New Leader Seeks to Turn Disk Drive Firm Around

Finis F. Conner, the new chairman of Chatsworth-based Computer Memories, attended a seminar in San Jose last week that offered advice he should be able to use immediately. The topic: “Strategy for Survival.”

Conner will need all of the help he can get in trying to avert disaster. He has taken over as chairman of a disk-drive company that is desperate for customers after being jilted last month by computer giant IBM. The IBM contract, which accounted for 81% of Computer Memories’ $50.5 million in first-quarter revenue, will expire at year-end.

To fill such a void, Conner will need to court major computer manufacturers at a time when the market is soft. He also will have to repair a corporate image that was battered by the IBM experience and by a ruling late last month by the U.S. Patent and Trademark Office that bolstered a patent infringement case against the company.

The job belongs to a 42-year-old entrepreneur who has built a reputation in the disk-drive industry as skillful salesman with a knack for spotting potential markets before others. He earned that reputation for his part in marketing in the mid-1970s one of the first low-cost floppy disk drives for use in personal computer memory systems, and later in pioneering the development of more powerful Winchester, or hard disk, systems.

Good Strategist

“Finis is probably as capable of getting those customers as anybody around. He’s an outstanding executive salesman and a good strategist,” said James Porter, editor of Disk/Trend Reports.

Conner’s success has brought him the kind of wealth that would allow him to retire comfortably now--he owns homes in Indian Wells, Pebble Beach and Lake Tahoe, three corporate jets and a 100-foot cruiser anchored off Spain. But he says he was bored and eager to accept the kind of challenge he’s facing at Computer Memories.

But the tasks ahead have some wondering if life aboard the yacht or on the golf course may not seem more attractive after Conner realizes the implications of having taken the job as chairman of Computer Memories from Irwin Rubin, who stepped down to vice chairman.

“What do you do with a company like that that has been branded as a bad supplier with the IBM experience and has no other large buyers? He could take the company back to a small size and try to start over again, but that’s virtually impossible to do,” said Stewart Alsop II, publisher of a personal computer newsletter in Redwood City.

But Conner says he isn’t worried. He compares conditions at Computer Memories to those he has faced in some of the new businesses he’s started, which include one of the nation’s major disk-drive makers, a job placement agency for technical workers and a corporate-jet leasing business.

Born in Alabama and raised in Florida, Conner was the last of five children. His parents named him from the French word “fini,” meaning finished, to show there would be no more children.

Worked for IBM

Conner said he left for California when he was 19 with $200, spending $100 on the train ticket and losing most of the remaining money gambling. He landed a job with IBM as a clerk in San Jose, and later working as a designer of printed circuit boards while earning a bachelor’s degree in business from California State University, San Jose.

In 1973, Conner was working as a salesman under Alan F. Shugart at Memorex when the two men tried to persuade the company to market an inexpensive floppy disk-drive system. They were turned down, so Shugart, Conner and six other executives left to form Shugart Associates, which grew into one of the nation’s major disk-drive firms and was later bought by Xerox.

In 1979, Conner recruited Shugart to help him form Seagate Technology in Scotts Valley to develop 5-inch hard-disk drives, which he sensed would be welcomed by personal computer users because these disks had much more memory capacity than the floppy disk-drive systems.

Those hard-disk drives are box-like units that store and retrieve information on rigid disks using magnetic heads in much the same way that a tape recorder records on or plays back a tape. The hard-disk method is more expensive than the floppy disk system, but has the greater capacity and can retrieve data faster.

In three years, Seagate was doing more than $100 million in business. The company was successful, but Conner left one year ago as vice chairman after numerous disputes with other executives over such issues as strategy, marketing and product development.

Quit After Dispute

The final dispute was occurred when he decided not to release a disk-drive system he felt wasn’t ready, but was overruled.

There is still bitterness between Conner and Seagate executives. Despite being old friends, he and Shugart aren’t speaking to each other, Conner said. He said he also has heard that Seagate executives are privately questioning his decision to take the Computer Memories job.

