U.S.-designed plant to produce disk drives in Russia

MISSILES TO MEGABYTES

April 27, 1992|By Mark Veverka | Mark Veverka,Orange County Register

LAGUNA HILLS, Calif. -- UniStor Corp. Chief Executive Michael Campbell sat at the bar of a local cantina last summer, watching the dramatic coup attempt in the former Soviet Union unfold before his eyes.

For months, he had been laying groundwork with communist apparatchiks to build a disk-drive manufacturing plant in Volgograd, Russia. But now foreign television correspondents were telling him that Mikhail Gorbachev had been overthrown and all bets were off.

"I thought for sure the deal was dead," Mr. Campbell said.

As it turned out, Mr. Gorbachev eventually returned to power, however briefly, before Boris Yeltsin raised the red, white and blue banner of Russia above the Kremlin. Communism may have died, but UniStor's deal apparently had not.

As Mr. Yeltsin's government began to dismantle the government-controlled economic system, a team of 18 UniStor engineers from the United States continued its fast-track plans to convert a former Soviet nuclear-missile factory into an assembly plant for 2.5-inch computer disk drives.

Tomorrow less than two years after striking its original deal, UniStor plans to flip the switch at its Volzhsky Computer Works in Volgograd. If launched on schedule, the disk-drive plant would provide a rare example of Western investment amid the tumultuous churn of Russia's evolving new government.

Mr. Campbell contends that the feasibility of his joint venture lies in the strength of his partners. UniStor has teamed up with high-tech ministries that were controlled by military and space agencies under communist rule. Mr. Campbell said UniStor's executive vice president, James F. Kingsrud, was largely

responsible for cultivating the necessary relationships. Mr. Kingsrud, a 14-year veteran of Control Data Corp., had been party to previous technology deals with Russia's Cosmos Space Agency, Mr. Campbell said.

Russian officials first showed an interest in 2.5-inch disk-drive technology in early 1991, when they talked to small disk-maker Prarie Tek of Longmont, Colo. But UniStor obtained the rights to the technology from Prarie Tek after it filed for Chapter 11 bankruptcy reorganization that year.

"The Russians want this," Mr. Campbell said. "They're very hungry for the technology needed to put people to work and get hard currency."

Unistor's 65/35 joint venture, VolzhStor, will employ about 100 Russian workers initially, expanding to about 300 at full production, Mr. Campbell said. The 20,000-square-foot plant and square-foot clean room are expected to crank out about 7,000 units per shift. Little, if any, of the production will be exported, with most of the 42-megabyte disk drives earmarked for sale within the Commonwealth of Independent States, Mr. Campbell said.

Nearly all of the project has been paid for by the government through one of its banks, which Mr. Campbell would not identify. But he voiced assurances that the financial partner had the hard currency to pay UniStor's American employees and buy foreign parts and equipment used to build the nearly completed manufacturing complex.

"Almost everything is controlled by and for the state," he said.

Most of UniStor's capital investment has been out-of-pocket. The company has dished out about $300,000 in bribes, shipping fees and jet-fuel bills just to get people and parts across the sometimes lawless landscape of the splintered commonwealth, Mr. Campbell said.

Founded in 1986, the privately held Laguna Hills company has quietly carved a niche selling disk-drive mounting kits for Apple Macintosh computers. Its StorMate kits are sold by 40 distributors in 16 countries, accounting for about 70 percent of the company's product mix, Mr. Campbell said. The remainder of UniStor's line consists of battery packs, software and other items, he said.

Mr. Campbell would not disclose earnings, but revenues have grown from $3 million during the first year to a projected $30 million for the year ending June 30. The company subcontracts virtually all its assembly and manufacturing offshore but handles most of its distribution and design duties in-house.

In Russia, UniStor's contribution to the joint venture is mostly technology, sweat equity and good old American know-how. When truckloads of manufacturing equipment were held up at the Poland-Ukraine border, immigration officials charged UniStor engineers about $1,500 per truck to use the roads, Mr. Campbell said. In addition, to assure safe delivery and protection from bandits, Russian militia members were hired at $6,500 per trip to protect cargoes on their voyage to Volgograd, he said.

And that was just to transport goods. Moving people was another matter. Mr. Campbell said it wasn't unusual for members of his entourage to carry bottles of vodka in their luggage to pay for jet fuel or encourage pilots to fly them to their destinations. Such is the cost of doing business on the wild frontier of the former Soviet bloc, he said.

All of which makes UniStor's commitment to the Volzhsky project impressive, said Gordon Feller of Integrated Strategies, a San Rafael, Calif.-based consultant for high-tech companies investing abroad. U.S. companies must demonstrate patience and long-term commitment for ventures to pay off in the former Soviet bloc, he said. "It's a very tough nut to crack."

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