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If you can't compete with LTO, buy it. That's what Quantum Corp. did yesterday when it announced it has agreed to acquire LTO tape company Certance for $60 million in cash. With the acquisition, Quantum will plug a hole in its portfolio with the fastest growing tape technology on the market.
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By purchasing Certance, Quantum adds the coveted LTO Ultrium tape technology -- along with lower-end tape formats DDS/DAT and Travan -- to its existing DLT tape drives. Additionally, the acquisition will give Quantum a DAT-72 autoloader and a disk-to-disk-to-tape (D2D2T) appliance for small and medium-sized businesses (SMBs), both of which Certance released over the past year.
Rick Belluzzo, chairman and CEO of Quantum, said the two companies are now combined as a $1 billion company and will build on each other's strengths. "We will offer the industry's broadest portfolio of tape and disk systems for backup, recovery and archive," he said.
Randy Kerns, senior partner, The Evaluator Group, Greenwood Village, Colo. points to the addition of LTO technology as the real boon for Quantum. "This is really a big deal," said Kerns. "It allows Quantum to diversity its tape portfolio and get into the fast-growing LTO market. This will make Quantum a much stronger company."
LTO tape library revenue outpaced SDLT by more than a 3-to-1 margin in 2003 according to Bob Abraham, president of Ojai, Calif.-based analyst firm Freeman Reports. He predicted that users and OEMs will benefit from the merging of the two companies. "This is a superb move because the two companies have historically been strongest in different parts of the market -- Certance in the entry-level and Quantum in the midrange," said Abraham. "This combination will benefit users and address the desire of OEMs and tape automation providers to streamline supply chain management."
Quantum's acquisition of Certance is one of a few actions the company has made in the past year. Last fall it introduced three products: the SDLT 600 tape drive, PX720 tape library and DX100 disk-based backup system.
Under the terms of the agreement Quantum will acquire all of Certance for $60 million in cash and integrate the company into Quantum. This purchase price excludes the distribution to the sellers of up to $34 million cash from Certance's balance sheet. The acquisition is expected to close within the fourth calendar quarter of 2004.