Cipher Data Products
| Company type | Public (until 1990), Subsidiary (1990–1992) |
|---|---|
| Industry | Computer hardware |
| Founded | 1968 in San Diego, California, United States |
| Founder | William "Bill" Otterson and others |
| Defunct | 1992 |
| Fate | Acquired by Archive Corporation in 1990; dissolved in 1992 |
| Headquarters | San Diego, California , United States |
Key people | William "Bill" Otterson (co-founder, chairman), Don M. Muller (president and CEO until 1987), Edward L. Marinaro (CEO after 1987), R. B. "Buzz" Woolley (investor) |
| Products | Magnetic tape data drives and media, WORM optical discs (via Optimem), CacheTape GCR drives |
Number of employees | Approximately 772 (in 1986); about 50 (in 1991) (1986 and 1991) |
| Parent | Archive Corporation (from 1990) |
Cipher Data Products, Inc. was an American computer firm headquartered in San Diego, operational from 1968 until 1992. It gained prominence as a top producer of magnetic tape data drives and media tailored for minicomputers, notably advancing tape streamer technology in the early 1980s. During the late 1980s, Cipher briefly ventured into manufacturing WORM optical discs through a collaboration with 3M. In 1990, Archive Corporation acquired the company for $120 million.
Initial independent phase (1968–1973)
Established in San Diego in 1968, Cipher was co-founded by William "Bill" Otterson (circa 1931–1999), who brought experience from IBM and Air Force computer systems. The company’s initial capital was provided by Sutter Hill Ventures, a venture capital firm based in Palo Alto. Otterson assumed the role of chairman in 1970.
Cipher initially produced incremental magnetic tape drives that recorded data unidirectionally. By late 1970, it had progressed to manufacturing random-access tape drives employing more sophisticated transport mechanisms. Early sales were modest, with the company reporting its first profitable year in 1970. Limited proprietary innovations and restricted capital investment prevented Cipher from achieving significant market share against competitors such as Kennedy Company, another Southern California-based tape drive pioneer later acquired by Allegheny Ludlum.
Period under Computer Machinery Corporation ownership (1973–1976)
In 1973, Sutter Hill began divesting its shares in Cipher to Computer Machinery Corporation (CMC), a Santa Monica-based manufacturer of data entry equipment. By October of that year, CMC had fully acquired Cipher, integrating it as their internal tape drive production unit while continuing to supply drives compatible with IBM and DEC minicomputers to external clients. Production was divided roughly 85% for CMC systems and 15% for third-party customers.
Cipher remained profitable initially under CMC’s ownership but encountered difficulties when CMC faced financial troubles in the mid-1970s. Starting in 1975, Otterson and investors including R. B. "Buzz" Woolley sought to reacquire Cipher but faced opposition. In 1976, Pertec Computer Corporation, a major OEM tape drive manufacturer, purchased CMC. Soon after, Pertec accepted Woolley’s $850,000 buyout offer, returning Cipher to independent status. Within one year, Cipher compensated for lost revenue from CMC contracts and restored its financial footing.
Renewed independence and growth (1976–1985)
Following its regained independence, Cipher expanded operations by acquiring a 38,000-square-foot manufacturing plant in San Diego in 1977. By 1979, with revenues reaching $14 million and production capacity fully utilized, the company acquired an additional 68,000-square-foot facility and relocated there in 1980. That year saw revenues exceed $20 million.
After Pertec’s divestiture, Woolley and his partners held a 60% stake in Cipher while Otterson retained the remaining 40%. In 1979, Otterson appointed Don M. Muller—formerly with Pertec—as president and subsequently CEO. Muller served until 1987 before joining Optotech; he was succeeded by Edward L. Marinaro, previously CFO at Western Digital.
Cipher launched its initial public offering on Nasdaq in late 1981. Revenues expanded from $23 million that year to $151 million by 1984 following the acquisition of Perkin-Elmer's memory products division in 1982 and the introduction of the CacheTape series of GCR drives in 1983. The CacheTape drives incorporated an internal data buffer designed to enhance transfer speeds while minimizing wear on tapes and hardware. During this period, the company completed two additional public offerings and reported a $15 million profit for fiscal year 1984. That same year, Woolley divested most of his shares and exited the board of directors.
Decline, Irwin Magnetics Acquisition, and Integration into Archive (1985–1992)
By the middle of 1985, Cipher maintained manufacturing facilities in San Diego, Garden Grove, California, and Mountain View, California. According to Muller, the company was shifting its focus from traditional 9-track reel-to-reel tape products toward advanced GCR-based tape cartridge technology.[1] In 1986, Cipher secured substantial licensing agreements with IBM for its QIC technology, which was incorporated in IBM's PC RT and System/36 models, as well as for 1880 half-inch reel-to-reel tape drives used in the IBM 9370.[2]
During June and July 1986, Cipher purchased Optimem Inc., a producer of 12-inch WORM optical discs, from Xerox Corporation for $6.3 million. Xerox retained a 10% ownership share and received royalties from Optimem’s sales.[3] Optimem was engaged in developing rewritable optical disc formats in collaboration with 3M, but these efforts stalled by the late 1980s following the loss of a significant government contract in 1987.[4] By 1988, Optimem had secured contracts to supply WORM disc products to the United States Department of Defense, NASA, and the United States Patent and Trademark Office.[5]
Cipher’s Garden Grove facility, a key tape drive manufacturing site employing up to 772 individuals, was shut down in October 1986 after duplicating production capabilities in Singapore. The San Diego plant experienced major workforce reductions in November 1988.[6]
In March 1989, Cipher acquired Irwin Magnetic Systems, based in Ann Arbor, for $77 million. Irwin was recognized for its proprietary AccuTrak tape cartridges commonly used for PC backup solutions. This acquisition also granted Cipher control over patents held by the Kennedy Company through Irwin’s prior purchase of Kennedy.[7] Following the acquisition, Irwin operated as a division within Cipher responsible for all QIC-related products.[8]
From December 1989 through March 1990, competitor Archive Corporation initiated a hostile takeover bid for Cipher amid ongoing patent disputes concerning QIC technology. Archive progressively raised its offer until Cipher consented to a $120 million stock exchange deal completed in April 1990.[9]
After the acquisition, Cipher functioned as a subsidiary of Archive for two years alongside divisions such as Irwin and Optimem.[10] Archive utilized patents obtained via Irwin and Cipher to reinforce its competitive stance in the market.[11] By September 1991, Cipher’s employee count had declined sharply from 400 to approximately 50.[12]
In 1992, Archive redirected Cipher’s operations away from tape drive manufacturing toward antivirus software development. Later that year, Archive merged its software units, effectively dissolving Cipher as an independent organization. Archive itself was acquired by Conner Peripherals in 1993.[13]