The two biggest tape automation companies have their heads above water and are looking to have good prospects. Others are in a more depressed state and for some the good times may never return. For Quantum and Sun StorageTek (SSTK) the good times are rolling. SSTK is seeing great take-up of its StreamLine technology and Quantum is the consolidator now digesting ADIC.
But for competitors like Overland and Exabyte the skies are dark with both companies looking like hooked fish wriggling to get away and swim into safer waters.
Exabyte has signaled its putting itself up for possible sale. It would be interesting to know if Rick Belluzzo received a call from Exabyte CEO Tom Ward before Exabyte engaged St Charles Capital. Despite this Exabyte has recently strengthened its Magnum LTO line by adding native Fibre Channel. It's business as usual in these straightened times.
Overland Storage has just announced a 'jam tomorrow hopefully' set of results, another 'jam tomorrow' set in fact. The numbers are disappointing: for the 12 months ended June 30, 2006, the company reported net revenue of $209.0 million compared with $235.7 million for the prior fiscal year; the net loss for the year was $18.3 million, or $1.33 per share, compared with net income of $4.6 million, or $0.32 per diluted share, a year earlier.
The company outsourced manufacturing during the year, then took it back in house - this is what I mean by wriggling on the hook. The outsourced manufacturing facility couldn't make enough product and sales to a large OEM partner and Asia-Pacific region customers suffered. Ouch!
On the good side a new tier one OEM customer for ARCvault is expected. CEO Christopher Calisi said: ""As we enter fiscal 2007, we believe that the majority of our R&D investment is behind us, and we are poised to return to profitability."
"We remain committed to our tiered storage strategy and are excited about each of our new products, which we believe represent compelling value propositions the market will readily accept." The tiered storage strategy is the last call; there is nowhere else to go. Overland has to be committed to it. If it fails then Overland will probably need a new chief executive.
Calisi is fighting a good fight. He's seen off ADIC. Let's hope he's read the market runes right and is taking Overland to safety and enduring profits.
There is a compelling case, a pretty compelling case, that tape automation is a mature product area. LTO rules, okay! Consolidation is well under way. The tape market has been hit hard by disk-based backup and future holographic disk archiving technologies look set to limit the tape market a little more. So too may Internet-based backup and archiving with service providers buying tape gear from the big vendors.
For companies like Tandberg, Breece Hill, Qualstar, Overland, Sony (in tape I stress) and Exabyte the old marketing cliche of 'get big, get niche, or get out' rings out loud and clear. Overland is trying to get niche - but it is unclear whether its niche is a separate market from the one sold into by HP, EMC, IBM and NetApp with protected (by snapshot technology) drive arrays.
If its niche is part of that market then Overland may be exchanging a frying pan for a fire.
Exabyte appears to be in the 'get out' school. Quantum and SSTK are in the 'get big' sector. Sony's AIT/S-AIT format niche may not be a long-term niche; the company may need a defensible market sector-based niche. There is ongoing format consolidation, well, there may be - the pace is glacial - in the entry-level/low-end tape market, the Travan - DAT area. What happens there may well dictate the futures of other tape automation players. Will a format emerge as a winner? Can LTO get cheap enough to take over the sector? Can HP popularise DAT-72 enough?
Or will disk-based backup mop up more and more tape customers here?
This tape automation market is not a pretty sight; a mature market in a time of consolidation and under attack from competing technologies. The good times are in the past and not every supplier will survive.