasable optical disk drive. It followed with a new product line of Apache disk drives for Apple Computer's PowerBook notebook, and shortly thereafter offered a line of new disk drives for NetWare local area networks. Maxtor then sold its assembly plant in Malaysia to Read/Rite Corporation for $17 million, and placed on the market its Storage Dimensions Inc. subsidiary, a manufacturer of optical and magnetic subsystems. The company laid off 140 domestic workers and permanently eliminated approximately 130 positions at its manufacturing plant in Singapore. Through what McCoy and Hootnick described as an aggressive strategy to reduce costs, control inventory, and manage the company's cash flow, Maxtor recovered from its financial difficulties and headed for profitability. By the end of the new management's first year, Maxtor had turned a profit of $4 million.
In 1992, Maxtor celebrated its 10th birthday by surpassing the billion-dollar mark in total revenues; the company reported an $89 million profit on revenues of $1.40 billion, a complete turnaround from just two years earlier. This dramatic change of fortune was partly caused by the improvement in the disk drive industry and the growing demand for disk drives geared toward Windows applications. However, management also took the appropriate measures to build upon its core business, improve its quality control, and provide better service to customers. Maxtor's No Quibble service plan guaranteed that it would replace a customer's disk drive in less than 48 hours. At the same time, Maxtor introduced new products such as drives for high-end personal computers and high-end notebooks. The company also increased its quarterly research and development budget from a mere $5 million to just over $29 million. Finally, in an effort to financially strengthen the company, management sold its Storage Dimensions subsidiary to a private investment group for a $4 million note, $18 million in cash, and a 30 percent interest in the company.
According to every economic indicator, Maxtor was back on track. During the first half of fiscal 1993, sales increased almost 50 percent and net income jumped to $66 million, compared to the same period a year earlier. Yet the past acquisition of MiniScribe came back to haunt the company. The purchase and subsequent merging of Maxtor's and MiniScribe's operations were executed poorly, and continued to drain the company of cash that needed to be spent elsewhere. Combined with an unexpected pricing war, these financial difficulties resulted in Maxtor's revenues dropping 24 percent and a net loss of over $72 million for the first quarter of fiscal 1994.
With Maxtor in such a precarious financial situation yet again, management sought a long-term solution to the company's problems. An agreement was reached with Hyundai Electronics Industries Corporation, a gigantic South Korean-based firm, to purchase a 40 percent interest in Maxtor. Under the terms of the agreement, Hyundai would put up $150 million and receive almost 20 million shares of common stock in Maxtor at a price of $7.70 per share. Furthermore, the agreement would entitle Hyundai to representation on Maxtor's board of directors and voting rights proportional to its ownership of Maxtor stock. The deal pleased both companies: Maxtor would gain desperately needed cash, and Hyundai would benefit by Maxtor's presence in the international disk drive market.
At the end of 1993, the agreement between Maxtor and Hyundai was still awaiting approval by Maxtor shareholders and the governments of the United States and South Korea. This delay meant that Maxtor had still not received the cash as stipulated in the agreement, although it appeared likely that the money would be forthcoming. In addition, Maxtor's difficulty in getting its products to market in a cost-effective, timely manner still hampered the company's ability to improve its financial condition. Maxtor's 2.5-inch, 250-megabyte disk drive, for example, was experiencing severe production problems. According to Chief Executive Officer Laurence Hootnick, Maxtor's future viability depended on an infusion of capital and an ability to bring products to market on time. As of mid-1994, whether or not Maxtor could get the cash it needed to stay afloat and solve its seemingly intractable production delays, according to many people within the disk drive industry, was sheer speculation.
After nine years of development, the original XT-series of drives had achieved a capacity of 1 GB. Maxtor sold the rights to the series to Sequel of Santa Clara, California, in the mid-1990s, thus exiting the server SCSI drive market. Sequel, a spin-off of Unisys, was not a disk drive manufacturer; rather, they specialized in refurbishing drives for the existing customer base. Teetering on the brink of bankruptcy in 1992, Maxtor's exit from the high capacity 5.25-inch SCSI market temporarily left a product void in the industry. Around this time, SCSI versions of the 7000 series drives were also discontinued and all engineering operations in San Jose were shut down in late 1993, leaving only the former MiniScribe design engineering staff. After turnover in the executive staff, Maxtor decided it had made a mistake, and having moved its headquarters to nearby Milpitas, gradually began rebuilding its Silicon Valley engineering staff.
