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Tape Guys Look for Answers

Tape vendors feeling the pinch of sagging sales and the encroachment of disk backup are searching for ways to reverse poor results.

Quantum Corp. (NYSE: DSS), which barely broke even last quarter and recently announced its second layoff in less than a year, this week revised its product strategy to try and better compete in the tape drive market. (See Quantum Gives Prelim Results, Quantum to Thin Ranks Again, and Quantum Outlines Tape Strategy.)

Overland Storage Inc. (Nasdaq: OVRL) this week announced an outsourcing plan that will reduce one third of its staff, and also rolled out a bigger disk backup device in hopes of growing that end of its business after total revenue came in below analyst expectations the last two quarters (see Overland to Layoff One Third).

The two companies face different challenges, so theyre pursuing different plans of attack. Quantum is battling not only disk, but is riding the trailing horse in the tape format race. Sales of its Super Digital Linear Tape (SDLT) have fallen steadily, while sales of the rival Linear Tape Open (LTO) standard backed by IBM Corp. (NYSE: IBM), Hewlett-Packard Co. (NYSE: HPQ), and Certance LLC are on the rise.

According to tape market research firm Freeman Reports, LTO tape library revenue outpaced SDLT by more than a three-to-one margin in 2003. Quantum’s answer is to cede speed to LTO, while increasing capacity of its SDLT format.

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