Quantum Bulks Up

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Quantum announced late Tuesday that it will acquire Advanced Digital Information Corp. (ADIC) for about $770 million, a nearly 50% premium for its tape storage rival.

Quantum, which added LTO tape technology to its core DLT format with the 2004 acquisition of Certance, will move further into the LTO space with the acquisition of ADIC, creating a $1.2 billion data protection giant to compete with the likes of Sun/StorageTek and IBM. ADIC also offers SDLT.

Quantum said it expects to save $45 million in the first full year of combined operations. Savings are expected to come primarily from economies of scale and manufacturing efficiencies in cost of goods sold, reduction of duplicative operating expenses and sharing of R&D and marketing costs.

“We are very excited about bringing Quantum and ADIC together to create what will clearly be the largest independent provider of backup, recovery and archive solutions and a global leader in addressing customers’ evolving data protection challenges,” Quantum CEO Rick Belluzzo said in a statement. “With an unparalleled portfolio of systems, software, devices and media, we will be able to integrate these assets and incorporate value-add features to offer best-of-breed solutions for customers of all sizes.”

ADIC will give Quantum a strong enterprise, midrange and OEM business — including EMC — along with a bigger share of the LTO market, de-duplication technology and a solid data management software business.

“The combined company will have an enormous set of offerings, the scale, footprint and financial foundation to really have an impact in the data protection market,” stated Enterprise Strategy Group founder and senior analyst Steve Duplessie. “This acquisition propels Quantum into a clear top three position among the largest data protection suppliers, and makes them big enough to control their own fate. I love this deal.”

Duplessie might have loved the deal, but Wall Street seemed to have mixed feelings. ADIC shares rocketed 44 percent higher in Wednesday morning trading, while Quantum shares tumbled 12 percent.

Both companies also released quarterly results that showed that the tape market remains a mixed picture, with pricing pressures and competition from greater use of disk backup technologies. Indeed, both Quantum and ADIC have moved into the disk backup market themselves.

ADIC said it expects sales of $115-$117 million in the second quarter, up 8-10 percent from the year-ago period, but that figure would come in below the $118 million revenues that Wall Street analysts are expecting, according to Thomson Financial.

Quantum, meanwhile, reported March quarter sales of $206 million, down 14 percent and $19 million below analysts’ estimates, the company’s results hit by product transitions and weaker than expected sales.

“Users will increasingly demand integrated platforms, not more stand-alone products,” said Simon Robinson, a storage analyst at The 451 Group. “The smart money should be on those vendors that can combine a wide range of integrated capabilities that span the entire data protection lifecycle with a common, central point of management. … Quantum’s proposed acquisition of ADIC is partly motivated by its desire to achieve just this. Quantum is hoping to stay relevant in the game by combining high-value data protection software such as virtual tape and data reduction with its legacy commodity disk and tape hardware platforms.”

Quantum will pay $12.25 per share in cash for ADIC. The deal is expected to take three to four months to close.

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Paul Shread
Paul Shread
eSecurity Editor Paul Shread has covered nearly every aspect of enterprise technology in his 20+ years in IT journalism, including an award-winning series on software-defined data centers. He wrote a column on small business technology for Time.com, and covered financial markets for 10 years, from the dot-com boom and bust to the 2007-2009 financial crisis. He holds a market analyst certification.

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