In 1990 Maxtor entered the mass market with its purchase of the assets (but not the liabilities) of bankrupt MiniScribe in Longmont, Colorado.[2] The transition was a tough one, with the early products of this union (notably the 7120 3.5-inch 120 MB drive) having many quality and design problems. Later products managed to sell well despite the initial problems, and in 1996 the company completely redesigned its drive lines, introducing the Texas Instruments DSP-based DiamondMax series.
Statistics:
Public Company
Incorporated: 1982
Sales: $1.4 billion
Employees: 8,900
Stock Exchanges: NASDAQ
SICs: 3572 Computer Storage Devices
1 President(s)
Michael Wingert, President and Chief Operating Officer
1 Other
Raman Yeung, Channel Sales Supervisor of Greater China Region
1 Senior Vice President(s)
John Klinestiver, Senior Vice President Human Resources
2 Vice President(s)
Nancy Bush, Principal Accounting Officer, Vice President and Corporate Controller
William Sweeney, Vice President, Secretary and General Counsel
3 Director(s)
Keith Gurries, Sales & Marketing Director
Jeff Werning, Director of Rochester Branch
Jon Van Bronkhurst, Senior Director of Product Marketing
Address:
211 River Oaks Parkway
San Jose, California 95134
U.S.A.
Maxtor targeted both the server and desktop market, concentrating on disk capacity more than disk speed for desktops.
Maxtor Corporation is one of the world's leading manufacturers of computer disk drives. Along with Conner Peripherals, Quantum Corporation, Seagate Technology, Western Digital, and Micropolis, Maxtor shares in dominating the 1.8 to 5.25 magnetic and optical disk drive market. However, due to the cyclical nature of the disk drive market, a failure to introduce new products in a timely fashion, and poor management decisions, Maxtor has been plagued by severe financial problems for most of its existence.
Established in 1982 by a group of computer and computer-marketing whiz kids, Maxtor was soon dominated by co-founder James McCoy, who became the central figure in Maxtor's early development and success. McCoy, who had held positions at Verbatim and Exabyte and had been a marketing manager at Shugart Corporation and a vice president at Quantum Corporation, possessed valuable experience in the computer storage device industry. He immediately set out to make Maxtor a leader in the magnetic disk drive market by engineering and manufacturing 1.8-inch (105MB) to 5.25 (1.2GB-1.7GB) Winchester magnetic disk drives.
The company's sales increased rapidly and soon Maxtor was competing with the biggest names in the computer disk drive industry. By 1984, it was in direct competition with Seagate Technology over the introduction and market share of high-capacity 5.25-inch Winchester rigid-disk drives. However, the competition took place in the realm of company press releases rather than in the marketplace. Seagate, the originator and leading manufacturer of 5.25 Winchesters, boasted that it would soon introduce the ST412 High Performance interface, which would make it easier for high-volume computer manufacturers to enhance their disk drives in a shorter period of time. Maxtor responded by publicizing that it would soon introduce its Enhanced Small Disk Interface, which would transfer high-rate data in large memory systems. With the demand for 5.25 high-capacity Winchesters increasing, it seemed as though the first company to ship its product in volume would be declared the victor.
Yet even with such high stakes, Maxtor could not avoid delayed production shipments of the high-capacity 5.25 Winchesters and allowed Seagate to reach the market first with its product. Maxtor's shipment problem originated with its decision to contract Read/Rite Corporation, a components manufacturer and supplier for the computer disk drive industry. Read/Rite was experiencing financial, production, and management difficulties that prevented the company from supplying Maxtor's order according to the schedule stipulated in the contract. As time elapsed, and no product was yet in sight, Maxtor began to suffer severe financial losses. Once the management at Maxtor ironed out its problems with Read/Rite and contracted other suppliers, the company reversed its losses.
