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Ousted Seagate CEO provocative to the end

In a surprise move, the disc drive maker replaces Bill Watkins with chairman Steven Luczo, the CEO whom Watkins replaced in 2004.

By Jeffrey M. O'Brien, senior editor
January 13, 2009: 6:47 PM ET

seagate_free_agent_hard_drive.03.jpg
Seagate's free agent hard drive.

NEW YORK (Fortune) -- Over a wine-soaked dinner two years ago, Bill Watkins told Fortune that hard-drive manufacturer Seagate is in the business of helping "people buy more crap - and watch porn." That statement landed the now-former CEO in a PR mess inside the company. But he said something else that evening to reveal the attitude that may have ultimately led to his ouster as CEO.

When asked how he handles his board of directors, he said this: "You never ask board members what they think. You tell them what you're going to do." That strategy may have worked for the famously outspoken Watkins in headier times, but not now.

In a surprise move announced yesterday, Seagate's board removed him, naming Chairman Steven Luczo, whom Watkins replaced in 2004, as the new CEO. Company spokesperson Woody Monroy said Watkins is staying around to help the transition, however. It's not yet clear whether he will remain on the board or in another advisory role.

In addition, the company announced the resignation of the would-be heir-apparent, president and COO Dave Wickersham, whose responsibilities will be handled by CTO Robert Whitmore. There has been speculation that Wickersham resigned to protest the Watkins move. But according to the company, Wickersham relinquished his post last week and the two events are not connected.

In the weeks leading up to his departure, Watkins certainly didn't act like a CEO under fire. He attended last week's CES trade show in Las Vegas. (Though he failed to show up for a meeting with Fortune, and no one seemed to know why, or where he was.) He met with a different Fortune writer before the trade show, and was candid but unrepentant about the company's performance. "I pre-announced (bad earnings numbers) yesterday and my stock went up," he said.

Like much of the technology sector, Seagate (STX), the top drive maker, has been battered recently by a slump in demand. Profit dropped 83% drop last quarter and the company has been facing pressure from arch rival Western Digital (WDC, Fortune 500). "It's the only time in my life I'll get to pre-announce and have my stock go up."

Watkins went on to say: "It wasn't as bad as (investors) thought. If there was no macro-economic collapse, I would have just been raked over the coals."

No Seagate executives would comment for this story, but Monroy acknowledged that the company had its own peculiar matters that compounded the overall economic pall. "Everyone here is focused on fixing the execution issues and regaining the technology leadership that we let slip," he said. "That means improving time to market, getting the customers the right products at the right time. It's been apparent that we've let that slip, and we've got to get that back."

Monroy denied that the move represents a power play on Luczo's part. He said that Luczo and Watkins have a good relationship and have worked on many things outside the office together, including the professional lacrosse team The San Jose Stealth, which they purchased together.

"Bill has made many significant contributions to the company in his 12 years, prior to him even being CEO," said Monroy. "But the board made the determination that Steve was the right person. From what I understand, this was a decision made by the independent directors." Board members include former Viacom CEO Frank Biondi and former U.S. Senator Bill Bradley.

Jon Fortt contributed to this article. To top of page

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