New CEO Takes Helm at Western Digital Corp. : Management: IBM-trained Charles Haggerty succeeds Roger W. Johnson at a time of promise and peril for the Irvine firm.
As a young clerk at his first job in an IBM plant in 1964, Charles Haggerty vowed that one day he would occupy the plant manager’s fancy glass office across from his desk.
Two decades later, he got that office at IBM. But his career has since deviated from Big Blue, and he now has a new glass office atop the 15-story Western Digital Corp. headquarters in the Irvine Spectrum business park.
Today, Haggerty becomes chief executive and chairman of the Fortune 500 computer products company, succeeding Roger W. Johnson, an Orange County industrial baron who resigned last week for a political post in the Clinton Administration.
“Did I ever stand back and say I wanted to be chief executive of a $1-billion company? Not really,” said Haggerty, 51, in his first interview since the transition. “But after a 28-year career at IBM, climbing up the ladder and overseeing everything from finance to marketing to manufacturing, I’m ready for it.”
Haggerty, who has held Western Digital’s No. 2 post as president for the past year, takes over at a time of promise for the 23-year-old company, which has weathered its worst crisis in a decade and is now considered a technological leader.
At the same time, Haggerty faces a substantial challenge to Western Digital’s principal business--the manufacture and sale of computer disk drives, which store data on personal computers. A renewed price war among the five leading disk drive manufacturers could endanger the company’s financial turnaround.
Analysts said the company, as well as industry rivals such as Conner Peripherals Inc. and Maxtor Corp., could face losses for the next two quarters, though not as severe as those experienced during the price war of 1991. Western Digital has been profitable for the past four quarters, but it had lost $212.7 million for the preceding six quarters.
For its third quarter ended March 31, the company reported a profit of $1.6 million, equal to 5 cents a share, compared with a loss of $18.6 million, or 64 cents a share, a year earlier. Revenues were $325.4 million, up 41% from a year earlier.
“I have seen every indication that Chuck will be a very good leader for the company,” said Johnson, who was confirmed Thursday by the Senate as head of the General Services Administration, the federal agency that manages government purchases and properties.
While both Johnson and Haggerty balk at oversimplified comparisons of their management styles, observers of the transition said there are obvious differences in the way the two men run the company.
“I give Roger credit for holding the company together through thick and thin,” said Phil Devin, an analyst at market researcher Dataquest Inc. in San Jose. “I give Chuck a lot of credit for coming and being the tough guy. Western Digital needed a kick in the pants.”
Trained at companies such as General Electric Co. and Memorex Corp., Johnson created his own corporate empire from the $25-million, money-losing, unfocused company he inherited in 1982. At the time, Western Digital had 811 employees.
He saw the promise of the personal computer and began acquiring businesses that would turn Western Digital into a one-stop supermarket for computer manufacturers. The company hit critical mass with more than $1 billion in sales and 7,500 employees by 1990. Then a series of disasters struck.
The company had to dispose of its obsolete circuit board manufacturing plants and expand its disk drive and computer chip manufacturing businesses when it had about $200 million in debt and little cash.
Then the national recession and a severe, industrywide price war struck, and Johnson had to ward off bankers and lay off 1,500 workers for the company’s survival.
Over the past two years, Johnson has restructured the company, renegotiated loan agreements, hired Haggerty and a new crop of executives, and engineered the corporation’s second financial recovery in a decade. In the past 12 months, the company repaid $70 million in debt.
Some compare Western Digital’s leadership change to the recent transition at Apple Computer Inc., where the visionary John Sculley is turning control over to hands-on operations executive Michael Spindler.
“Their styles are very different,” said Devin of Johnson and Haggerty. “Roger was a visionary and somewhat of a dreamer. He wasn’t as concerned with day-to-day control of inventory, cash and such things.”
Johnson calls such a comparison a broad generalization.
“I think it is unfair and not useful to compare styles,” he said. “Everything changes so fast in this industry that even within a year, different kinds of leadership are needed from the CEO. Sometimes you have to be a visionary, a taskmaster and terribly pragmatic.”
