Conner Peripherals

» see conner.com as it lived, on the wayback machine

~ the obit ~

Finis Conner co-founded Seagate Technology with Al Shugart and then left it in 1985, which is the kind of thing that usually ends a career and in this case started the fastest one in American manufacturing. He set up Conner Peripherals in San Jose in June 1985 and within months folded in CoData, a small Colorado outfit that had a working design for a 3.5-inch hard disk. Seagate at that point was a 5.25-inch company. The industry was about to move and Conner had the design for where it was going.

Compaq is the other half of the story. It put in $6 million in June 1986 and another $6 million in early 1987, ending up with close to half the company, and it did that because it wanted the drives more than it wanted the equity. Conner shipped its first units to Compaq in early 1987, and for that whole year roughly nine tenths of everything the company sold went into a Compaq machine. The first year of sales came to $113.2 million, a record for a manufacturing startup in the United States. By 1990 the number was $1.337 billion, reached in four years with no acquisitions, which was a record too.

What happened next happened to everyone who made hard disks. Capacity per dollar improved so fast that the product turned into a commodity, and a commodity with a dozen manufacturers in it does not have margin. Conner bought Archive Corporation in December 1992 to get into tape and diversify, ran into component shortages and price pressure anyway, and started losing money. On 20 September 1995 it agreed to merge with Seagate in a deal valued around a billion dollars. The merger closed on 5 February 1996, and the two companies together held about a third of all drive units sold, which put the combination ahead of Quantum.

By the time I was choosing drives myself the names on the shelf were Seagate and Maxtor, and Conner had already been reduced to a sticker inside older machines. That is the normal way a drive maker dies and it is why hardly anyone noticed this one. Nobody buys a hard disk out of loyalty. You buy megabytes per lira with a warranty behind them, and then you screw the thing into a case and never look at the label again. Second-hand PCs kept circulating in Turkey for years with that name on the metal, still spinning for owners who had no particular reason to know the company had been folded into the one its founder walked out of.

~ the rap sheet ~

~ how it got that big that fast ~

The engineering answer is that the 3.5-inch form factor arrived at exactly the moment portable and small-footprint machines needed it, and Conner had John Squires and the CoData team building for it from day one instead of shrinking an existing product. The business answer is stranger and more interesting. Conner built to order. Drives were manufactured against orders already placed rather than into a warehouse, which in a market where the value of stock fell every month meant the company was never sitting on depreciating inventory while its competitors were.

The Compaq relationship made that possible, because a customer taking ninety percent of your output is a production schedule you can plan against. It also made the company fragile in a way nobody wanted to say out loud during the good years. Conner spent the late eighties widening the customer list precisely because one buyer with half the equity is not a position anyone survives forever.

~ the part that broke ~

Between 1990 and 1995 the price of a megabyte of hard disk fell far enough that every manufacturer in the sector was selling more units for less money. Conner's response was to buy Archive and add tape backup, and to keep pushing volume. Neither worked. The company posted losses and the stock fell, and Finis Conner ended up negotiating with Al Shugart, who was running the company they had started together and who now had the balance sheet to absorb his.

There is no dramatic collapse in this one and that is worth saying plainly. Conner did not fail at anything it set out to do. It built a good drive and sold an enormous number of them. What killed it was that the product improved faster than anybody could charge for. Seagate absorbed the tape business and kept the drive plants, and the name was off the market within a year of the merger closing.

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