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Specialty Lines Aid Western Digital

March 15, 1987|CARLA LAZZARESCHI | Times Staff Writer

It's no secret that high-tech industry has attracted more than its share of eccentric chief executives.

Apple Computer had megastar Steve Jobs. Atari Corp. had flashy, flamboyant Nolan Bushnell and Advanced Micro Devices has party-loving Jerry Sanders.

And then there's Western Digital Inc., the computer parts maker. It has Roger Johnson.

Some employees at this Irvine-based company jokingly wonder whether their strait-laced, 52-year-old boss wears a white shirt and tie to bed.

But the back-to-basics, buttoned-down approach Johnson brought to the company five years ago has paid off too handsomely to be taken as a joke. Under Johnson's direction, Western Digital has been quietly transformed from a scatter-shooting, jack-of-all-electronics firm to a highly disciplined, tightly focused supplier of just a few personal computer devices, many of which are the leading sellers in their markets.

"He's not flamboyant and jet-setting, and neither is the company," says Kathy Braun, Western Digital's vice president for storage products. "We're solid, and we stick to the rules. And that's not so bad, either."

Indeed not. At the same time that many American chip makers have fallen on hard times because of increasing foreign competition and sluggish worldwide sales, Western Digital has enjoyed high-flying growth, increased market share and record earnings. For the current fiscal year ending June 30, analysts are predicting sales will approach $445 million, up from $280 million in fiscal 1986. They estimate profits will surpass $40 million, about double last year's record.

Sales could top the $1 billion mark by the end of the decade.

While high-tech turnarounds are becoming commonplace, Western Digital's transformation stands out because it has coincided with increasing Japanese domination of the semiconductor business. Further, the strategy that Johnson has orchestrated over the last five years, experts say, shows that American chip makers can avoid bone-crunching competition from Far Eastern manufacturers by using their technical superiority and marketing savvy to sew up speciality markets.

To be sure, Western Digital, which collapsed into Chapter 11 bankruptcy reorganization 11 years ago, is by no means immune to the threat posed by the low-cost, high-volume Japanese chip makers.

The company's strategy requires a steady stream of product advancements and continued pampering of its existing customers, a list of which reads like the "Who's Who" of the computer industry. A prolonged downturn in personal computer sales, a miscue on a new technological development or a defection by a major customer, such as IBM, which accounts for more than 25% of the company's sales, could be damaging.

Equally ruinous, Johnson says, is getting trapped by your own outdated ideas. "You get into more trouble falling in love with your plans and technology than you do changing them," he said.

Johnson's Key Changes

In fact, Western Digital's success since emerging from bankruptcy in 1978 has come from the changes Johnson has made, and continues to make.

The key change, both insiders and outside observers agree, was the company's move out of the traditional chip-making business five years ago. Although the company still churns out millions of tiny silicon wafers each year at its plants in Irvine, Ireland and Puerto Rico, more than 85% of them are never sold simply as semiconductors.

Instead, the wafers are the raw materials for the company's lines of printed circuit boards--the hard, plastic-like sheets that combine chips and other electronic pieces with elaborate microcircuitry into a single device that helps computers perform specific tasks.

Western Digital makes three different types of boards.

Its major line, and the source of about two-thirds of corporate revenues, are boards that control the storage and flow of data within computers.

A second product line controls the flow of information among personal computers, a swiftly developing market also known as "area networks."

The company's third, and newest, product line controls how personal computers create charts, pictures and other video graphics.

Set It Apart

The switch into the board business didn't just give Western Digital entree to a higher-priced line of business. It also permitted the company to create products that set it apart from competitors and to give customers one-stop shopping for controller circuitry.

"They made it easier for the customer," said Daniel Klesken, an analyst for Montgomery Securities in San Francisco.

The strategy also made it easier for Western Digital to keep its customers, since they depend on the company not just for its chips, but for the extra circuitry and software the company adds to the boards.

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