History (1993): Exclusive Interview With Syed Iftikar, Founder, Chairman, President and CEO of Syquest

Syed Iftikar, founder, chairman, president and CEO of Syquest

Computer Data Storage Newsletter: We met Fred Wenninger, president and CEO of Iomega, one month ago. We will ask you the first same question: why haven’t removable disk drives ever been a big market, in comparison with fixed disk drives?
Iftikar: Removable disk drives is a very difficult technology, it takes a lot of money to make this technology practical and then when it’s finally made practical in terms of cost for the product, it’s more expensive than fixed drives and so it cannot become a main primary storage. Removable media became secondary storage which is a smaller market.

SyQuest never had any big OEM, why?
Since SyQuest started, the first six years, SyQuest was an OEM company. 80% of SyQuest’s sales was to OEMs like IBM, Zenith Data Systems and AT&T. 3 of the largest OEMs were SyQuest customers the first 6 years.

For what reasons is the Macintosh world more opened than the DOS one?
On a Macintosh, it’s very easy to connect a SyQuest drive. You don’t have to open the PC and install a computer card, so integration is very easy, everybody can integrate into the Mac. Macintosh is a standard in desktop publishing, most of the artists, graphic artists, use the Macintosh. SyQuest drives are very important and have become the de facto standard in desktop publishing.

What are SyQuest margins on disk cartridges and separately on drives?
On the drives, we loose money. On the cartridges we make money. And the strategy is very simple: just like Gillette razor blades. You give the razor free of charge. We don’t give it free, but basically we don’t make money on the drive.

There were many announcements from SyQuest that we never saw afterwards. You announced in 1990 a 175MB cartridge with an integrated head, in 1991 a 2.5-inch 43MB drive, in October 91 a 105MB 3.5-inch drive, at last Comdex 1.8 inch disk drives. What happened to all these products?
R&D is not a guarantee that every project will happen. When SyQuest starts 4 different projects internally if 50% of the projects come out, that’s a success, that’s why we invest like $20 million in R&D. So let’s go back to the 175MB, we spent over $1 million in hard tooling, and then we spent time testing the product in quality control. When we tested the product, mainly we did the drop test. Then we had a choice, either we shipped the product and we would have a bad reputation or we decided we better not ship. So SyQuest decided for quality not to ship. The good news is we are shipping the 2.5-inch 42MB in volume production this quarter. We are shipping the 3.5-inch 105MB, we will ship over 6,000 drives this quarter, so two of the programs are doing very well. Today we have a good reputation for quality, we don’t want to compromise that. So even again, next year, if we have a product that doesn’t meet quality standards, we’ll cancel it again.

Yes, but today’s problem is that when SyQuest announces a new come …
Since last year, it does come now, we have announced the products and we have delivered.

What is the situation of the 1.8-inch drive?
The 1.8-inch drive will ship in the July/August/September quarter.

What’s the capacity?
It’s 80MB on 1.8-inch, single-platter. Highest capacity of any disk drive. If you come to Comdex this year, you will see the 1.8-inch in a lot of computer systems: notebooks, portables.

As a primary storage?
No, as a secondary storage. PCMCIA interface type III, 10.5mm high.

Who is your biggest competitor, Iomega or 3.5-inch M-O drives?
I think both are competitive. The 3 largest removable drive companies are SyQuest, ≠1, 2nd is Iomega, number 3 is Sony with M-O drives.

When you announced the 88 cartridge, it was just read compatible with the 44. Why? Was it for marketing or technology reasons?
When we first shipped the product, we tried to read and write 44MB cartridges. You got to realize that the 2 drives have different sizes for the head. 44MB has wider head, the 88 has narrow head. So when you read and write there are compatibility problems. You cannot erase the data on the wider head. So that was a technology problem. We solved it with the 3 path write, we moved the head left to erase, we moved the head right to erase, then write the track in the middle.

For your last quarter, what was the percentage between 88 and 44  sales?
About 30% for 88.

SyQuest is alone in Winchester removable disk drives. Why did Ricoh fail?
Like everybody else. In 1992, there were 14 disk drive manufacturers making removable products including Iomega, Control Data, Digital Equipment, DMA. Later on DMA failed, and Ricoh acquired the license from DMA. Last year, Ricoh decided it couldn’t make the drive at a low cost, they were loosing too much money. They decided that the technology was too difficult.

We have to speak about Nomai who, in your opinion, is illegally manufacturing compatible cartridges. You have a suit in the US and in France now. Do you have other ones in other countries?
We’re planning to.