From 1985 through 1987, Maxtor held undisputed dominance in the disk drive market above 100MB. The company's gross profits, which approximated 19 percent of total revenues, jumped to nearly 30 percent by the end of 1986. During these years, Maxtor had developed into a market leader primarily because it was able to identify industry trends quickly and improve its manufacturing efficiency. These two factors gave the company an edge over its closest competitors. However, after 1987, Maxtor's success began to unravel once again. Manufacturing problems with its most recent SCSI and ESDI drives plagued the company, and an increase in both domestic and foreign competition crowded the disk drive industry. Compounding the company's problems was the retirement of almost all of the founding management, and the discontinuity in both strategy and financial management that this departure caused.
By the middle of 1988, Maxtor was losing its market position within the industry. The company's continuing dependence on five-year-old products, its inability to solve its supplier problems, and its involvement in a price war contributed to plunging profits. At the end of the fiscal year, Maxtor's gross profits had dramatically decreased to a mere 3.4 percent of total revenues. Yet the new president and chief executive officer of Maxtor, a 17-year management veteran of Advanced Micro Devices named George M. Scalise, was optimistic that economies of scale in manufacturing products could return the company to the profitability of earlier years.
The Maxtor founders, James McCoy, Jack Swartz, and Raymond Niedzwiecki --- graduates of the San José State University School of Engineering and former employees of IBM --- began the search for funding in 1981. In early 1982, B.J. Cassin and Chuck Hazel (Bay Partners) provided the initial $3 million funding and the company officially began operations on July 1, 1982. It shipped its first product in February 1983 to Convergent Technology and immediately received an additional $5.5 million in its second round of funding. The company also began negotiations with the EDB (Economic Development Board) of Singapore for favorable terms before committing to Singapore as its offshore manufacturing location. The DBS (Development Bank of Singapore) agreed to provide financing to help grow the company in Singapore. In 1983, the company established a liaison and procurement office in Tokyo, headed by Tatsuya Yamamoto.
Maxtor's product architecture used eight disks; 15 surfaces recorded data and the final surface was where the servo track information was located. The company developed its own spindle motor, which was fitted within the casting containing the disks. This was a major departure, the motor usually being mounted external to the disks. The first product was designed to provide 190 MB of storage, but delays in getting magnetic heads to the Maxtor design resulted in the company taking what was available and the first drives were shipped with a capacity of only 140 MB. The company received an additional round of financing of approximately $37 million in 1984 before going public in 1985, with Goldman Sachs as the prime underwriter.
Scalise resigned in January of 1991, after receiving a poor performance review by Maxtor's board of directors. Scalise, and most of the upper-level positions that he had filled upon his arrival at the company, were replaced by many members of the old management team, including James McCoy. McCoy was immediately appointed chairman of the board, and Lawrence R. Hootnick, a former president of the embedded controller and memory division at Intel Corporation, was chosen as the new president and chief executive officer. Together McCoy and Hootnick devised a strategy to stop Maxtor's financial hemorrhaging by introducing new products and by selling some of the firm's assets.
Maxtor's new management quickly introduced Tahiti II, the company's 1-gigabyte erasable optical disk drive. It followed with a new product line of Apache disk drives for Apple Computer's PowerBook notebook, and shortly thereafter offered a line of new disk drives for NetWare local area networks. Maxtor then sold its assembly plant in Malaysia to Read/Rite Corporation for $17 million, and placed on the market its Storage Dimensions Inc. subsidiary, a manufacturer of optical and magnetic subsystems. The company laid off 140 domestic workers and permanently eliminated approximately 130 positions at its manufacturing plant in Singapore. Through what McCoy and Hootnick described as an aggressive strategy to reduce costs, control inventory, and manage the company's cash flow, Maxtor recovered from its financial difficulties and headed for profitability. By the end of the new management's first year, Maxtor had turned a profit of $4 million.
In 1992, Maxtor celebrated its 10th birthday by surpassing the billion-dollar mark in total revenues; the company reported an $89 million profit on revenues of $1.40 billion, a complete turnaround from just two years earlier. This dramatic change of fortune was partly caused by the improvement in the disk drive industry and the growing demand for disk drives geared toward Windows applications. However, management also took the appropriate measures to build upon its core business, improve its quality control, and provide better service to customers. Maxtor's No Quibble service plan guaranteed that it would replace a customer's disk drive in less than 48 hours. At the same time, Maxtor introduced new products such as drives for high-end personal computers and high-end notebooks. The company also increased its quarterly research and development budget from a mere $5 million to just over $29 million. Finally, in an effort to financially strengthen the company, management sold its Storage Dimensions subsidiary to a private investment group for a $4 million note, $18 million in cash, and a 30 percent interest in the company.