For his part, Haggerty said: “It’s not a dramatic transition by any means. Roger and I have shifted responsibilities over the past year, and he allowed me to pick up things at my own speed.
“I will talk to all the employees in large meetings over the next several months and to all the major customers and suppliers too,” he said. “But the only ceremony will be to come to work in the morning and to get on with it.”
But Haggerty said it’s fair to say that he is more conservative and operations-oriented in his business style than was Johnson in his latter years.
Haggerty draws his lessons from decades of training at IBM during its heyday and was involved in some of Big Blue’s most entrepreneurial businesses: He was the manager of the Boca Raton, Fla., plant where IBM launched its PC business in 1981. He also managed storage operations for IBM and launched its highly successful AS/400 minicomputer system for medium-sized businesses.
He said he admires “Control Your Own Destiny,” a book by Jack Welch, who as chief executive revolutionized the structure of General Electric Co. in the 1980s. And Haggerty said he likes to keep contact with rank-and-file engineers and employees.
Since moving to Laguna Niguel, Haggerty and his wife, Carleen, have relearned the game of golf. Haggerty, who also has a fondness for tennis and biking, was born and raised in Rochester, Minn., and attended the University of St. Thomas in St. Paul. He has two adult children, Kevin and Terry.
While Johnson’s dry wit, charismatic personality and activism in politics and high-society charity efforts often held center stage, Haggerty said he is focused on making Western Digital the center of attention.
Haggerty “is reasonably terse in his words,” said Cyril Yansouni, chief executive of Read-Rite Corp. in San Jose, a supplier of disk drive components for Western Digital. “He uses one sentence instead of five to make his point.”
Most of Johnson’s management team remains intact, though Haggerty in February hired Travis A. White, who heads the company’s unprofitable computer chip manufacturing business, as one of four key executives.
“I will allow people to run their businesses,” Haggerty said. “They will be responsible for them and accountable for them.”
He said the company has regained its standing among the major computer makers that it supplies, such as IBM, Apple, Compaq and AST--all are ordering more components than in the past.
Industry analysts said they are surprised to see Western Digital, once slow in introducing new products, take the forefront in bringing new disk drives to market. The company was the first to introduce disk drives with storage capacities of 170 megabytes and 340 megabytes. A megabyte stores the equivalent of 500 single-spaced, typewritten pages of data.
“We are suffering from the same price problems, but the patient is not critical like it was two years ago,” Haggerty said. “We’ve proven we are a survivor, but it is disappointing to see a company that has become a technology leader go through a price war like this.”
He said he will focus everyone on quality, achieving technological superiority, and profits. But he doesn’t expect drastic changes in employment or in the company’s strategic direction.
“We have to keep raising the bar on quality,” he said.
Yansouni said that when Haggerty is in the Bay Area, the two often eat lunch together and tour Read-Rite’s research and development laboratories.
“He talks to our engineers and asks them questions and looks in microscopes,” Yansouni said. “That is a much different style than Roger.”
Within Western Digital, Haggerty said, he has made an effort to listen to the rank-and-file. Every week he holds a 90-minute open meeting with about 15 employees.
The closer contact has helped jump-start creativity at the company. For instance, two engineers hatched an idea during a business flight to create battery recharging equipment that didn’t weigh as much as the portable computer it served.
The engineers crafted an attachment to a battery, equipping the battery with fold-out prongs that could be plugged directly into an outlet. Haggerty was receptive to the product idea and pushed it through to production.
“The company grew up in an age where the market would take anything you made because it was all new,” he said. “Now we have to distinguish ourselves and convince the market that our product is worth buying.”
One immediate goal is to reduce Western Digital’s dependence on disk drive sales, which account for 85% of its revenues, compared to about two-thirds two years ago.
The company may also delve further into marketing its know-how to others, such as sharing--for a fee--its expertise in the import-export business.
“The company has been a two-legged stool for a while, and we need to figure out what the other legs are,” Haggerty said.
And as much as Haggerty once craved a big glass office like that he now has, he said he isn’t planning to spend much of his 11-hour days in it.
“You can’t run a company like this from a glass office,” he said. “You have to be out with the people doing the work or with the customers.”
