A Hard-Driving CEO
MILPITAS, CALIF.-Is Bill Watkins the Rodney Dangerfield of the tech world? The shaggy, athletic, tough-talking CEO of Seagate Technology can't help but stick out among the pressed-khaki, Stanford-educated, jargon-speaking executives of Silicon Valley.
And investors have turned sour on the prospects of Seagate, the world's biggest maker of hard-disk drives. They are bearish because a price war has slashed profitability. Increasingly, consumers seem to prefer to store their songs, documents, and pictures on solid-state chips instead of Seagate's spinning disks. As a result, Seagate's stock is mired in the same range as at the start of this year.
"I get frustrated sometimes," Watkins says. "Disk drives get no respect ... and investors think we've got [expletive] for brains."
Yet, unlike many tech companies, Seagate makes money and pays growing dividends. It is now buying back $2.3 billion worth of stock. This summer, it solidified its position as the dominant manufacturer of the standard memory device in almost every personal computer and server by buying up a major competitor, Maxtor. It has also recently won several prizes for quality and innovation.
Like Seagate, Watkins, 53, himself had to earn respect. A high school fullback and linebacker in football-mad Pampa, Texas, he certainly didn't strike his friends as a budding CEO. He was very smart and showed physical courage, but "goal-directed is not how I would have described him," says longtime friend Philip DarcÃÂé. Instead, he says, Watkins enjoyed life, following his own dictum to "dance like nobody's watching."
Nor was the military impressed by Watkins's leadership. Enrolled in ROTC at Texas Tech, he flunked important field tests, such as a war-game scenario in which his platoon had gone behind enemy lines and captured two enemy soldiers at the cost of the wounding of two of his troops. When asked what he would do if ordered to move his platoon on to another objective, Watkins said, "Shoot the prisoners." That, of course, would violate the Geneva Conventions. The answer the Army wanted was to leave the wounded to guard the prisoners and move on. Even today, Watkins defends his answer. "You can't leave wounded soldiers behind enemy lines undefended. We are all in this together, and we have to be brutal with the enemy."
So Watkins spent two years as an enlisted man. "It helped settle me down," Watkins says of his Army service. It also taught him a key lesson: "Officers live a better life."
Sidetracked. Another plan, to become a campaign manager or political pollster, got sidetracked when he took time off from studying government in graduate school at the University of Texas to follow a girlfriend to California.
There Watkins took a job at a small floppy-disk manufacturing start-up in Silicon Valley. He was surprised to enjoy managing teams of engineers and factory workers. "I always loved the bond you create in a good team. You can create that same really good feeling in a company," he says.
His bosses soon began to notice. Finis Conner, founder of Conner Peripherals, a Seagate predecessor, watched Watkins "fight his way up" as a manager. "He hit his numbers and did what he said he was going to do."
Watkins made a breakthrough when Seagate bought Conner in 1996 and then mishandled the merger. Faced with four factories making seven different kinds of 3
In 2000, to further Seagate team spirit, Watkins, an avid adventure racer, got the company to launch "Eco Seagate." Each year 200 different Seagate staffers gather in the wilds of New Zealand for a week of outdoors training culminating in a daylong rock climbing, mountain biking, and kayaking endurance race.
Watkins, who became CEO in 2004, showed his competitive edge in buying Maxtor. He promised Seagate employees they'd keep their jobs, shut down unnecessary Maxtor factories, and laid off half of the Maxtor workers. "You've got to be brutal about competition," he says. "It is our job to make them lay off their people and not to lay off our people."
But Seagate unwittingly set off a price war, as Hitachi and others saw a chance to grab market share. By September, they had taken almost half of Maxtor's sales away from Seagate. Watkins hopes that his new strategy of absorbing whatever pricing pain is necessary to keep the customers he still has will lead to a truce.
Storage war. He also had to come up with something to compete with the tiny flash-memory chips that are increasingly replacing disk drives in iPods, laptops, and other mobile devices. Seagate plans to launch a 1.8-inch drive that will fit into smaller MP3 players and store 60 gigabytes-more than enough to store every single episode of Lost and The Office, plus hundreds of songs and pictures. And next year it will offer consumers a supplemental disk drive that will hold a massive 1 terabyte (1,000 gigabytes) for their home systems.
Even if chips win the small-device battle, Watkins expects to win the storage war. People need to download their songs and movies from somewhere, and Seagate dominates the market for big electronic storage, he notes.
Analysts warn that any tech company that relies on a single product is doomed to obsolescence at some point. But they say that Seagate has got years, if not decades, before its hard drives turn into the 21st-century version of buggy whips. And, they say, if anybody can keep Seagate jumping ahead to the next new thing, it's Watkins. "He's a breath of fresh air" in tech, says John Monroe of Gartner Dataquest. "He's gruff and rough around the edges, but he's a brilliant man passionately consumed with making Seagate the best company in the world."
This story appears in the November 13, 2006 print edition of U.S. News & World Report.