March 30, 2001 4:40 PM PST

Quantum exits hard drive business

After 21 years of selling hard drives, Quantum on Friday formally left the business to turn its full attention to higher-level storage products and services.

Shareholders approved the sale of the hard drive business to competitor Maxtor, announced in October. Selling hard drives has been excruciating to many companies facing unpredictable demand, cutthroat competition and low profit margins.

Now Quantum, a 3,000-employee company headquartered in Milpitas, Calif., is out to become more like storage companies such as EMC that sell storage products and services rather than components. That strategy will include acquisitions of companies with expertise in both storage hardware and software, chief executive Michael Brown said in an interview.

The company's chief products are its DLT tape backup systems and their recently released SuperDLT successors, the ATL line of tape libraries--robotic systems that shuffle numerous backup tapes--and the Snap line of storage servers.

About a third of the company's $1.4 billion in revenue last year came from wrapping its products with services such as consulting or installation help, Brown said. The company hopes to increase that fraction to one half in the next year, he said.

One big area for growth, especially for automated tape library products, is high-end storage area networks (SANs) devoted to shuttling storage data between servers and assorted storage devices. Quantum installed 300 SANs in 2000, Brown said.

The company does a strong business with its tape backup systems--particularly because customers keep buying tapes even after they've bought the tape drive. Tape sales inject about $200 million to $250 million into Quantum's coffers each year. But the company faces competition with a new tape drive, Linear Tape Open "Ultrium" systems, backed by Hewlett-Packard, Seagate, IBM and StorageTek.

The advantage Brown is counting on is that SuperDLT drives can read the older DLT format tapes, whereas the Ultrium drives cannot.

Quantum had hoped to spin off its Snap division as a separate company, but the current economic climate discourages such a move, Brown said. Eventually, the company hopes to proceed with the plan.

 

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