Why didn’t you attack Nomai specifically on patents only?
We have applied for patents, we are not sure the patents will be granted. But until it is official, we cannot anticipate. So our lawyers told us to wait until the patents were granted. In the next 2 to 3 months the patents will be granted. Then we will add patents to that lawsuit, patents on the cartridge, trademarks, software.

Do you intend to manufacture a new drive that will not be able to read or write Nomai’s cartridges?
Yes. The concept is very simple: I have eyes, the drive has heads. I have a processing brain, the drive has a computer on board. So when I look at you, I see you, so my eyes process you, I compute and say it’s you, and he’s him, I can tell the difference. In a similar way, I have the heads to see the cartridges and I have the computer to process the cartridges, and we have found over 20 differences in the cartridges. So the computer can tell the difference. That means that in the future you will have a drive that will not be able to use Nomai’s cartridges. But the old one could. The old one could. But now every year, we ship 400,000 drives, and since the company is ramping up, each year there’s more dilution, so by the end of the year, almost 50/50% of the drives are old and new. That’s one reason. The quality becomes a major problem. Second reason is for future growth. We will ship a 200MB drive this year, 5.25-inch, that will read and write our 44 and 88. So for those people that want their cartridges, to be read by the 200MB drive it’s no use. To protect their investment, the customer has to stay with SyQuest.

Do you think It’s possible to find a compromise or an agreement with Nomal?
We always wanted to find a compromise. That’s how we started. Nomai came to us and asked us for a license to do a future advanced disk drive. But instead of working on an advanced disk drive, we were surprised when they finally disclosed their current plans.

Why haven’t you ever had an agreement for a second source manufacturing?
We do have a second source on the 5.25-inch cartridge with a Japanese company called Hoya Electronics. They always had the license for the 44 and 88MB drive and cartridge. Hoya tried to manufacture them but they told us it’s too difficult. What’s surprising is that the largest capacity you actually have on a 5.25-inch platter is 88. Today you can put 100, 200MB.

Why aren’t you doing it?
We are doing it. If you come to SyQuest, you will see a 200MB drive. Next year we can go as high as a 350MB capacity, on a single platter. The 200MB will be shipping by next Comdex.

A premiere: removable PCMCIA drive with removable magnetic cartridge

Not only is the drive removable since it has a PCMCIA III interface, but even the cartridge that is placed into the drive is removable. The new 1.8-inch unit, that SyQuest mostly offers to OEMs, is thus the first PCMCIA removable disk removable drive. The company is developing storage capacities of up to 100MB. In fact, the ability of tacking out the cartridge and the drive seems of small interest. Users will probably more appreciate the removability of the cartridge. Joel Levine, SyQuest’s VP marketing, explains: “The cartridges themselves are highly durable and can withstand extreme impact forces of up to 2,000G which is 10X greater than the fixed drives. In addition, the SyOuest technology continues to offer the lowest cost per megabyte when multiple cartridges are required.”

How SyQuest plans to become $1 billion company?

In 1996 SyQuest, with sales that reached $175 million in its FY ended September 30, 1992, is aiming the $1 billion for 1996 with the following partition in its removable disk drives shared:

Editor’s opinion blockage
Between SyQuest, the first manufacturer of removable HDD cartridges, and Nomai, the French company that is manufacturing compatible cartridges, things are completely blocked. First, the 2 companies had talked about the possibility of manufacturing a 5.25-inch drive with a 1GGB cartridge. But when Syed lftikar, came to France at Nomai, he discovered that the French firm had started, without letting him know, manufacturing cartridges which represented SyQuest’s total profits. SyQuest’s anger is justified. On another hand, if Nomai invested in this manufacturing, it wasn’t without taking precautions. The French company had noticed the almost complete lack of patents on these cartridges. The only one was on the opening and closing of the cartridge when it is introduced in the drive to let the magnetic heads by. It wasn’t very much. Nomai even signed a contract with an insurance company to get payed back in case of eventual law suits with SyQuest. The economic game doesn’t forbid to copy what can be copied. The war between the two protagonists will probably go to its end. SyQuest will not discuss with Nomai and will take it to court in any country as long as it will continue its manufacturing. And Nomai, financially covered/or the law suits, has invested too much in this activity to simply stop it.
JJM, editor

This article is an abstract of news published on the former paper version of Computer Data Storage Newsletter on issue ≠63, published on April 1993.

Note: SyQuest filed for bankruptcy in late 1998, and portions of the company were subsequently purchased by Iomega Corp. in January 1999. It retained the rights to sell their remaining inventory, on condition of renaming themselves SYQT in order to continue operations. For several subsequent years, a Web site at www.SYQT.com sold disk drives and media, and provided software downloads in support of those products. As of January 22, 2009, that Web site ceased to exist.