Conner doesn’t seem to care. He says that Computer Memories has extensive resources with which to work, including a plant in Singapore, some existing customers and a strong balance sheet that includes $20.5 million in cash with no debt.

“I’m not sure this is as impossible a task as people might think,” Conner said confidently, with a trace of a Southern accent.

Last Thursday, Conner visited the Chatsworth offices of Computer Memories for the first time as chairman, setting up a temporary office in a meeting room. He plans to have his permanent office in the San Jose area, where Computer Memories has sales and engineering offices now, so he can be close to the Pebble Beach home.

To get enough customers to fill the void left by IBM, Conner must first beef up a product line characterized as “a little thin” by James Porter, editor of Disk/Trend Report.

“He’ll have to have a product ready damn fast,” Porter said.

Acquisitions Expected

While Computer Memories works on developing its own products, the company likely will be spending some of its cash on acquisitions to strengthen its product line.

Conner and Rubin confirmed that the company is negotiating to buy a Northern California disk-drive firm. They refused to identify it, but Computer Memories in the past has shown interest in acquiring Atasi, a San Jose disk-drive maker that has filed for protection from its creditors under Chapter 11 of the Federal Bankruptcy Code.

Conner’s role will be mostly that of a salesman, seeking to drum up business to replace IBM’s orders by using the contacts he developed in the past with such major companies as Hewlett-Packard, Digital Equipment, Wang and Texas Instruments.

Conner even plans to court IBM. He said there is a “100% chance” he will approach them, although he has not talked to IBM executives yet. “They are the largest and most important company,” Conner said, “but they aren’t the only customer out there.”

Rubin’s new role with the company isn’t entirely clear. Conner will serve as chief executive, while Gary Streuter is president and chief operating officer. Rubin, who owns 5% of the stock, says he will help with operations and financial aspects, comparing his role to that of a “senior adviser.”

Pressure Increased

Rubin said he first approached Conner in mid-May about joining Computer Memories, with the two men nearly reaching an agreement two months ago. The pressure on Rubin to make a move increased after IBM’s decision in mid-August, was followed two weeks later by the development in the patent case.

The U.S. Patent and Trademark Office reissued Quantum a patent that is at issue in a lawsuit pending against Computer Memories. Quantum alleges that, in one of Computer Memories disk drives, the positioning of the heads, which record information on disks, infringes on a Quantum patent.

Computer Memories says it is confident it will win, but some analysts believe the ruling bolsters Quantum’s case.

Rubin acknowledged that the ruling contributed to the decision to bring in Conner. “We needed a new, strong person,” Rubin said. “There had to be a new face at the company, and it had to come from the top.”

Conner flew in one of his jets to Van Nuys Airport a week ago Sunday, and had a brunch meeting at a nearby restaurant with Rubin and Frederic A. Heim, a Computer Memories senior vice president and director. Conner left the meeting as chairman three hours later.

Rubin bristles at suggestions of analysts that he may have brought Conner aboard in reaction to pressure from Intel, the Santa Clara semiconductor firm that is Computer Memories’ largest shareholder with 17% of the stock. Rubin’s statement that he recruited Conner on his own was confirmed by Laurence Hootnick, an Intel senior vice president and the company’s representative on Computer Memories’ board of directors.

Two May Clash

Some who know Conner and Rubin wonder if their strong personalities will allow them to get along. Conner conceded that the two might at times interact “like cats and dogs,” but said he is confident the disagreements will be overcome.

For his part, Rubin, 57, says he plans to work only four more years, that he knows Conner is the boss. “If he came in here and said he wanted this office,” Rubin said from behind his desk, “I’d say yes.”

Conner acknowledges that improving Computer Memories’ image and credibility will be a problem. But he said last week’s conference in San Jose, attended by numerous other disk-drive executives, helped convinced him that there are companies that still want to do business with Computer Memories.

“The first thing people said to me was that I must be crazy,” Conner said. “The second thing they said was congratulations. The third thing they said was let’s talk.”