Exabyte Excited About LTO-2

Exabyte Corp. (Nasdaq: EXBT) has entered a key tape-backup market late, but at least one analyst thinks its tardiness won't mess with success.

Exabyte yesterday announced the Magnum 1x7 LTO Autoloader, a small, rackmountable automated tape-backup system based on LTO-2 technology (see Exabyte Offers LTO Tape Autoloader). Exabyte claims the new gear is cheaper than competing products, and it touts its previously released automation features, which have reappeared in this box (see Exabyte Expands LTO Automation).

Don't glaze over: LTO-2 is said to be the leading technology for drives and cartridges used in enterprise tape libraries, outstripping competing techniques like Super DLT (SDLT) and the AIT format from Sony Corp. (NYSE: SNE). If Exabyte can stake its claim to a piece of this market, it could make a difference in the company's ailing financials (see Exabyte Loses Money).

"While they're a bit late to the party, they have a very good price point... and the product leverages their own automation technology," says Bob Abraham, principal at market research firm Freeman Reports. "LTO-2 is at its peak right now. While Exabyte missed the front end of the curve, it's still got a long way to go."

Freeman estimates that LTO-2 products will account for more than 40 percent of the $2 billion spent worldwide on so-called compact tape drives this year. In contrast, DLT and SDLT drives will be 27 percent, and AIT drives less than 1 percent. And the firm predicts LTO will be at least 40 percent of the market through 2009.Exabyte's entering a crowded field. A slew of players already have LTO-2 backup systems, including Certance LLC (now merging with Quantum Corp. (NYSE: DSS)) and Hewlett-Packard Co. (NYSE: HPQ) -- both of which not only make LTO-2 drives but offer their own autoloader products as well. (See Quantum Buys Certance, LTO.)

Notably, HP and IBM Corp. (NYSE: IBM) had predominant market shares of LTO-drive revenues for 2003, while Certance glommed the remainder, according to Freeman. Vendors like Exabyte, Overland Storage Inc. (Nasdaq: OVRL), and Quantum who OEM these drives stand to share in a growing market.

Figure 1:

Exabyte is aiming to undercut its rivals on price. It's charging $5,000 for 1.4-Tbyte system with one drive from IBM and seven tape cartridges. Comparable systems advertised online from HP and Certance sell for at least $1,000 more. Exabyte CEO Tom Ward says new pricing only makes sense, given how tape libraries are being used these days.

"Finally, over 50 percent of all servers are in rackmount, not tower, configurations.... Also, 90 percent of all servers cost less than $7,200," Ward says.Even if Exabyte can compete on price, it still has its challenges. The company's claims for capacity and performance are neck-in-neck with vendors like Certance, who've been on the ground with LTO-2 for months and support more software packages with their tape-drive systems. Presently, Exabyte's new autoloader's only been certified for use with BakBone Software Inc. (Toronto: BKB).

What's more, Exabyte doesn't yet have the next-generation LTO-3 technology, although Certance does. HP and others are set to have it later this year or early next.

There's something else: Industry pundits continually bash tape technology as increasingly passe in the world of disk backup. To this, Exabyte's Ward is defiant. "Tape is always needed for archiving... volumes are up. They've been saying tape is dead for 40 years now."

Asked if the new gear will help Exabyte's financials, he's just as succinct: "Absolutely, it will help."

Mary Jander, Site Editor, Byte and Switch0