In the 1970s, Pertec Peripherals was one of the San Fernando Valley's premier high-technology companies. It developed an internationally known name in the data storage business and bred a cadre of talented engineers and managers, many of whom went on to play key roles at computer-equipment firms like Tandon, Micropolis and Symbolics.
Pertec's heyday is long past, however. The Chatsworth company has piled up millions in losses amid the current computer-industry slump, partly because it has spent heavily on research and development.
Even so, at least three companies made bids this year to buy Pertec, and on Friday, a deal was completed: Pertec was acquired by Digital Development Corp. of San Diego, a comparatively obscure firm less than half Pertec's size.
Deal Not Announced
Terms of the transaction were not disclosed, but sources familiar with the bidding estimated a purchase price of slightly more than $10 million. A tentative agreement was reached in late September between Digital Development and Pertec's previous owner, Triumph Adler North America, but the companies never made an announcement.
To acquire Pertec, Digital Development outbid an Arizona company named 3 Phoenix, which makes equipment that tests disk drives, and a group led by Ben Wang, the founder of such technology firms as Rexon in Culver City and Wangtek, Rexon's Simi Valley-based subsidiary.
Pertec primarily makes tape drives, which store and retrieve information for computers using tape, and disk drives, which do the same thing on rigid platters. A private company, Pertec has annual revenue of more than $40 million, according to Digital Development executives, and employs 320 people, down from as many as 700 last year. Executives familiar with Pertec said the company was losing as much as $1 million a month earlier this year.
Has $15-Million Contract
The executives said Pertec probably attracted interest because prospective buyers figured they could acquire it cheaply. They speculated that Pertec has about $10 million in assets and estimated that its lucrative contract with Digital Equipment Corp., a big Maynard, Mass.-based computer maker, brings in $15 million in revenue annually.
Founded in 1967, Pertec's annual revenue grew to $148 million by the end of the 1970s, when it employed 1,500 workers. But Pertec also made miscues, such as its 1977 purchase of Micro Instrumentation Telemetry Systems, or MITS, a New Mexico company that was a pioneer in manufacturing personal computers.
In their book "Fire in the Valley" chronicling the development of the personal computer, authors Paul Freiberger and Michael Swaine say that Pertec alienated nearly all of MITS' key personnel.
"The MITS regulars simply didn't respond well to the Pertec management teams," the authors wrote. "The standard characterization was 'two-bit managers in three-piece suits,' so common an epithet that some just shortened it to 'the suits.' "
In 1979, Triumph-Adler North America agreed to pay $119 million for Pertec, outbidding North American Philips Corp. Olivetti, an Italian office equipment company, recently acquired Triumph Adler's business machines operations in the United States but excluded Pertec from the deal.
Pertec is well known in the high-technology field in part because many of its executives eventually left to start other major computer equipment companies. The alumni include Sirjang Lal (Jugi) Tandon, chairman of Tandon Corp., and Stuart Mabon, chairman of Micropolis. Both Tandon and Micropolis are based in Chatsworth.
Parts for Minicomputers
Founded in 1959, Digital Development also has specialized in making data storage equipment, primarily for minicomputers. President W. A. Lowrey said the company has annual revenue of about $15 million and employs 225. Lowrey, its sole shareholder, said the company will have no trouble financing the acquisition.
Lowrey would not say how much money Pertec has been losing. He attributed it largely to research and development expenses and expressed confidence that Pertec can be turned around by trimming costs, mostly by improving the company's manufacturing efficiency.
Pertec, which will become a wholly owned subsidiary of Digital Development, will keep its operations in Chatsworth, Lowrey said. He added that most of the executives and employees are expected to stay on.
Lowrey said, however, that he will manage the Chatsworth operation himself. A spokeswoman for Pertec's president, W. Clay Matthews, said Matthews will not be staying with the Chatsworth company.