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Quantum still idling with DXi disk

The DXi data deduplication disk system still isn’t working out for Quantum as planned.

The DXi platform and StorNext archiving software are the main pillars in Quantum’s strategy to become a systems company instead of just a tape vendor. But the DXi is stuck in neutral. Quantum reported its disk revenue fell four percent last quarter due to poor enterprise sales, marking the second straight poor quarter for DXi. That was a drag on Quantum’s product revenue, which fell 8.3% to $86 million while overall revenue grew 5% to $148 million.

Quantum CEO Jon Gacek said the DXi problem was a combination of large deals that didn’t close and fewer sales than expected to existing customers. He said the DXi 8500 enterprise system faltered while the DXi 6000 midrange revenue grew 23% over last year.

“Our real issue this quarter and last has been the DXi,” he said on the earnings call. “We did well with new customers and in the midrange, but we didn’t do as well with our installed base and bigger deals. These last two quarters have been more of a struggle.”

Gacek added “We still think the market is there,” and that he is happy with how the DXi stacks up against EMC Data Domain and other competitors. The problem, he said, is mainly that Quantum lacks the market reach to get into enough deals. He pointed out that EMC is in nearly every deal because it is a much larger company than Quantum.

Besides EMC, Quantum faces a newer competitor in Symantec, which is having success selling its backup software on pre-packaged hardware appliances. When Symantec sells a NetBackup appliance, its customer no longer needs a separate disk target such as the DXi. According to the most recent market figures from IDC, Symantec’s disk appliance revenue grew 149.3% to $102.3 million in the first quarter of this year. Quantum’s $18.3 million revenue grew only 2.5 percent compared to the overall 16.5% market growth. Quantum was fifth behind EMC, Symantec, IBM and Hewlett-Packard with 3.1 percent market share, and it doesn’t look like it gained share last quarter.

“Symantec is 50 percent of the backup market, and their product does impact us for sure,” Gacek said in an interview after the earnings call. “But their product does not scale as much or have high performance. Is it good enough? For a bunch of enterprises it is. We have them below us and EMC on the same level and above us. But there’s still a lot of market.”

Take away a one-time $15 million intellectual property deal with Microsoft, and Quantum would have missed its revenue target by $2 million. Still, Gacek said the quarter had hits high points. While Quantum’s DXI revenue faltered, it beat estimates for income and finished $3 million in the black for the quarter on solid tape sales and 13% StorNext growth. He’s still counting on better DXi sales and expects Quantum’s new Lattus object-based storage system to pick up steam soon. But he spent much of the earnings call defending the DXi results.

“Without sounding whiny, everybody’s always unhappy about something,” he said of investors and analysts. “Last year the DXi was killing it and we were getting hammered because of tape. Now DXi is off and tape is doing well, and DXi is what everybody wants to talk about.”

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