StorageTek emerged from 1984 bankruptcy by betting on automated tape libraries

Storage Technology had grown into a leading maker of IBM-compatible tape and disk storage, but founder Jesse Aweida's push into mainframe computers and optical disks consumed about $250 million of R&D and delayed the disk drives customers actually wanted. Losses hit $500 million in 1984, and the company filed for Chapter 11 on October 31, 1984.

New CEO Ryal Poppa, hired in January 1985, killed the mainframe and optical-disk projects, closed plants, cut staff from 15,000 to 8,500, put the sales force on commission and collected $70 million from receivables. By the end of 1985 annual losses had fallen to $52 million.

Poppa's pivotal bet was an automated tape library that a robot could load in minutes. Engineers had hidden a plywood model from Aweida; Poppa invested in it, involving customers in design, and the Automated Cartridge System was completed in January 1987. Seven months later StorageTek emerged from bankruptcy paying creditors 100 cents on the dollar.

The plan distributed $187 million in cash, $285 million in notes and about 193 million new shares. The automated library became the company's flagship — 3,700 sold in four years — and within five years of emergence the stock had risen from the low single digits to $66.

Emerged in June 1987 paying creditors 100 cents on the dollar; stock later rose to $66 and the company was sold to Sun for $4.1B.

Ending mainframe and optical-disk R&D stopped the cash burn at the source.

The automated tape library was an adjacent product with real customer demand.

Paying creditors 100 cents rebuilt credibility and supported the stock.

Customer involvement in design turned a good idea into a product people bought.

Kill the prestige projects that brought the company down and bet on adjacent products customers already buy; paying creditors in full on the way out rebuilds trust and share price.

StorageTek grew steadily after emergence, reporting net income of $47 million in 1988 and $92.4 million in 1990, and it stayed an independent storage leader for years. In June 2005 Sun Microsystems agreed to buy the company for $4.1 billion in cash, a price that reflected its position in tape automation and backup software.