October 15, 2002 12:51 PM PDT

Quantum tries again to spin off Snap

Quantum, a company that sells tape-backup equipment, is taking a second crack at spinning off its Snap division, which builds devices that store files on a network.

Under an agreement announced Tuesday, Snap Appliance will pay Quantum $11.3 million and employ "a substantial number" of the Quantum employees who have been working on Snap products. Snap's new backers include Moore Capital Management and Mellon Ventures, but Quantum will keep a minority interest in the new company.

The deal, taking place under the tenure of new Chief Executive Rick Belluzzo, a former Microsoft executive, is the second time Quantum has tried to set Snap on its own feet. Two years ago, the company had been hoping to spin off Snap through an initial public offering, but Quantum abandoned that plan in 2001 after investors turned sour on technology ventures.

Eric Kelly will be Snap's CEO. The deal is expected to close by the end of October.

Quantum acquired the Snap line with the acquisition of Meridian Data in May 1999, a time of industry expansionism. Now customers' tight purse strings have changed the climate; Quantum rival Maxtor canceled a direct Snap competitor in August because sales were slim.

Milpitas, Calif.-based Quantum has been retrenching to its core business, tape-storage technology used to back up vital corporate data. It sold its hard-drive business to Maxtor in March 2001, canceled its "Rushmore" high-speed memory-based storage systems in May 2001, and acquired tape-drive maker Benchmark Technologies in September 2002.

Snap Appliance, based in San Jose, Calif., makes "network-attached storage" (NAS) products, systems that store files over regular Internet Protocol (IP) networks. The new Snap products will incorporate software from a privately held company called Broadband Storage.

During brighter times, Snap's products were sold by Dell Computer, but Dell dropped the arrangement after coming up with its own products.

Larger companies, including EMC, Network Appliance and Sun Microsystems, maintain their interest in the NAS market, though many of them have focused on higher-end products costing tens or hundreds of thousands of dollars.

 

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