[ Technology Blogs Articles News Reviews ]

www Technoclicks.com
Post Tech Blog Article News Reviews

Top Articles

Quantum Takes Tape Rival ADIC

Posted by iTech - 2006-05-05

The shrinking roster of tape library vendors lost another player when Quantum acquired rival ADIC for $770 million Tuesday night, creating a larger player looking to take on Sun and IBM.

The acquisition brings together companies with combined revenues of more than $1.2 billion over the past year. Quantum CEO Rick Belluzzo says he expects the deal will give his company a revenue boost and accelerate growth in the tape and disk backup markets. It also makes Quantum a partner with EMC, which has a reseller deal with ADIC.

"This gives us the ability to have a greater presence in the marketplace," Belluzzo said in a conference call to discuss the deal. He said the broadened product line should give Quantum more strength in dealing with OEMs that sell tape libraries. He acknowledged that winning OEM deals is hard "unless we have the ability to have market influence quickly, and that's been a limitation of the company."
Belluzzo says he expects the deal to close in three or four months. At the close, ADIC shareholders can receive $12.25 per share in cash or 3.461 shares of Quantum stock for each ADIC share they own.

Quantum could use a revenue boost. The sale came on a day when Quantum announced disappointing revenues of $206 million, down 14 percent from the same quarter last year and below its previous guidance of $210 million to $225 million. Quantum blamed the poor performance on product transitions to new tape and disk products.

ADIC said it expects quarterly revenues between $115 million and $117 million -- up 8 to 10 percent over last year -- when it reports earnings on May 18.

Belluzzo offered few details about how Quantum would integrate product lines or ADIC's personnel. He did say there is little overlap in the product line, and the companies' go-to-market strategies are complementary. ADIC is stronger in the higher end of the midrange space and mostly sells branded products or through partners such as EMC, while Quantum's sweet spot is in the lower end of the midrange through the channel.

The deal makes Quantum a bigger player in the higher-end tape automation space. According to Bob Abraham of market research firm Freeman Reports, the combined market share of tape automation revenue for the companies should be 21.7 percent. In 2005, ADIC was third in that market, with 17.4 percent share, following Sun, which had 41 percent, and IBM with 23 percent. Quantum was fifth at 4.7 percent.

"This is a significant acquisition in terms of size and scope," Abraham says. "It puts the new company in a much stronger position."

Abraham notes the number of tape vendors has shrunk from 40 to 15 over the past 18 years. So it's no surprise that Quantum, ADIC, and other tape vendors have tried to diversify with disk backup products.

ADIC has been aggressive in trying to make acquisitions over the last year. After failing to complete a hostile takeover of rival Overland Storage last November, CEO Peter van Oppen set his sights on emerging technologies and picked up Australian data compression startup Rocksoft for $63 million in March.

Quantum marketing VP Rob Pickell tells Byte and Switch that Quantum had explored an OEM deal with Rocksoft, was impressed with its software, and looks forward to integrating it into its product line.

Some Wall Street analysts question the purchase price of yesterday's deal. In notes to clients, Aaron Rakers of A.G. Edwards called it a "relatively hefty price tag." Dan Renouard of R.W. Baird commented, "We view the acquisition as somewhat expensive."

But Rakers added that consolidation in the tape industry makes sense. "We're not surprised to see further consolidation in the tape industry, as we believe this market to be a low single-digit growth opportunity," he wrote.

Related Category :

Network ||

Next ....: New Motorola Gateway To Stream Video Content In Home

:: Previous Articles
:: AMD Reports Potential Heat Problem With Some Opteron Chips
:: IBM Says New DB2 Will Require Less Storage
:: Firm Builds SAN After Merger

Recent Articles



Home | | Members | Search | Upadtes | RSS | Tags | Site Map | Tags | Conact

© Technoclicks.com - All rights reserved.