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High Hopes for a Hard Disk Drive : Tandon Pins Its Bid for a Comeback on a Device to Make Its PCs Stand Out

August 22, 1989|PATRICE APODACA | Times Staff Writer

Casey Hughes, vice president of personal computer manufacturer Tandon Corp., yanked a hard disk drive from his computer and tossed it on his desk. To further emphasize his point, he dropped the data-storage device on the floor and allowed it to clatter dramatically.

Hughes looked satisfied. "You can throw it on the floor and it'll still boot," or restart, he said. "That was something previously you would never do."

Here lie Tandon's hopes for a comeback from severe problems that have plagued the company in recent years. Tandon, based in Moorpark, once was a successful producer of disk drives--the units that house information in computers. But by the mid-1980s it had fallen victim to Japanese competitors and slumping computer sales, and it lost nearly $200 million in the 1985-86 fiscal years.

Since then it has been trying to make it in the personal computer market and is hawking the removable, portable disk drive as the feature that distinguishes it from other PC makers. Meanwhile, Tandon sold its data-storage business to Western Digital last year.

Difficult Changes

It has been a rocky transition. The firm lost $19.9 million last year on sales of $309 million, and lost $11.9 million in the first six months of 1989. Its stock, which hit a peak of $34.25 a share in 1983, traded recently at 50 cents.

And there are signs that Tandon's rebound won't be easy. Competition is intense in the U.S. personal computer market, and the recent strength of the dollar has hurt the firm in Europe by making its products more expensive. Also, it remains a big question as to whether Tandon's removable disk drive will spur enough demand for its computers.

Sirjang Lal Tandon, chairman and chief executive who founded the company in 1975, is apparently undaunted. The Indian-born Tandon, known as Jugi, was out of town and unavailable for an interview. But Hughes said Tandon "takes his impact on the PC market seriously."

At the height of his success in 1983, Tandon was listed by Forbes magazine as one of the nation's 400 richest individuals, with his 11% stake in Tandon Corp. worth an estimated $150 million. A flamboyant entrepreneur with a passion for collecting cars, he was quoted at the time as saying, "I've made more money than the next four generations will need to spend."

Remains in Control

But with the collapse of Tandon's stock, Jugi Tandon's 7.3% stake in the company is worth only about $2.5 million. Nonetheless, he remains firmly in control of the company.

"Everything in Tandon is Jugi," said Hughes, who heads Tandon's U.S. operations.

Yet, Jugi Tandon's impact on the PC market has yet to be felt to any major degree, at least in the United States. Nearly 90% of Tandon's sales are in Europe, where the firm established a base under the guidance of Chuck Peddle, a former Commodore International computer whiz.

Peddle joined Tandon in 1986 as part of an impressive team of computer industry veterans, including former International Business Machine Corp. executives Dan H. Wilkie and H.L. (Sparky) Sparks, who were hired to make the company a successful PC manufacturer.

Peddle, Wilkie and Sparks have all since left Tandon, and along with the departing executives went Tandon's profits. After two years of losses, the firm reported net income of $23 million in 1987. But last year's loss indicated that the bad times weren't over.

Considered Unreliable

Moreover, the company earned a reputation for unreliability by announcing and taking orders for products long before it was able to deliver them. "We had a year where we waved the banner of technology and didn't deliver it," Hughes admitted. "I shot myself in the foot."

Peddle said Tandon can still become profitable. "We showed Tandon could be a profitable company," he said. "The market hasn't changed that much since then."

Peddle quit his post at Tandon last year and he's forming his own computer company.

Asked why he left, Peddle replied, "You can only have so many managers at the top."

Wilkie said he butted heads with Jugi Tandon over management issues. "At the time he wanted complete control of the company," he said, but added that they remain friends. He also said Tandon can survive the downturn. "I wouldn't count the man out at all," he said.

Wilkie and Sparks resigned from Tandon in 1986 and run Dynabook Technologies, a Pleasanton, Calif.-based computer company.

Hughes tried to cast the management changes in a positive light, saying of Tandon, "He's now back firmly entrenched at the helm, which is where I believe he should have been all along."

Growing Sales

Hughes also insisted that the worst is behind Tandon. Sales are growing, he noted, and the company is leaner because of cost-cutting moves, including a decision to drastically scale back U.S. operations. Field offices across the country were closed this year and 240 employees, or 35% of its domestic work force, were laid off.

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