In the six decades since a few Silicon Valley engineers founded unassuming start-up Memorex, their pioneering data storage company soared to iconic brand status before a dramatic reversal of fortunes. This volatile history of rapid success then sudden failure encapsulates the potential rewards and risks of the high-tech industry.
Humble Beginnings
In 1961, engineer Laurence L. Spitters partnered with former colleagues from Ampex Corporation including Donald Eldridge, Arnold Challman and W. Lawrence Noon to incorporate Memorex in Santa Clara, California. With substantial experience in magnetic recording technology, this small team aimed to manufacture digital tapes specifically for the emerging business computing market.
While Silicon Valley had spawned earlier hardware firms like Hewlett-Packard down south, Santa Clara was still largely agricultural land in the early 1960s. Thus Memorex broke ground as the region‘s first computer company – predating giants like Intel by nearly a decade. The new company constructed an 8,000 square foot factory to rigorously produce their initial product – chromium dioxide-coated data cartridge tapes.
Thanks to Spitters‘ patented production process that deposited precise magnetic layers on Mylar film, Memorex‘s "Chrome" tapes offered superior density ideal for handling growing computer storage needs. This painstaking technique involved an intricate 38 step orchestration of people, custom machinery, and simulation technology – immensely difficult for a fledgling start-up to develop and scale.
A Dominant Data Recording Powerhouse Emerges
Yet scale it rapidly did – Memorex‘s early investments in advanced Chrome tape manufacturing paid off hugely by the mid 1960s. In 1965, industry sales soared over $4 million as Memorex‘s tapes captured 75 percent market share, dethroning long-time leader Reeves Soundcraft. By 1969, that share expanded to a whopping 90 percent worth over $50 million in sales.
Bolstered by their tape success and flush with cash, in 1966 Memorex became one of the first companies to sell shares publicly. They soon expanded into related magnetic storage technologies like data cassettes and disk packs. Most notably, Memorex shipped the industry‘s initial IBM plug-compatible disk drive – the 3670 – in 1968.
Competing directly with dominant players like Big Blue was a risky gambit. Yet their disk drives and flexible "floppies" continued gaining customers given high IBM compatibility coupled with aggressive pricing. Now a diversified recording media giant, Memorex saw sales topping an astounding $150M by 1971 with over 4,000 employees.
| Year | Revenue | Market Share |
|---|---|---|
| 1965 | $4M | 75% |
| 1969 | $52M | 90% |
| 1971 | $150M | 60% |
Catering to Consumers: The "Is it Live or is it Memorex?" Era
Having conquered the computer tape and disk market, Memorex next set its sights on the massive consumer electronics category. Their inaugural 1971 product entry – high-fidelity cassette and 8-track audiotapes – applied the same oxide coating techniques used on computer media.
The pivotal moment catalyzing Memorex‘s mainstream fame came next in their iconic 1970s marketing campaign. Their "Is it live or is it Memorex?" ads suggested music recorded on their tapes captured such sonic precision that it was indistinguishable from a live performance. The ads featuring singer Ella Fitzgerald shattering glass via a pure high note etched Memorex as the pinnacle of recording fidelity into public perception.
By 1978, this consumer division accounted for half of Memorex‘s near billion dollar revenues. Cassette tape sales continued thriving well into the 1980s, financed by the rising popularity of portable devices like the Sony Walkman.
Battling a Computing Empire: Memorex vs. IBM
As a dominant maker of data recording products and IBM plug-compatible drives, Memorex depended heavily on interoperability with Big Blue‘s ecosystem. So when IBM introduced its 3420 reel-to-reel tape drives in the early 1970s with modified interfaces that locked out third-party media, Memorex cried foul.
In 1973, Memorex filed a landmark antitrust lawsuit against IBM worth over $600 million, claiming IBM deliberately disrupted compatibility to undermine competition. What ensued was a war of attrition dragging on nearly eight years. When IBM eventually prevailed in 1981, Legal scholars still view Memorex as instrumental in framing Big Blue as an illegal monopoly – paving the way for the US government‘s later antitrust enforcement.
Though scarring Memorex leadership and finances, challenging IBM marked them as a force willing to confront entrenched giants rather than acquiesce. Their dramatic public battle also brought widespread attention cementing Memorex‘s underdog image.
Rapid Growth But Existential Threats Loom
Despite battling industry titans and volatility in the high-tech market, Memorex continued posting record revenues each year from 1972 through 1981. They grew both disk drive density and market share, even achieving #2 position industrywide behind Storage Technology Corp by 1978.
When early personal computers like the Apple II sparked breakthrough demand for floppy disks, Memorex cassette sales also surged on dual fronts. Variants like 8-inch Winchesters and high-capacity Rigid Disk Drives (RDDs) running on the time-sharing servers or mainframes kept Memorex atop the storage food chain despite rapidly evolving technologies.
However, behind the financial success lurked emerging threats. IBM ushered in the PC revolution and Compatible-Disk Operating Systems marginalized non-IBM disks. Digital began challenging tape with inexpensive hard drives. Meanwhile public competitors like StorageTek innovated faster as Memorex dealt with its internal turmoil. Overdependence on analog magnetic tech proved an Achilles Heel as digital transformation loomed.
| Year | Revenue | Market Position |
|---|---|---|
| 1978 | $967M | #2 Disk Maker |
| 1981 | $1.27B | #7 IT Services |
Burroughs, Bankruptcy and Brand Survival
In 1981, computing conglomerate Burroughs Corporation acquired Memorex for $117 million – eyeing their data storage strengths while the PC revolution roiled mainframe giants. Just a year later however, Burroughs shockingly sold both the Memorex brand and consumer business to Tandy Corporation.
Under Burroughs ownership throughout the 1980s, the remainder of Memorex pivoted hard into IT infrastructure services and enterprise disk drives. But rapid technological change overwhelmed engineering resources already thinned by IBM litigation and leadership churn. Tectonic shifts from magnetic disks/tapes to flash and cloud storage proved fatal. Burroughs‘ Unisys division shuttered Memorex in 1996 – a once high-flying company grounded by market turbulence.
Yet like a phoenix from ashes, the Memorex identity remarkably persists today as an audio equipment brand. After passing between multiple owners including Hanny Holdings and Imation, Hong Kong‘s Digital Products International (DPI) now stewards the Memorex trademark for the 21st century. Capitalizing on lingering nostalgia and name recognition, DPI markets headphones, karaoke machines and recording gear that carry forward Memorex‘s legacy of consumer entertainment – if not its original engineering prowess.
Driven by Data Storage Innovation
In retrospect, Memorex‘s wild ride symbolizes both the fertile yet fickle nature of technology frontiers. Within a few frenzied years during the 1960s, Memorex skyrocketed from fledgling Silicon Valley start-up into one of America‘s early high-tech champions. Visionary leaders like Laurence Spitters and Arnold Challman built an engineering organization that outpaced giants several times their size.
Record profits flowed by riding each successive wave in data recording – from computer tape to floppies to disk drives. Ironically, their immense early wins financing unbridled growth later blinded Memorex. By directing profits into branching beyond their core expertise, they grew calcified. Meanwhile debilitating battles with IBM and inability to digitally transform sapped once legendary nimbleness.
Yet products like Chrome Tape and pioneering disk drives revolutionized systems architectures for entire industries over decades. And that iconic ad campaign glamorizing their tapes‘ audio purity endures culturally fifty years later. Both technically and imaginatively, Memorex left an indelible imprint far outweighing its fleeting life. While the company collapsed painfully, their logo still evokes innovation against odds – creative engineering daring that launched Silicon Valley‘s story.
