Chatsworth Company Backs Out : Computer Memories-Atasi Deal Unravels

A pact between Chatsworth-based Computer Memories and Atasi under which Computer Memories was to have made and sold two hard-disk drives similar to those made by Atasi has unraveled, according to Donald Lundell, president of San Jose-based Atasi.

Lundell said Atasi was told last week by Computer Memories that it is backing out of the tentative agreement, announced Oct. 1. Computer Memories gave no reason for canceling the deal, he said.

The pact would have allowed Computer Memories to make and sell products similar to Atasi’s 85-megabyte and 170-megabyte hard-disk drives, which are memory devices for personal computers. Those disk drives can store more information for computers than existing Computer Memories disk drives and also use Atasi-developed technology that allows a computer to retrieve data faster and more accurately.

Favorably Viewed by Analysts

Analysts had responded favorably to the announcement of the agreement, noting that it would allow Computer Memories to expand its product line and attract new customers in the wake of a decision by IBM in August not to renew its contract to buy disk drives from Computer Memories. IBM accounted for 81% of Computer Memories’ $50.5 million in revenue in the quarter ended June 30.

Atasi, which in August filed for protection under Chapter 11 of the federal bankruptcy laws, was to have received an immediate cash payment of more than $1 million and royalties that could have eventually totaled more than $5 million, Lundell said.

Lundell said he was puzzled by Computer Memories’ decision because the company had previously been so eager to sign the agreement. “They were the ones who issued the press release when we signed the letter of intent. If they were so anxious to put the information out in front of the world, why are they reversing their field?” he asked.

Lundell said that, although a final contract was never signed, Atasi did have a signed agreement with Computer Memories.

Rubin Not Reached

Irwin Rubin, chairman of Computer Memories, could not be reached for comment.

The decision by Computer Memories to cancel the contract came two weeks after Finis Conner stepped down as chairman and chief executive of the firm. Connor, who held the job for less than a month, was replaced by Rubin, the company’s previous chairman.

Lundell said he does not believe that Conner’s leaving influenced the decision to cancel the agreement, which Atasi had negotiated with Rubin.