Quantum Buys NAS Startup

Quantum Corp. (NYSE:DSS) stepped up its efforts in the NAS market today, announcing itsintention to acquire ConnexInc., a subsidiary of Western Digital Corp,(Nasdaq: WDC), for $11 million in cash (see Quantum Acquires Connex).

Under the terms of the agreement, Quantum gets Connexs NAS product line,23 employees (the majority of whom are engineers), and other intellectualproperty assets -- including several patents. The employees will joinQuantum’s Snap Appliances NAS unit, based in San Jose, Calif.

Traditionally, Quantum has been a provider of the nuts and bolts ofstorage systems -- most of its revenue comes from selling DLT tapecomponents and table libraries. But more recently it has been making movesinto the NAS market.

Its ultra-low-end NAS box, the Snap Server, sells for $499; Quantum saysits sold more than 70,000 in less than two years. "We didn't expect this product lineto be such a big growth generator," says Sara Spivey, VP of marketing forQuantum’s Snap business. This makes Quantum the largest supplier of NASdevices, according to market data supplied by the company. Still, in termsof revenue it’s a long way from the likes of EMC Corp. (NYSE: EMC) and Network Appliance Inc. (Nasdaq: NTAP),which sell fewer units -- but charge upwards of $100,000 apiece.

That's where the Connex acquisition comes in. The startup has beenworking on a high-end system aimed at the data center.

”We hope this acquisition will move us a step closer to Network Applianceand EMC,” Spivey told Byte and Switch.The new product isn’t expected to ship for at least six months, however.While the company wouldn't release any more information on the product atthis stage, the device is expected to offer NAS-level virtualization andiSCSI connectivity in keeping with the trends set by other startups in thisspace, such as FalconStor Software Inc. and Panasas Inc.

The acquisition reflects Quantum's strategy to broaden its storageportfolio. “Manageability is becoming a key issue in storage networking, sowe’re investigating storage management software,”says Spivey. "And professional servicesalso becomes a consideration as we evolve into a complete storage provider."

Interestingly, the deal does not cover SANavigator Inc., a wholly ownedsubsidiary of Connex that provides storage resource management software."Other companies are also rumored to be interested in SANavigator," saysSpivey. But she was unable to provide any more details on this.

"This acquisition positions Quantum to enhance the company's NASdevelopment efforts with an expanded focus on software capabilities and todeliver a broader range of product offerings," says Brad Nisbet, seniorresearch analyst for IDC. "With the NAS market estimated to grow from 6 percent ofthe overall disk storage systems market to almost 28 percent in 2004, storagesolutions providers such as Quantum must continue to add functionalitythrough software in order to stay competitive in the NAS market."

The acquisition is expected to close by mid-August, subject to the usualclosing conditions. Quantum expects the transaction to be nominallydilutive in fiscal year 2002, ending March 31, 2002.— Jo Maitland, Senior Editor, Byte and Switch http://www.byteandswitch.com

Movers and shakers from more than 100 companies – including Quantum, EMC, Network Appliance, and Falconstor – will be speaking at StorageNet, Byte and Switch’s annual conference, being held in New York City, October 2-5, 2001. Check it out at StorageNet2001