Storage tape drive specialist Quantum
Corp. late Thursday made an aggressive strategic
purchase when it moved to acquire privately-held rival Benchmark Storage
Innovations for about $55 million.
That price is based on transaction terms which hold that Milpitas, Calif.’s Quantum will exchange 13.1 million shares of Quantum stock and $11 million in cash. Quantum had already owned a 20 percent stake in
Benchmark, which specializes in selling the DLTtape drives that Quantum
created. DLTtape is a widely adopted tape platform and the de facto standard for
mid-range tape backup. Tape drives
devices like tape recorders that read data from and writes it onto a tape.
Companies buy tape drives for backing up the massive amounts of data they
create, and most of Quantum’s customers are medium- to large-sized
companies. Quantum competes with IBM, StorageTek and Seagate. This deal will
essentially see that Benchmark is folded completely under Quantum’s wing.
Interestingly, Quantum, helmed by
ex-Microsoft executive Rick Belluzo, also said it will outsource its current
tape drive manufacturing to Jabil Circuit.
Quantum feels these plays will only bolster its DLTtape Group business by
expanding its revenue and customer base through a broader product portfolio
and by improving the efficiency of its manufacturing model. Customers,
Quantum said, will also benefit from working with a single supplier with an
installed base of roughly two million drives with over 80 million cartridges
sold. Quantum will also place greater emphasis on its so-called “super
drive” — the SDLT 320 — which it claims provides 60 percent greater
capacity, higher performance and lower cost-per-gigabyte than rivals’
devices.
Benchmark has shipped more than 200,000 tape drives to systems OEMs and
library partners and has generated revenues of approximately $80 million
over the last year. Perhaps most impressive, it has achieved profitability
in the current environment of lower IT spending.
The deal met with the approval of tape drive analysts.
“I am confident that the quality found in Benchmark’s family of value-line
DLTtape-based drives and media will enhance Quantum’s high-performance tape
drive solutions while providing customers with the industry’s most reliable,
dependable products for safeguarding ever-increasing volumes of
business-critical data,” said Dennis Waid, president Peripheral Research.
Quantum, which expects the deal to close in its fourth quarter of 2002, will
continue to manufacture Benchmark products through Benchmark’s current
outsourcing partners, Mitsumi Electric and Beyonics Technology.
A Tale of Two Tape Drive Businesses
