Quantum Buys Certance, LTO

Less than a month after revamping its product line to better compete with LTO tape, Quantum Corp. (NYSE: DSS) today bought its own LTO company.

Quantum agreed to acquire private tape rival and LTO pioneer Certance LLC for $60 million in cash, picking up LTO and other technology it lacked.

LTO has emerged as a more lucrative format than the SDLT format that Quantum sells. According to tape market research firm Freeman Reports, LTO tape-library revenue outpaced SDLT by more than a three-to-one margin in 2003 (see Tape Guys Look for Answers and Quantum Outlines Tape Strategy).

Certance is part of an LTO consortium with Hewlett-Packard Co. (NYSE: HPQ) and IBM Corp. (NYSE: IBM). Although it was far behind the other two in revenue, Certance became the first of the three to make the third-generation LTO drive available early this month (see Certance Ships LTO-3 Drives).

Besides LTO, Certance also gives Quantum lower-end tape formats Travan and DDS/DAT. Quantum has traditionally been stronger in the midrange. Quantum CEO Rick Belluzzo says he hopes the deal will close in around six weeks.This gives us LTO as well as some lower range products,” Belluzzo says. “We embrace the products they have.”

Belluzzo says Certance was profitable for the last three years, and had $226 million in revenue in the fisal year that ended in July. Quantum announced its earnings today, reporting $180 million in revenue -- down 8 percent from a year ago.

Quantum last month announced a product roadmap for its SDLT tape, aimed at cutting into LTO’s market share by ceding speed while emphasizing larger capacity drives.

“Much of the world has been turning to LTO, and now they [Quantum] have LTO,” says Freeman Reports analyst Bob Abraham.

Belluzzo says integration details are still being worked out, such as whether Certance will run as a division of Quantum, how many of its employees will join Quantum, and how Certance’s products will be branded.Belluzzo also stressed that Quantum will continue selling SDLT along with the LTO format.

“We think we have a complimentary offering of SDLT and LTO," Belluzzo says. "We think we can have success with both formats.”

— Dave Raffo, Senior Editor, Byte and Switch