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Quantum reorganizes, cuts workforce

Embattled tape vendor Quantum is trying to find its way back to profitability by reorganizing its internal operations and cutting more than 100 jobs.

It has been less than two weeks since Quantum Corp.'s CEO Rick Belluzzo laid out his agenda for getting his company back on track, and he wasted little time in acting. Quantum announced last week that it will reorganize its business groups and sales organizations. It's a move that will result in the elimination of 110 employee and 20 contractor positions.

San Jose, Calif.-based Quantum's two business groups, the DLTtape Group (DLTG) and the Storage Solutions Group (SSG), will be integrated into one organization with consolidated operations and three business units -- Storage Devices, Media and Storage Systems.

The company will also merge the DLTG and SSG sales organizations into one OEM sales force and one Quantum-branded sales force. Belluzzo will continue in his role as chairman and CEO, and John Gannon, who has been president of DLTG, will assume the position of president and COO for the company.

Belluzzo said the changes will help Quantum combine its strengths, serve customers better, further reduce costs and provide opportunities for growth. In addition, Larry Orecklin, who has been president of the Storage Solutions Group, has chosen to leave the company to pursue other opportunities, according to Quantum.

Quantum's most recent financial results were less than encouraging. Quantum recorded a loss of $38 million for its second quarter on revenues of $195 million. The results were Quantum's worst since the second quarter of 2002, which saw revenues of $204 million and a loss of $111 million. Quantum has not made a profit since the third quarter of 2002.

The company expects to incur restructuring charges of approximately $10 million to $15 million over the next several quarters related to its reorganization.

Belluzzo's plan

It's been a choppy first year at the helm of Quantum Corp. After two consecutive quarters of economic disappointment, CEO Rick Belluzzo says the company is taking more than a handful of steps to return to profitability.

"We've identified about seven things we need to do to get back to profitability," Belluzzo said. "We'll be looking to new product growth, reducing cost structure, [internal] operations and the tape media pricing issue, among other things that the management team has identified."

Belluzzo admits that recent, aggressive tape media pricing in the industry has led Quantum to lose some revenue, but he sees that as a short-term problem that the company cannot control. He says some of the newer media that Quantum will license, such as SDLT600 and DLT VS 160, will be more favorable for the company in the long term.

Belluzzo said he'll also be looking to increased OEM relationships with some of the storage heavyweights, such as Hewlett-Packard Co., Sun Microsystems Inc. and EMC Corp., to get a foot into environments.

The former HP and Microsoft executive says Quantum is in phase one of its technology plan. The company is expecting new disk-based products, integrated with "cost-effective" tape aspects, to help heal the company's economic woes, a strategy that makes sense to industry observers.

Phase two of the process is to provide more intelligence through software at the device and systems level. New features are expected to include elements like snapshots. But don't expect Quantum to create a complete software package. Belluzzo says it would be out of character for the purely hardware company to create an extensive software package. He says he'll leave that development to the Verities of the world.

Quantum is hoping its homegrown technologies will break its Wall Street losing streak. Quantum rolled out several products in 2003, including its DLTSage software tool, which helps diagnose where tape failures occur, the DX100 and the MAKO tape library. Belluzzo also noted that the DX30 is gaining continued traction with a 20% repurchase rate.

Dianne McAdam, senior analyst and partner at Data Mobility Group Inc., said Quantum continues to increase the speed and capacity of its tape drives and DX30 products. "They must continue on this path to continue to be successful. The addition of products such as DLTSage provides an integrated series of products that makes tapes easier to manage, and that is the correct path that they need to take."

She added that now is the time to buy if you're in the market for tape technology. "Storage managers should approach Quantum the same way they would approach other vendors. The market is very competitive right now, and customers can use that to their advantage," McAdam said. "All vendors desire to post good results this year, so the next two quarters would be a good time to buy."

Let us know what you think about the story, e-mail: Kevin Komiega, News Editor

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