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Economic Conditions Stifle Storage Plans: Page 2 of 3

Workman says Finisar is open to working with Marlow on other projects. But as for acquiring it, all bets seem to be off.

In another failed deal, Quantum Corp. (NYSE: DSS) decided not to spin its Snap Appliances subsidiary off into an IPO. Instead, last week, the company declared that Snap, originally acquired with Quantum's purchase of Meridian Data last year, has become the network attached storage (NAS) division of Quantum.

Again, market conditions were blamed for the abandonment of the original scheme. "The market valuation for NAS was almost an order of magnitude higher than it is today [when the plan for IPO was made]," Quantum CEO Michael Brown told analysts in a conference call last week. Now, the overall difficulty of raising capital funding, as well as a slowdown in Quantum's own tape drive business thanks to weakened IT demand, have caused Quantum to back off from the plan indefinitely.

Even Snap, which should realize 55 percent growth in business overall this year, saw its revenues flatten sequentially this quarter.

What's the upshot? "While my sense is that the telecom sector is faring worse than IT in general, we're definitly in a downturn in the overall business cycle," says the previously quoted analyst. "Clearly, it's going to take a while for business conditions and stock prices to straighten out. Until then, everyone's going to suffer."