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Quantum's Snap decision

Quantum is playing defense.

Milpitas, Calif.-based Quantum Corp. has nixed plans to make its network-attached storage (NAS) unit, Snap Appliances, a separate company.

Michael Brown, chairman and chief executive officer, said the company is also lowering its revenue expectations, stating that Quantum's revenue will be down 10% for the quarter.

Quantum said the slowdown in IT spending and weakened U.S. and European markets led to the change in plans.

"There was a time where we could have expanded our NAS business as a separate company, but that time has passed," Brown said in an interview yesterday. "The IPO market has dried up and we didn't get the valuation that we expected."

The decision to make Snap Appliances a separate company came in October of 2000, but Brown said that since the IPO has not been completed, there have not been many internal changes.

He said a handful of positions will be eliminated, but that the decision to keep Snap in-house will impact a small number of people.

Jim Schraith, president of Snap Appliances, who was slated to take the reigns of Snap as CEO when it came into its own, will remain president of the Snap unit under Quantum. ?An IPO no longer serves our strategic objective of expanding our NAS offerings, given the difficulty that other companies are having in raising sufficient capital through an IPO and the lowered expectations for valuation,? Schraith said.

Snap makes workgroup level NAS appliances called Snap Servers that sell for under $10,000.

Overall, Quantum is projecting revenue for its fiscal first quarter, ending July 1, 2001, is currently expected to be in the range of $265 to $275 million, compared to $309 million in the previous quarter. The company expects that revenues in both its DLTtape Group and ATL/Enterprise Solutions Group will decline, adding that current market conditions will hit the ATL/Enterprise Solutions Group hardest because a large percentage of that Group's product revenues comes from sales at the high-end of the storage market, where buying decisions are being put off or delayed.

The decision to pull Snap's IPO is permanent. According to Brown, Quantum is going to focus on growing its NAS division under the Quantum brand name.

Snap recently began positioning itself to move beyond its current workgroup market to compete with the likes of Network Appliance and Compaq with a new mid-range NAS appliance called the Snap Server ES12. The ES12 features almost 1T Byte of capacity and Gigabit Ethernet (GbE) connectivity.

Yankee Group analyst William Hurley said the NAS opportunity is not a given. "The NAS space is becoming extremely crowded as legacy and new entrants try desperately to differentiate on a variety of levels, such as price, function, performance, ease of use and capacity," he said.

Let us know what you think about the story, e-mail Kevin Komiega, assistant news editor

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