Cranston Rides Into Zschau Country--Silicon Valley

The Silicon Valley produced Republican U. S. Senate nominee Ed Zschau, and it is pouring thousands of dollars into his campaign. But Democratic Sen. Alan Cranston is not going to cede the high-tech turf without a fight.

On Friday, Cranston rolled out several of the biggest names in the Silicon Valley to charge that Zschau was not the business success he makes himself out to be and that he has abandoned his principles in his quest for the Senate.

“I took Ed Zschau’s board seat when he left his company,” said Regis McKenna, the marketing and public relations executive whose most famous client is Apple Computers. “The company was in a shambles when he left. Its management since that time has put it back together.

“It was not a leading-edge company, and it did not fight international trade competition. I think if it were not for the people who followed Ed, it would not even be around today.”

Zschau’s Response

When told of McKenna’s comments Friday, Zschau said: “I think Regis is wrong. Obviously he is making a political statement, trying to cast aspersions on my company.”

It is not the first time that questions have been raised about just how successful Zschau was as a businessman before he moved on to politics in 1982.

Zschau founded System Industries in 1969 in his living room. Primarily, it produces data storage systems for minicomputers. But some of Zschau’s former associates told The Times in June that System Industries failed to break into the big time in the Silicon Valley because of its inability to bring a major research and development project, an ink jet printer, onto the market.

Although those associates praised Zschau’s ability to raise venture capital and to motivate people, they said management was not Zschau’s strong point.

“He had this fantastic ability to motivate, inspire and sell,” James L. Patterson, a former vice president of System Industries, said in a June interview. “But that didn’t always translate into effective management. Many of our operations were just plain sloppy.”

Zschau acknowledges that his company had not done all of the things he had wanted it to before he left in 1982 to win a seat in the House of Representatives. But he contends that it was still successful because it created new jobs.

Sales of $100 Million

System Industries made Zschau a millionaire. Today it employs about 800 and has sales of about $100 million.

Also appearing at the press conference with Cranston was Thomas Peters, author of the best-selling business book “In Search of Excellence” and David Barram, chief financial officer of Apple Computer Co.

Their problem with Zschau was of a different nature and was described most articulately by Peters:

“The reason I once supported Zschau (for Congress) was that the entrepreneurial spirit of this valley is an exciting definition of what could happen to America in the future. And the notion that somebody could do that and also support some of the positions that he held on the MX, on Nicaragua and on South Africa made me a Zschau fan.

“But as soon as he became a state politician . . . you found that the moral support for major issues was gone.”

Zschau opposed the MX missile when he first ran for Congress but later supported it, before finally opposing it again. He once opposed giving military aid to the Nicaraguan rebels but switched to support the aid during the GOP primary.

And though critical of apartheid, he refused to support Republican Gov. George Deukmejian’s decision to seek divestiture of University of California holdings in companies doing business in South Africa.

The comments of McKenna and Peters notwithstanding, Zschau has raised more than $300,000 from high-tech-related sources, compared with less than $100,000 raised by Cranston.