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Quantum confirms EMC data deduplication OEM deal

Quantum pins its hopes for a revenue turnaround on a data deduplication OEM deal with EMC and a new enterprise dedupe disk backup system.

Quantum Corp. executives divulged their OEM data deduplication deal with EMC Corp. today and said they are finally shipping their enterprise data deduplication disk backup system.

The announcements came during Quantum's earnings conference call, but weren't exactly a surprise. Quantum first launched the DXi7500 virtual tape library (VTL) last June and forecasted a fall ship date, and reported the EMC deal two months ago.

Quantum executives made it clear they pin their hopes for a turnaround on the success of their double-barreled data deduplication strategy. But it may take a lot to turn Quantum around, if the news that came out of its earning call is any indication. The company completed its sixth straight year of net losses, and its losses widened during this quarter.

"Over the year we established ourselves as a significant player in data deduplication," said Rick Belluzzo, Quantum CEO. "The market for deduplication and replication is still very young, with many opportunities."

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Quantum's first shot at data deduplication fell short of diversifying the company from its tape business, mostly because it consisted of Quantum pushing out what Belluzzo called "limited" products to try and capitalize on the hot market for dedupe.

OEM deal with EMC for dedupe finally in the open

The EMC-Quantum data deduplication deal was no secret, although neither company confirmed it until Thursday. Quantum executives didn't go into any product details, leaving that for the EMC World conference in Las Vegas next week.

When asked how EMC would use the data deduplication software it will license, Belluzzo would only say, "It's their product, their brand, and they're taking it through their go-to-market machinery." reported this week that EMC will sell Quantum's software on three disk backup systems, two aimed at the midrange and one with an enterprise focus.

Belluzzo was more forthcoming on Quantum's new data deduplication disk library. The DXi7500 is by far the largest of Quantum's three data deduplication systems and gives customers the option of deduplicating data inline (before it is written to disk) or post-process (after it hits the disk).

Quantum's revenue decreased last quarter from the previous quarter for Quantum's first two data deduplication disk libraries, the entry-level DXi3500 and midrange DXi5500. Quantum blamed the shortfall on customers waiting for the larger system to ship, as well as inexperience making and selling data deduplication products.

Customers clamoring for enterprise dedupe?

Quantum claims that eight customers have placed preorders for DXi7500s, which are now out of beta, and that it has more than 200 requests for price quotes. Belluzzo said there are "$80 million [worth] of deals in various stages," although finalization is not one of those stages, since none of the deals are closed yet.

As for the delay with the DXi7500, Belluzo said Quantum wanted to avoid mistakes it made with its smaller systems. He admitted that Quantum may have rushed its first data deduplication products to market after picking up the technology when it acquired ADIC in August 2006, saying "We made some tradeoffs to get product to market with a fairly limited product."

Quantum reported revenue of $229 million for last quarter, down 17% from the previous year and 5% below the low end of its guidance. For the year, Quantum's revenue of $976 million was down 4% over last year and also below its guidance for the year. Quantum lost $15 million for the quarter and $60 million for the year. Its guidance for this fiscal year is between $950 million and $1.05 billion.

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