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Quantum: Page 2 of 3

"We're going to leverage our strong cash generation from tape, and invest in storage solutions businesses," said Daly, in a company presentation at a recent Wells Fargo Van Kasper conference in San Francisco.

Right now, Quantum has a healthy war chest. For its first fiscal quarter of 2002, which ended on July 31, Quantum recorded $279 million in revenue, giving it earnings per share of 11 cents, a figure in line with previously reduced estimates. Quantum closed the quarter with $370 million in cash and has already used $11 million of that to snap up NAS appliance vendor Connex Inc. (see Quantum Buys NAS Startup).

According to Daly, the Connex acquisition brings Quantum "significant value in terms of intellectual property," specifically in its engineers and its Linux-based systems. He says Quantum will lean more toward using Linux going forward, as the OS makes it easier to add functionality to NAS devices. Currently, the company's Snap servers use a proprietary operating system.

"Using Linux will let us bring new features to the table much more quickly than we could with a proprietary, highly tuned OS," Daly says. To better compete with NAS heavyweights like Network Appliance Inc. (Nasdaq: NTAP), Quantum needs to add capabilities, like mirroring, into its NAS devices. This is crucial, Daly believes, since users are looking to use NAS devices for purposes "beyond just backup."

Daly says that Quantum is also trying to "put teams together" to build up its nascent SAN-services business. While he claims that Quantum has already installed SAN implementations for big-name customers like Intel Corp. (Nasdaq: INTC), Motorola Inc. (NYSE: MOT) and Nortel Networks Corp. (NYSE/Toronto: NT), he says the company is just at the beginning of the consulting curve.