History (1993): Cygnet Under Chapter XI

“Manuel Munz (an executive of NIC and Dorotech) will be next week in the US to make an offer to Kodak for the acquisition of Cygnet that would become a subsidiary of ATG,” said on June 24 Christian Maillard, ATG’s GM.

If this operation succeeds, it will mean the merger of Cygnet Systems (San Jose, CA), the number one 12-inch optical disk jukebox manufacturer, with ATG Gigadisc (Toulouse, France), a major 12-inch media and drive manufacturer, as well as 2 leading optical disk integrators, Dorotech (Nanterre, France) in Europe on one side, and Network Imaging Corp. (Reston, VA) in USA on the other.

NIC seems in a good position to recuperate Cygnet that is also the target of at least 2 other US companies, Ramtek and ACMA.

Some things have to be known to understand this operation. Cygnet filed for Chapter XI bankruptcy on June 11 on account of a $7.7 million debt for which Kodak Eastman was demanding to be payed. This debt was the result of a loan made in 1987 by Kodak for Cygnet to invest in the development of a 5.25-inch optical disk jukebox. At that time it amounted to $5.3 million, but grew with interests.

Cygnet never reached an appropriate product. Cygnet then offered a jukebox for these small disks, but it was a big flop. And since then, Eastman Kodak developed and manufactured its own jukebox.

Finally, Kodak filed a suit vs. Cygnet last year to get its money back. The profitable private Californian company apparently preferred being placed under Chapter XI, not able of paying back its debt.

It claims that Kodak is pursuing a strategy directed at helping their optical division to eliminate a major competitor, rather than recover any of the money loaned.

This is when ATG gets in the act, and it probably was aware of this matter since it has been distributing Cygnet jukeboxes for several years. ATG is now under the control of Dorotech’s shareholders that became more recently those of NIC. And among its main shareholders, there are Bruno Costa-Marini and Manuel Munz who has good chances of seeing its acquisition offer accepted by Kodak, especially since NIC has just received fresh cash from a French investing company, Altus Finances.

“Nothing is done, but the situation should be solved in 3 weeks,” said Costa-Marini.

The conclusion is that NIC could now be at the head of a worldwide 12-inch WORM optical disk business. This jukebox manufacturing activity was the only one missing, for which Cygnet is number one, with $1 3 million sales in 1992, more than 1,000 units shipped and OEM customers as famous as AT & T, Bull, DEC , IBM , ICI, NCR , Olivetti, Siemens/Nixdorf, Wang and without counting a distributor like ATG.

“We are Cygnet’s second customer,” said Costa-Marini.

These jukeboxes were mainly integrated with ATG and LMS drives but also with Sony’s ones.

The only other 12-inch jukebox manufacturers in the world are Hitachi, Sony, Access (ATG is also a jukebox distributor for Access), FileNet, a pioneer who is putting more and more this hardware activity aside to focus on software, and finally DSM GmbH (Deternerlehe, Germany) who custom manufactures.

The only 12-inch optical disk and drive manufacturers are once more ATG, Hitachi, Toshiba and Sony, to which has to be added LMS (Colorado Springs, CO), a subsidiary of Philips.

At the end, Cygnet would become a subsidiary of ATG in a NIC group with “a center of gravity moving closer and closer to the US,” says Maillard.

ATG won’t stop there and will beg in distributing Hewlett-Packard’s drives and jukeboxes for multi-function 5.25-inch optical disks on which it will integrate its GigaNet interface, developed by Symmetrical Technologies (Knoxville, TN), a subsidiary of NIC, that allows a direct connection to Ethernet network.

An unofficial source says that ATG would have made some time ago an offer to acquire part of LMS that wouldn’t have answered.

This article is an abstract of news published on the former paper version of Computer Data Storage Newsletter on issue 66, published on July 1993.