Rubin Steps Down at Disk Drive Firm : New Chairman Is Named at Troubled Computer Memories

Irwin Rubin stepped aside Monday as chairman of Computer Memories Inc., a beleaguered Chatsworth-based disk drive manufacturer that is scrambling to find business in the wake of IBM’s decision last month not to renew its contract with the company.

Rubin, 58, who becomes vice chairman, will be succeeded as chairman by Finis Conner. Conner, 41, was a co-founder of Seagate Technology, a Scotts Valley-based disk drive company, where he was vice chairman when he left last October.

His Own Decision

Rubin said that it was his decision to bring in Conner and that he had not been asked to step aside either by Computer Memories’ board of directors or Intel Corp., the company’s largest shareholder with about 17% of the shares.

He said Conner understands the disk drive business better than he does and will try to attract customers to make up for the loss of IBM, which accounted for 81% of Computer Memories’ $50.5 million in revenue in its first quarter ended June 30.

“We needed someone in the company who could help us through this rather difficult period,” Rubin said.

Rubin said he still will help run the company, even though Conner will assume the role of chief executive and even though the company in May named a new president and chief operating officer, Gary Streuter.

‘Face-Saving Position’

Analysts who follow the company, however, said that Rubin’s influence clearly will be diminished. Beverly Hills money manager Wen Birkhofer, who controls about 3% of Computer Memories’ stock, called the title of vice chairman a “face-saving position” for Rubin.

“My guess is that this guy is Intel’s man,” Birkhofer said of Conner. “Vice chairman is a nondescript position that is generally given to a person to pave the way for the new guy.”

Michael Murphy, editor of the San Francisco-based California Technology Stock Letter, predicted that Rubin will not have much influence because Conner is a forceful manager.

Analysts’ Criticism

Birkhofer and Murphy both said Rubin may have felt pressure to take action after IBM’s decision was announced. Analysts have criticized Computer Memories’ management for being too slow in producing the disk drives IBM wanted for its PC-AT computer.

“It sounds to me like he is taking responsibility for what happened,” Murphy said.

Conner, who was at a computer conference in San Jose, was unavailable for comment.

The loss of the IBM business was not the only setback for the company in the past month. Computer Memories was notified early last week that the U.S. Patent and Trademark Office had re-established a patent by rival Quantum Corp.

That patent is at issue in a lawsuit Quantum filed against Computer Memories two years ago in U.S. District Court in Los Angeles. In the suit, which has yet to be tried, Quantum alleges that the positioning of the “heads” in a Computer Memories disk drive infringes on a Quantum patent. The heads are used in the reading and writing of information on a disk.

Thomas Rooney, a computer industry analyst for Donaldson, Lufkin & Jenrette in New York, said the ruling is likely to bolster Quantum’s case. Rubin, however, said the company is confident it will win.

Rubin became involved in Computer Memories in 1980 when he was approached about investing in the company. He joined the company as chairman the next year as chairman, and owns about 5% of the company’s stock.

In the first quarter ended June 30, Computer Memories reported a profit of $4.8 million, up 408% from a year earlier. In its last fiscal year, however, it reported a loss of $3.8 million.

Along with Computer Memories and other U.S. disk-drive makers, Seagate, the company Conner helped found, also has been hurt by the slump in the personal computer business. The company has closed many of its U.S. operations and moved them to Asia, where manufacturing costs are cheaper.