High Tech Tape Unravels At 3 M

3M has always loved businesses like making reflective tape for road signs--high-margin, with few rivals and long life cycles. But when 3M steered its capital into high-tech tape, it went from road signs to roadkill.

On Nov. 14, 3M Chairman L.D. DeSimone announced that 3M would close its video- and audiotape units and spin off the remaining imaging and data-storage units. The decision comes after 3M poured $2 billion into the businesses from 1992 to 1994. In the end, it found itself unable to overcome the problem of historically meager returns. Says DeSimone: "We didn't match the kinds of results that sustain 3M."

3M struggled in magnetic media--floppy disks, videocassettes, and audiotape--for years, slugging it out with the likes of Sony, TDK, and Eastman Kodak. But excess capacity and an inability to produce a distinctive product left the company open to price competition. And last year, material prices for tape skyrocketed. With new rivals in Korea and China, DeSimone figured it was time to take an easier road.

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