History (1966): Caelus Memories

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1966: Caelus Memories
Early plug compatible disk pack manufacturer

Why it’s Important
IBM had a ‘lock’ on early removable magnetic disk storage with their 1316 disk pack, which was used on both the 1311 and 2311 disk drives. These were highly profitable items for IBM, with a manufacturing cost under $100 and a selling price of about $600. As such it represented a huge target of opportunity for competitors, some of whom (e.g. CDC) were forced to buy IBM disk packs at list price and relabel them for use on their own equipment. Availability of compatible disk packs appeared starting in the fall of 1967 from Memorex, a few months later from Caelus (January 1968), and subsequently became a commodity after entry by the major traditional media makers including 3M, CDC, and BASF, plus smaller start-ups including Athana, CFI, and others.

Details
Caelus was an early IBM-San Jose spin-off in 1966, founded as the first supplier of ‘IBM Clone’ 14-inch magnetic disks and disk packs used initially in IBM’s 1311 and 2311, later including 2314 and 3330. The company obtained an IBM patent license, and worked with IBM to obtain special test equipment. Due to the ‘clone’ nature of the disk (same materials and process as IBM) it was favored by many drive makers who had designed equipment around the properties of IBM media. Other suppliers often invented their own processes, and not all disks behaved exactly like IBM product, so Caelus had a short term compatibility advantage.

IBM’s business model favored leasing over purchase, at about $50 per month for a $600 priced disk pack. In two months they recovered the manufacturing cost, and in one year collected the equivalent purchase price, after which lease revenue was pure profit.

The independents had lower volume with consequently higher manufacturing cost, and had to borrow money to finance the cost of production plus distribution, with a longer payback period made worse by the interest on debt. Success in the traditional disk pack lease marketplace required a huge amount of cash and resulting debt. Loan terms usually required full debt repayment on a lease return, and many customers were not too careful with their disk packs, so the vendor had to refurbish at his own cost and go through the cost of remarketing the used product. IBM also had a timing advantage, since the independents were not usually the first to deliver media to a new system, so drive obsolescence took an earlier and heavier toll.

With IBM’s move to non-removable media in newer drive designs, so the business model evolved to OEM sales of single disks to fixed disk drive makers (e.g. STK ‘superdisk’), a less profitable but steady business. With the decline of disk pack and a growing number of well funded competitors, Caelus was sold to it’s major investor EM&M, which subsequently resold the operation, and it eventually was closed.

Key personnel (many ex-IBM) were Phil Yaconelli, Sung Pal Chur, Serge Blanc, Tom Scholten, Bruce Colegrove, Don Ivie, Bill Benz, Bill Sousa, Bob Deardorff, and Bill Carlson.