EMC (NYSE: EMC) came to the aid of data deduplication partner Quantum (NYSE: QTM) today with $100 million in financing.
Quantum said it will use the money to refinance its convertible debt to “address a key challenge posed by its current capital structure and the very constrained credit environment.” The company was facing a February 2010 deadline to refinance most of its convertible debt.
EMC, which licenses Quantum’s dedupe software, made the $100 million financing commitment “to help ensure that Quantum can continue to invest in the technology enhancements required by EMC to meet the needs of their customers in this fast-growing sector,” Quantum said in a press release.
Quantum CEO Rick Belluzzo said in a statement that “Despite the significant improvements in operational performance Quantum has made over the past year, our capital structure has clearly been a hindrance in the current economic environment. The financing from EMC will give us greater financial flexibility and enable us to maintain a high level of investment in deduplication and replication technology that can be leveraged by both Quantum and our OEM partners, with compatibility across solutions.”
EMC senior vice president Rich Napolitano stated, “We’re fortunate to have the financial strength to execute this strategic investment. By addressing the challenge posed by its capital structure, Quantum will be able to focus more energy on continued innovation and working with EMC to remain front and center in one of the storage industry’s hottest trends.”
Quantum shares soared 92 percent on the news today. Before today’s gain, the stock market valued Quantum shares at less than $100 million.
Asked why EMC just didn’t acquire its dedupe partner, Enterprise Strategy Group analyst Brian Babineau said, “When you buy the company, you absorb the debt, which is $400 million.”
By loaning Quantum the money, EMC keeps its deduplication provider healthy at a lower cost.