History (1996): ATG Cygnet Optical Disks Spinning Out of Control

ATG Cygnet (Toulouse, France) is in the midst of the French equivalent of Chapter XI proceedings.

Its San Jose, CA subsidiary should soon follow suit.

The company is now looking for a buyer.

Credit Lyonnais, the French bank, majority shareholder of ATG Cygnet through its subsidiary CDR (Consortium de Realisation), is now looking for a way to save what it can of its investments in the wake of its own enormous financial problems. The destruction of the bank’s magnificent Paris headquarters in a catastrophic fire hasn’t particularly helped Credit Lyonnais’ own finances, for that matter.

Now that ATG Cygnet, a manufacturer of 12-inch disks, optical drives and jukeboxes, finds itself at the end of the month and unable to pay its employees, CDR has refused to advance the company another centime. Consequently, the Toulouse commerce tribunal has placed the company in judicial review for an initial period of six months, with the possibility of renewal, which means that salaries will be paid, but suppliers and other creditors must wait.

ATG’s president and CEO, Bernard Meffre, is currently looking for a buyer, “preferably in industry rather than finance.”

He will thus be in contact with German, British and above all American firms, and seems optimistic about how events will turn out.

“ I don’t foresee total liquidation. We have 6 months to find a purchaser, and we have orders to fill for the next several months.”

For its fiscal year ending in March, the company of some 150 people achieved revenue of FF140 million, but has yet to announce whether this represents a profit or loss.

Before the bankruptcy proceedings, ATG shutdown its Rungis office, in the Paris area, and laid off 3 executives, including its VP European sales, Jean-Claude Beckmann. At the beginning of this year, the Toulouse HQs suffered 2 weeks of employee unrest and strikes after 9 layoffs, while 20 or so employees were let go in San Jose last month.

How did ATG get to this point? Officially and above all because of its San Jose subsidiary, spending some $3 million with its ambitious Cygnature project for a multimedia jukebox. Another reason for the company’s problems was the delay of the VFD 16000, a 16GB 12-inch WORM dual-sided recorder, a long with its 6-disk autochanger. The delay provided a much-needed edge to ATG’s 2 remaining competitors, Philips and Sony.

VFD 16000
(Source Mosarca)

ATG ought to have diversified much earlier towards other, smaller optical disk formats, and above all towards one larger than that of the 12-inch form factor, which in the end is just a narrow niche.

“We didn’t have the means to spread ourselves out any thinner,” said Meffre.

What then does the company have to offer potential rescuers? Current installations of more than 1,000 12-inch drives in 250 sites throughout the world, 10 or so patents, some for VFD 16000 and 4 for erasable optical layers (the majority of their basic patents are actually Thomson’s proprietary material, not ATG’s, and will soon revert to the public domain), a European ESPRIT contract for the development of small-format rewritable disks, a superb R&D team, with particular expertise in optical heads, and finally, a top-notch, if over-large leased facility (99,000 square feet), with 13,000 square feet of cleanroom and all the necessary equipment for manufacturing drives and media.

One could write a book on the entire story of the French firm’s activities in 12-inch optical WORMs, which have been plagued by setbacks and will have cost ATG Cygnet a fortune in the end.

The abridged version: It all started around 1979-80 in Thomson CSF’s laboratories with the first 12-inch video disk, followed by a digital optical disk in 1982-83. ATG Gigadisc was created in 1984 by Alcatel and Thomson, jointly. The firm then became Art-Tech-Gigadisc in 1987, after a first slide into Chapter XI, due to an overambitious director, Pierre Grouvel. The company then fell in to the hands of a venture capital risk firm, under the management of Alain Bouttier, who got it back on its feet. Then the company came under the control of a holding company, Optix, which included the French integrator Dorotech and Altus Finances, a subsidiary of Credit Lyonnais. In 1993, ATG was run by the American firm NIC, in which the French bank was an investor. Credit Lyonnais took majority control in 1994, through a financial subsidiary. In 1993, ATG acquired the California jukebox manufacture, Cygnet. During this period, ATG’s 12-inch optical WORM expanded from 2GB in 1983, to 6.4, 10.2 and finally 16G today.

This article is an abstract of news published on the former paper version of Computer Data Storage Newsletter on issue 101, published on June 1996.