Kalok

~ the obit ~

The hearing was set for 11 a.m. on 4 February 1994, in Room 3070 at 280 South First Street in San Jose, before the Honorable Marilyn Morgan. Four law firms are named at the top of the order, for a company that made cheap hard disks. What they had come to sign was an Agreed Order Compromising Controversies, which is the polite name for everybody dropping their lawsuits at once, and by the end of it Kalok Corporation had no patents and no payroll.

It had started seven years earlier in the next town over. Steven Kaczeus and Wayne Lockhart founded Kalok in Sunnyvale in February 1987, and named it by gluing the fronts of their surnames together. Kaczeus had designed drives at Memorex and Seagate before this one, and at LaPine Technology; Lockhart brought twenty years of Silicon Valley management. They raised $1.5 million, which was not much even then, and spent it on a single proposition: a 3.5-inch drive that cost system builders several hundred dollars less than anyone else's.

They got there by value engineering, which in practice meant looking at every part in a hard disk and asking whether the drive would still spin without it. Manufacturing went to the Oriental Precision Company in Seoul, which took a minority stake in Kalok and a license to sell the drives under its own name, and went from a thousand units a month in December 1987 to ten thousand by October 1988. In August of that year Kalok announced three drives at once, 30 and 40 megabytes, all of them under $330, aimed at resellers who had been paying Seagate prices.

The peak was 1990, at eighty million dollars of sales. Kalok was building its own factory in the Philippines by then, backed by the Ayala Corporation, and in October a group led by Mitsubishi put in fifteen million dollars for a nineteen percent stake. The plant had survived a coup attempt against President Aquino the previous December, which stranded Lockhart in a Manila hotel. He told a reporter it was less disruptive than the four-week stoppage he had been through in Korea.

~ the rap sheet ~

~ what it left out ~

The parts Kalok engineered out had a cost. Its drives were not known for speed or for lasting, and as late as 1991 they still positioned the heads with stepper motors, which everyone else had started dropping in favor of voice coils. A Kalok drive was the one you got because the machine it came in had to hit a price.

A Kalok drive could not have found its way to me. The company was finished in February 1994, my first modem was still four years off, and the drives went to American system builders in lots of hundreds. What reached Turkey was the result of the fight. By the time I was listing my own hardware in a forum signature, the drive brands left standing were Seagate and Quantum, and the cheap disk in the cheap case was cheap because companies like this one had spent the late eighties working out how much you can take out of a hard disk before it stops working.

~ the year everything stopped ~

Oriental Precision went into court receivership in South Korea and stopped building Kalok's drives. At roughly the same time the controller boards developed a bug in their ASICs, which meant recalls of drives already sold. Sales fell to sixty million dollars in 1991 and the company ended up more than twenty-eight million in the red.

Lockhart resigned as chief executive in November 1992 and Robert Martel took over with a mandate to sell whatever would move. The Octagon line, 40 megabytes up to 120, went to Xebec in Japan. The Philippine factory went back to Ayala. TEAC of Japan and DZU of Bulgaria, both of them already manufacturing partners, put in eight million dollars between them to keep the company breathing. Martel resigned in June 1993 and David B. Pearce replaced him.

Kalok filed for Chapter 11 on 21 June 1993, within weeks of Pearce taking the chair, and for the next seven months it kept trading as debtor in possession while the people who had funded it argued about who owned what.

~ what walked out of the estate ~

The February order settled that argument by letting TEAC and DZU bid their own debts. Section 363(k) of the bankruptcy code lets a secured creditor bid a lien instead of writing a check, so the two of them released their claims and took, in the order's own phrasing, separate but equal right, title and interest in every Kalok product and every patent behind it. TEAC also took the physical assets and the K-STOR trademark, and DZU paid the estate $275,000 in cash.

One thing was carved out of the deal: the unfinished Nordic II design, which went instead to a company the order calls Newco. Newco was JT Storage, incorporated in Delaware that same month by Pearce with Jugi Tandon and Tom Mitchel, and it took Kalok's engineers and its building along with the technology. JTS shipped the Nordic family out of a factory in Madras for three years, and on 30 July 1996 it merged with Atari Corporation in a deal that ended Atari as a company. The asset nobody in that courtroom could put a price on is the one that finished Atari.

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