Tale Of The Tape: LTO Key To Quantum's Buy Of Certance

Quantum, Milpitas, Calif., already develops and manufactures SDLT tape drives and subsystems. LTO technology is important to the company because it has overtaken SDLT as the backup technology of choice among midsize businesses and enterprises.

Quantum plans to pay about $60 million in cash for Costa Mesa, Calif.-based Certance. The deal is expected to close before the end of the year.

John Thome, vice president of Chi, a Cleveland-based solution provider, called the acquisition a smart move because it gives Quantum access to the faster-selling LTO products.

But with the new product line come R&D requirements as LTO rivals IBM and Hewlett-Packard move forward in that space, Thome said. "Can they keep up the pace of product development?" he asked.

Thome also noted that Quantum has not had a very strong channel program and its tape library business has slipped every year. "But if Quantum can capitalize on the acquisition and work with it, it would help them out with the channel," he said.

Rick Belluzzo, chairman and CEO of Quantum, told CRN that his goal is to do just that.

The channel is an important and growing part of Quantum's business, Belluzzo said, noting that about 45 percent of Certance's revenue comes from the channel. "We're excited to have a wide product line from the low end all the way up," he said. "It's good for our channel. We want this to be very channel-friendly. We want synergy."

In the past year, solution providers have been saying that Quantum's channel sales have dropped while the company underwent a number of turnovers in key channel personnel.

Belluzzo said the change resulted from combining its VAR-direct and distribution channel organizations. "We picked the strongest team," he said. "So solution providers may have seen some changes."

Bob Abraham, president of Freeman Reports, a research firm specializing in the tape market, said Certance could help Quantum hold on to the high end.

Quantum was not going to succeed on the basis of its DLT and SDLT business alone, Abraham said. "So, rightly so, they looked at other technology," he said.

In the short term, it's the low-end technology, not LTO, that will drive Quantum's growth, Abraham said. But in the long term, LTO will be a major driver for the company, he said.

In addition to SDLT, Quantum offers a lower-end line of DLT VS tape drives that it picked up with its acquisition of Benchmark Storage Innovations two years ago. Meanwhile, Certance adds low-end compact tape technologies such as Travan, DDS-4 and DAT-72 to the mix.

Certance's Travan tape product line has been slipping slowly, but its DDS-4 and DAT-72 lines are both definitely growing, Abraham said. DAT-72 is the name of what was once called DDS-5. HP also produces DDS-based tape drives.

Certance, which was part of Seagate before being spun off into a privately held company, came to market with LTO drives after HP and IBM (see review, page 46).

Two months ago, Quantum introduced its DLT-S line of tape drives. Unlike SDLT, and unlike the LTO line, DLT-S will focus on capacity instead of highest performance, Quantum executives said at the time.

That makes sense, said Robert Scroop, vice president and general manager of tape automation at Overland Storage. The San Diego-based vendor of tape-automation products uses Quantum tape drives in some of its products.

"This is the first sign a tape manufacturer recognizes that the role of tape has changed," Scroop said.