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Ed Zschau Doesn't Fit Big Blue's Mold And That's The Point


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ED ZSCHAU DOESN'T FIT BIG BLUE'S MOLD--AND THAT'S THE POINT

Call him the Singing CEO. Ed Zschau loves to write and sing his own songs. And he'll do it for just about any occasion. He wrote a company song for System Industries Inc., the computer disk-drive company he started in 1968. Later, he penned campaign tunes for his congressional and U. S. Senate races. Back in 1978, while lobbying Congress to reduce capital-gains taxes, he sent every senator and representative a tape of his off-key ditty The Old Risk-Capital Blues, which pleaded his cause. Recalls Zschau: "They passed the bill--in spite of the song."

Zschau's next composition may have a few verses about Big Blue. On Apr. 23, IBM tapped Edwin Van Wyck Zschau (pronounced "shout," without the t) to head Adstar, its $6.1 billion maker of disk drives and other computer data storage gear. As the world's largest such company in a fast-growing market, Adstar is one of IBM's prime hopes for a turnaround. Louis V. Gerstner Jr., IBM's new chief executive, knows Zschau only by reputation, but evidently considers him the right man for the job. He phoned Zschau to urge him to take the IBM job just one day after taking Big Blue's helm.

With no experience at a large company, the 53-year-old doesn't exactly fit the Big Blue mold--which is just the point. Like the rest of IBM, Adstar needs the extra spark that a seasoned entrepreneur like Zschau can bring, computer industry watchers say. The unit lost $265 million last year, mostly because of restructuring charges, and it is still moving too slowly. Says Zschau: "I want to unleash the latent entrepreneurial spirit here."

Zschau has the right credentials for that. An Omaha native, he has one of Silicon Valley's most eclectic resumes. He collected a BA in philosophy (thesis subject: the philosophical implications of Einstein's theory of relativity) from Princeton University before heading to California. He added an MBA and a PhD in business management at Stanford University, but a bent for the mechanical inherited from his engineer father eventually got the better of him. So in 1968, while teaching business at Stanford, he started System Industries, an information-storage company, and built its sales to $75 million before leaving in 1982 to run for Congress. For the past five years, he has been CEO of Censtor Corp., a small company that develops computer disk-drive technology.

Adstar could use some small-company zip. IBM clearly didn't think Ray AbuZayyad, Adstar's general manager under IBM, was getting the job done. He now becomes president, reporting to Zschau. AbuZayyad cut costs and began selling more drives outside IBM's traditional customer base, including a large contract to supply Apple Computer Inc. And thanks to steep price cuts, he helped push up outside sales 64%, to $450 million last year.

But analysts say Adstar still has a lot of work to do. Its core market in drives for big mainframes is shrinking, which caused overall sales to drop last year. And despite two rounds of job cuts, analysts suspect that Adstar still loses money on its smaller drives, where its share ranks behind rivals (chart).

'NEW CULTURE.' How does Zschau plan to get things on track? For starters, he will try to win over computer makers that have always bought from rivals such as Conner Peripherals and Seagate Technology. He even plans to sell directly to PC owners via mail orders. He also hopes to accelerate development of smaller drives for desktop computers. To do that, he says he'll use new ways to manufacture the drives--going outside IBM for parts if it's cheaper. "He's a very creative supporter of new technologies," says Novell Inc. Chairman Ray Noorda, who knows Zschau.

Zschau should bring intensity to his new job. He demonstrated plenty as a two-term Republican representative from Silicon Valley in the mid-1980s. Kenneth Hagerty, a public relations guy who knows Zschau, remembers that he often asked such difficult questions of committee colleagues that they stopped coming to meetings. A moderate, Zschau also sometimes bucked his party, yet got colleagues to back his pet initiatives. In 1986, he challenged Democrat Alan Cranston for his Senate seat and lost by just 1.5% of the vote.

Even Zschau admits that Adstar will be a big challenge for someone used to small companies. But he figures his political skills will come in handy in maneuvering IBM's bureaucracy. He'll need those talents and more to reach his goal: getting IBM to move to a faster beat.Robert D. Hof in San Francisco


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