Norwegian tape-automation vendor Tandberg has catapulted itself into second position behind Quantum by buying failing tape product manufacturer Exabyte for $28 million.

Exabyte said it intends to liquidate and dissolve immediately after the closing of the transaction. All Exabyte employees will be offered positions with Tandberg, and it is expected that Exabyte management will continue as well, Exabyte said.

The purchase is indicative of how the tape market is headed right now, said IDC analyst Robert Amatruda. Consolidation is rife. Sun bought StorageTek; Quantum bought ADIC.

The main consolidating factor is the over-riding dominance of the LTO format and the increasing commoditisation of LTO tape automation devices. Smaller tape manufacturers have difficulty gaining access to the market and to customers, Amatruda said. He added that Tandberg is likely looking at the deal to give it a US distribution channel. It is financing the deal with a $35 million loan.

The longer term future of Exabyte's VXA format could be in doubt. An Exabyte spokesperson said: "VXA has enjoyed both channel and OEM successes and the technology has the ability for future generations to be developed. The VXA customer base is quite satisfied with the high reliability and quality of VXA as well as its price positioning. Tandberg Data feels that through the combined company we can expand the OEM business as well as the distribution market through stronger penetration in Europe and Asia Pacific."

A Tandberg spokesperson revealed: "Tandberg Data will continue to support the technology but has not decided for how long."