Magnetic Data Technologies, LLC

Date of Investment

In April 1999, the Partnership acquired Magnetic Data Technologies, LLC (MDT) from Applied Magnetics Corporation in a transaction structured as a leveraged recapitalization.  Applied Magnetics retained approximately ten percent of the equity ownership of the business.

The Partnership sold its entire investment in MDT to Solectron Corporation on June 11, 2002, generating a loss for the Partnership.

MDT is a leading provider of outsourced post-sale services to original equipment manufacturers (OEMs), including Compaq, EMC, Ericsson, Hewlett-Packard, Hitachi, Iomega, Lexmark, NEC, Nokia, Philips, Quantum, 3Com, and Western Digital.  The company provides repair and warranty services for manufacturers of computer peripherals, telecommunication systems, and other electronic and digital devices.  These services include hard disk drive “clean room” repair and reassembly, customer service center management, warranty administration, reverse engineering failure analysis, testing and repair of returned units, and component salvage of non-repairable units. MDT is headquartered in Goleta, CA, with facilities in Texas, Tennessee, Mexico, Belgium, and Singapore.

The company focused its long-term strategy on extending its leadership position in the growing market for outsourced post-sale services for electronics OEMs.  By providing a broader array of services and increasing the number of products and programs served, MDT intended to penetrate further its existing data storage device and telecommunication customers, as well as to develop new customer relationships.  Unfortunately, the company lost its largest customer within 60 days after closing.  In spite of this development, MDT pursued strategic acquisitions of under-performing competitors and captive in-house OEM service and repair centers.  Transactions included the purchase of Western Digital’s hard disk drive repair facility in Singapore, the purchase of EMC’s repair operation in Chihuahua, Mexico, and the provision of MDT management to a Hewlett-Packard-owned repair facility in Nashville, TN.

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