StorageTek CEO Eyes Exit

The countdown is on for the end of Pat Martins tenure at Storage Technology Corp. (StorageTek) (NYSE: STK).

Martin confirmed during StorageTek’s earnings conference call Monday night that he doesn’t expect to continue as CEO when his contract expires in 14 months (see StorageTek Revenue Drops).

“I serve at the pleasure of the board of directors and shareholders, and right now there’s been no discussions about that going on,” Martin said. “However, rest assured, there will be management continuity. The board is actively involved, and I’m involved with them in looking at succession.”

StorageTek filed an SEC document last month saying the board approved a transition agreement to provide for an “orderly succession for the Chief Executive Officer and maintain the executive team during that transition.” The day of the filing, a StorageTek spokesman claimed it was a standard filing for when a CEO’s contract is winding down and denied that it meant that Martin is leaving. Martin’s contract expires June 30, 2006.

Martin, 64, became StorageTek’s CEO in July 2000 after spending 23 years at Xerox Corp. (NYSE: XRX). Analysts asked Martin if his lame duck status would affect whether StorageTek will make any acquisitions with the more than $1 billion in cash the company has.“There’s nothing in our thought process right now that my year and a half or year and a few months I have left would be a barrier to anything we’re thinking about doing,” Martin said. “My tenure will have nothing to do with the strategy we have as a company, whether it be organic or inorganic growth. Obviously we can’t speak about anything more specific than that.”

StorageTek CFO Bobby Kocol said the company would aggressively consider acquisitions to bolster its product line despite the pending change in leadership. With the tape library market suffering, StorageTek has been pushing more into other areas such as services and disk sales (see StorageTek Swears by Services and Tape Vendors Grab Disk).

“We’re continuing to look at what’s out there that might be able to fill some of the gaps we have,” he said. “So we continue to look at hardware, software, any of the gaps that we might have."

At least one financial analyst thinks there is a good chance StorageTek could end up on either end of an acquisition over the next year. He points to its installed base, product line, and brand recognition as having value to a larger systems company.

“This is an important transition year for StorageTek on many fronts,” Dan Renouard of Robert W. Baird & Co. Inc. wrote in a note to clients today. “StorageTek must start succession planning as Pat Martin’s contract expires mid-2006. With a solid balance sheet and slow growing core business, it is obvious StorageTek will consider using some of the cash for acquiring. On the other hand, we suspect it is possible that the company might also be an acquisition target."— Dave Raffo, Senior Editor, Byte and Switch