Quantum Corp. has made a deal with fellow tape maker Benchmark Storage Innovations Inc. that gives Quantum more than just a competitive edge - it gives them control of all things DLT.
The Milpitas, Calif.-based Quantum will buy Benchmark, which is based in Boulder, Colo., for $11 million in cash and 13.1 million shares in Quantum stock.
Quantum also announced on Monday that it is cutting 1,100 jobs, roughly one-third of its work force. Additionally, last week Quantum announced that it would outsource its manufacturing operations to a Malaysian company called Jabil Circuit Inc. According to sources, most of the job cuts are related to the latter agreement, not the Benchmark deal. Jabil will manufacture tape drives for Quantum.
Bob Abraham, tape industry analyst and founder of Freeman Reports Inc., Ojai, Calif., said that Quantum expects the tape market to shift in its favor.
"Quantum has been talking about reducing manufacturing costs for years," Abraham said. "Benchmark has the best manufacturing model [out there]."
Quantum and Benchmark offer similar tape drives and products, but Abraham said there is very little duplication in their respective product lines or in the market segments that the companies serve.
What should end users expect now that one company seemingly controls the entire DLT tape universe? A better technology, according to Abraham.
"One company should really operate the entire DLT technology [line]," he said.
Abraham contends that compatibility problems have arisen over the course of DLT's evolution because too many vendors have been in the mix. "Different road maps did not always share identical media," he said.
"Benchmark has been on the rise in a declining market," Abraham said. "They may well be the only tape drive company that has had consecutive quarter-to-quarter growth for a long period of time."
Benchmark generated revenues of about $80 million in the past year.
With the Benchmark deal, Quantum has also landed new OEM partners such as Dell Computer Corp. and Hewlett-Packard Co. for its existing partner list, which already includes IBM Corp., EMC Corp. and others. The Benchmark relationships will be maintained after the acquisition, according to the companies.
"Quantum buys DLT1, which has successfully gained quite a bit of traction in a pretty short time," said Steve Duplessie, founder and senior analyst at Enterprise Storage Group Inc., Milford, Mass. "This immediately improves its reach into markets where [Quantum] really didn't play, as well as acquiring more reach into some big OEMs, such as Dell."
Benchmark's autoloader products will be integrated into Quantum's Storage Solutions Group tape automation line and will complement the Quantum SuperLoader, the company said. Quantum also plans to build on Benchmark's ValuSmart Tape 640 Blade, a rack-mounted automated tape library.
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