Quantum has paid $60 million for tape-storage company Certance. The deal is still subject to anti-trust review, but is expected to be completed by the end of the year. Certance backers will receive $34 million.
The purchase is to help Quantum deal with increasing competition from LTO. While the DLT format became pretty much an industry standard its successor, Super DLT (SDLT, but from last week now called DLT-S) has struggled to make headway against the strong demand for the rival LTO Ultrium format. LTO-1 and LTO-2 have proved very popular and LTO-3 looks set to continue that success.
Where SDLT has failed to boost earnings significantly, Quantum hopes the Certance acquisition will. Quantum sells tape libraries that support its own and the LTO formats so it can clearly see the relative strength of demand for the LTO and SDLT formats.
Certance sells storage devices for small and medium-sized businesses based on the DAT/DDS (digital audio tape/digital data storage), autoloaders and LTO (Linear tape open) tape formats. It has just released an LTO-3 drive. The acquision boosts Quantum's small business products where the DDS format reigns supreme and where Certance and HP have developed the DAT-72 format as the follow-on to DDS 4. Quantum will now be partnering HP with DAT-72.
But Certance is also part of the LTO consortium, the main competitor to Quantum, along with IBM and HP. The LTO group criticises Quantum saying that while the LTO format is open, Quantum's formats are not. Now Quantum is a de facto member of the LTO group and such criticism will no doubt cease. Also Quantum now becomes party to intimate details of LTO development plans and can contribute to them. This is perhaps taking co-opetion a little too far for LTO consortium members IBM and HP.
IBM has its own proprietary tape format line but this is sold primarily to its mainframe customers. HP does not have a proprietary tape line. It remains to be seen if the LTO consortium can survive with a member whose primary product is competing with the consortium's own primary product. In format and product type terms Quantum CEO Rick Belluzzo said "we offer the industry's broadest portfolio of tape and disk systems for backup, recovery and archive".
While disk-based backup is beginning to make in-roads into the backup market, tape remains the dominant medium. Quantum has pushed disk-based backup for its mid-range market as has Certance for its smaller enterprise customers. We could be seeing a continuing and slow consolidation of tape formats as disk-based backup technology gathers momentum. For example there might be some longer term realignment between the DAT-72 and low end DLT lines, even, possibly, between LTO and DLT-S at the high end.
Expect the Quantum focus to be on data protection rather than tape. Underneath that banner its main tape attribute is likely to be capacity as tape will always be slower than disk. Quantum's recent roadmap forecasts a 14TB (compressed) cartridge by 2011.
The acquisition will enhance Quantum's presence with small and medium sized businesses and strengthen its channel business, while bringing the company's annual revenues to over $1 billion, the company said.
Certance, which has over 1,000 employees and has been profitable for three years, was previously part of Seagate, the disk drive supplier, and known as Seagate Removable Storage Solutions until April 2003, when it adopted the Certance name. It was spun out of Seagate in 2000.
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