Innovating Web 2.0 Storage: Fabrik CEO Mike Cordano (Part 2)

SM: What was it about a turnaround that attracted you?

MC: The challenge of the situation. I had already experienced a high growth company at Conner. I wanted to see the renovation and the rebuilding. Unlike the clean sheet of paper of a high growth company, where everything is uncharted, there is an initial phase of deconstruction before the construction. That was intriguing for me.

SM: I have always been attracted to turnarounds. I have done a lot of them in my consulting career.

MC: When I arrived at Maxtor I came in on the sales side. There was zero OEM business in the company. They had a small distribution channel and were struggling on the OEM relationships. In the drive business it is all about the big systems companies and having those relationships. I did a lot of that at Conner, so building large corporate relationships was my expertise.

Within the first three or four years I was able to build the company’s customer portfolio. I was one of 10 senior managers who came into the company, including a new CEO and CFO, who were largely responsible for the turn around. We privatized Maxtor in concert with Hyudai; they bought out the company and turned it private. We brought it public again in July of 1998 when it was relisted on NASDAQ. Privatizing a company, getting it healthy, and taking it back out was a very interesting experience.

SM: What was the process of taking it private? Did you use private equity firms?

MC: It was 100% Hyundai. It was a very interesting process because their management style, and the agreement they had with the Maxtor management team, was that they would largely manage at the board level. As long as the plan was tracking, there was a lot of independence to manage the company.

SM: Why was Hyundai interested in Maxtor?

MC: At the time they were looking at a number of electronics areas. They were in DRAM so this was an adjacent market opportunity for them. They saw Samsung participating in the same market which also generated interest for them. They were interested in the component industry which surrounded IT.

SM: What were the big levers you moved in the five-year timeframe when you went private and then public again?

MC: At the corporate level we had to restructure the product side of the business. We narrowed the product portfolio. We focused on strategic products which would enable OEM success. We started with a product plan which drove customer acquisition on the OEM side. We defined products which were sellable and attractive to that customer base. At the same time we were able to go back and do our operations at manufacturing and supply chain and restructure into a much lower cost base.

SM: Was the sweet spot still enterprise products?

MC: It was enterprise and desktop products. We really wanted to turn the company around using desktop first because of a gap in the market we had identified. We created a new category which is now a very vibrant category, high capacity serial ATA in enterprise. We did some very interesting work with Network Appliance to define that category. We were their development partner and as they started creating it everybody joined the market. That was our way to attack the traditional enterprise that Seagate had a strong hold on.

My game plan tends to be to analyze the market and look for a gap. I have not been successful trying to emulate others as a path to success. I look for a market gap and try to find a way to change the rules to our advantage. We had a high capacity ATA enclosure with multiple platters. We could use that enclosure with a 20% design adjustment to have liability performance of enterprise. We were the first mover there which made it very attractive to us. We grew very quickly in that space. The market, including Seagate, had to respond to our move.

We also introduced the branded products group of the company. The idea was to take our brand directly to the consumer. Prior to the branded products group being founded in 2000, we were only in OEM channel plays. The move into this branded products segment did a number of things for us. Our OneTouch product line, which is external storage, got us directly out in front of consumers and is now a category that everyone in the hard drive world is competing in.

This segment is part 2 in the series : Innovating Web 2.0 Storage: Fabrik CEO Mike Cordano
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