Quantum to expand in storage
systems
BY MIGUEL HELFT
Mercury News Staff Writer
Disk drive maker Quantum Corp. said it will announce today a major
expansion into storage systems that help manage data along computer
networks, as it seeks to tap into the growing demand for large
repositories of digital information.
To boost its market value, the Milpitas-based company also said it
will become the first in Silicon Valley to implement a ''tracking
stock.'' The financial scheme would let investors evaluate and buy
shares in each of the company's two lines of business: disk-drives and
storage systems.
Two units
The systems unit will build upon Quantum's storage tape business to
create devices that can store information in clusters of both disks and
tapes. It will cater to large businesses that manipulate massive
amounts of information, said Michael Brown, Quantum's chairman
and chief executive.
The unit will also enter into a new market: simple-to-use storage
appliances that provide low-cost storage and can easily be connected
into a network. Finally, the unit will create software that makes it
easier to access, back up and recover information along networks of
storage devices.
Brown said financial markets value the disk-drive business and the
storage systems business differently. ''The tracking stock will allow
that,'' Brown said. But unlike situations where a company spins off a
unit, Quantum will continue to operate as one entity, with a single
management team and board of directors.
Although Quantum would be the first Silicon Valley company with a
tracking stock, the financial scheme is currently used by several large
companies, including General Motors Corp.
Brown said the diversification of Quantum's business is a response to
a growing demand for storage driven by the expansion of digital data.
This data explosion is driven in part by the Internet.
Jump-start for Quantum
Analysts said the move appeared to be an effort to reinvigorate the
company.
''They need to restart their momentum,'' said Jim Porter, president of
Disk/Trends Inc., a Mountain View-based market researcher that
tracks the storage industry. Porter said Quantum has lost market
share to rivals and has seen its shipments of disk-drives -- which
represent the bulk of the company's revenues -- shrink in 1998.
Porter said storage system companies are viewed much more
favorably by investors than disk-drive makers, whose products have
become commodities. For instance, Hopkinton, Mass.-based EMC
Corp., which dominates the high-end of the storage systems business,
had 1998 revenues of $3.9 billion, a price-to-earnings ratio of 51.9
and a market value of $51.4 billion. By contrast, Quantum's, with
1998 sales of $5.8 billion, had a price-to-earnings ratio of 21.7, and a
market value of a mere $2.7 billion. |