According to every economic indicator, Maxtor was back on track. During the first half of fiscal 1993, sales increased almost 50 percent and net income jumped to $66 million, compared to the same period a year earlier. Yet the past acquisition of MiniScribe came back to haunt the company. The purchase and subsequent merging of Maxtor's and MiniScribe's operations were executed poorly, and continued to drain the company of cash that needed to be spent elsewhere. Combined with an unexpected pricing war, these financial difficulties resulted in Maxtor's revenues dropping 24 percent and a net loss of over $72 million for the first quarter of fiscal 1994.
With Maxtor in such a precarious financial situation yet again, management sought a long-term solution to the company's problems. An agreement was reached with Hyundai Electronics Industries Corporation, a gigantic South Korean-based firm, to purchase a 40 percent interest in Maxtor. Under the terms of the agreement, Hyundai would put up $150 million and receive almost 20 million shares of common stock in Maxtor at a price of $7.70 per share. Furthermore, the agreement would entitle Hyundai to representation on Maxtor's board of directors and voting rights proportional to its ownership of Maxtor stock. The deal pleased both companies: Maxtor would gain desperately needed cash, and Hyundai would benefit by Maxtor's presence in the international disk drive market.
At the end of 1993, the agreement between Maxtor and Hyundai was still awaiting approval by Maxtor shareholders and the governments of the United States and South Korea. This delay meant that Maxtor had still not received the cash as stipulated in the agreement, although it appeared likely that the money would be forthcoming. In addition, Maxtor's difficulty in getting its products to market in a cost-effective, timely manner still hampered the company's ability to improve its financial condition. Maxtor's 2.5-inch, 250-megabyte disk drive, for example, was experiencing severe production problems. According to Chief Executive Officer Laurence Hootnick, Maxtor's future viability depended on an infusion of capital and an ability to bring products to market on time. As of mid-1994, whether or not Maxtor could get the cash it needed to stay afloat and solve its seemingly intractable production delays, according to many people within the disk drive industry, was sheer speculation.
After nine years of development, the original XT-series of drives had achieved a capacity of 1 GB. Maxtor sold the rights to the series to Sequel of Santa Clara, California, in the mid-1990s, thus exiting the server SCSI drive market. Sequel, a spin-off of Unisys, was not a disk drive manufacturer; rather, they specialized in refurbishing drives for the existing customer base. Teetering on the brink of bankruptcy in 1992, Maxtor's exit from the high capacity 5.25-inch SCSI market temporarily left a product void in the industry. Around this time, SCSI versions of the 7000 series drives were also discontinued and all engineering operations in San Jose were shut down in late 1993, leaving only the former MiniScribe design engineering staff. After turnover in the executive staff, Maxtor decided it had made a mistake, and having moved its headquarters to nearby Milpitas, gradually began rebuilding its Silicon Valley engineering staff.
In 1990 Maxtor entered the mass market with its purchase of the assets (but not the liabilities) of bankrupt MiniScribe in Longmont, Colorado.[2] The transition was a tough one, with the early products of this union (notably the 7120 3.5-inch 120 MB drive) having many quality and design problems. Later products managed to sell well despite the initial problems, and in 1996 the company completely redesigned its drive lines, introducing the Texas Instruments DSP-based DiamondMax series.
Statistics:
Public Company
Incorporated: 1982
Sales: $1.4 billion
Employees: 8,900
Stock Exchanges: NASDAQ
SICs: 3572 Computer Storage Devices
1 President(s)
Michael Wingert, President and Chief Operating Officer
1 Other
Raman Yeung, Channel Sales Supervisor of Greater China Region
1 Senior Vice President(s)
John Klinestiver, Senior Vice President Human Resources
2 Vice President(s)
Nancy Bush, Principal Accounting Officer, Vice President and Corporate Controller
William Sweeney, Vice President, Secretary and General Counsel
3 Director(s)
Keith Gurries, Sales & Marketing Director
Jeff Werning, Director of Rochester Branch
Jon Van Bronkhurst, Senior Director of Product Marketing
Address:
211 River Oaks Parkway
San Jose, California 95134
U.S.A.