Brown Bets on Diverse Offerings

Michael Brown is Chairman and CEO of Quantum Corp., a $1 billion maker of storage systems in Milpitas, Calif. Once riding the wave of near-limitless demand for more storage, Quantum, like others, has slipped in recent months and last week was forced to lower its revenue and earnings expectations for the quarter ended June 30. The company said it expects a pro forma loss of 9 to 13 cents per share and a Generally Accepted Accounting Practices loss of 60 to 80 cents per share. In its 22-year history, Quantum has evolved from a disk drive vendor to a purveyor of tape storage to a supplier of NAS (network-attached storage) systems. An 18-year veteran of Quantum, Brown was interviewed last week at eWeeks editorial offices by Executive Editor Stan Gibson and Senior Writer Evan Koblentz.

eWeek: What were the reasons for lowering your earnings expectations last week?

Brown: One of our OEMs was forecasting a new product ramp-up, and business was slower than they expected. The products were among the SuperLoader, midrange modular library and P-Series lines.

eWeek: Which OEM was it?

Brown: Weve agreed to protect confidentiality there. All the major server vendors, including IBM, Dell [Computer Corp.], [Hewlett-Packard Co.] and Sun [Microsystems Inc.] are our OEMs, however.

eWeek: How will Quantum return to profitability and how soon? And when will the industry as a whole turn around?

Brown: Were going to rely on the new products we recently introduced, the most aggressive product launch in the companys history. However, we dont believe were going to be helped by an IT spending recovery this year. So that may take us to 2003 until there is an IT spending recovery; thats probably the soonest it will happen. There was a great deal of storage capacity added during the dot-com buildup. Now people are trying to use that storage. Once they utilize that storage, more will need to be added, and that may happen in 2003.

eWeek: What is Quantums strategy in network storage for the next decade?

Brown: Well be delivering products and services that help customers make the transition from direct-attached storage to network storage. Network storage is NAS; its SAN [storage area network] and architectures that combine the two. And from there, moving toward the Holy Grail, which is storage as one big pool—about storage as a utility. To get there, youve got to get past all the incompatibility issues of different architectures and physical topologies, so the user can see what they have transparently. The user also needs to be able to expand their network storage and manage it at low cost. Were participating in data protection, tape drives, tape automation and NAS. Well work with other players and other standards to make sure that were connecting.

eWeek: How do you view the move to storage over IP?

Brown: Its going to be a big deal, but it will take a while for customers to adapt. The glass house will be the first to move to it. In two to three years, it will have a big impact on the business.

eWeek: You mentioned storage as a utility. Will that happen when NAS and SAN merge?

Brown: Thats one way of describing it—seamless access to storage. Its not necessarily a utility in the sense of being provided by a service provider. But as technology evolves, you will have increasing access to your data as a pool of information.

eWeek: Youre a prominent player at the low end of NAS. How will you move to the high end?

Brown: We started out at the low end with our acquisition of Meridian Data Inc. in 1999, offering products at $1,000 and under. We have expanded with $5,000 rack-mount NAS products. Now, with the Guardian 14000, were up to a $25,000 price point. Were also looking for new opportunities, like disk-based backup—the X-30. Meanwhile, at the high end, weve moved in the other direction by expanding our SuperLoader and the modular library series to get at the midrange and the low end.

eWeek: Given the advances in disk technology, how long does tape have to live?

Brown: While disk is a bigger industry, tape is continuing to make advances. We just introduced this quarter the Super DLT [digital linear tape] 320, with 50 percent more capacity than any other tape drive in the marketplace. The key to tape is that its removable. No virus can get at it when its removed and being stored. And its more cost-effective by a factor of 5 compared to disk.

eWeek: How fast is the services part of your business growing, and what are your plans for it?

Brown: Services is a $70 million business for us, and its growing 28 percent year over year. Our services and our media revenue grew this last year. Other parts of our business declined. Faster-growing parts of the services business are installations of SANs, including our equipment, other vendors equipment and software. People will come to us and ask us to put together a SAN that works. Not only do the Fibre Channel switch and tape library need to be installed, but the throughput needs to be optimized. Were also offering managed backup and archiving on the customer premises. Intel [Corp.] is a user of our SiteCare service, where we manage their tape libraries on-site around the world.

eWeek: What happened to the storage service providers?

Brown: They had a business model that assumed that bandwidth is free. And bandwidth is not free yet. Also, companies were not willing to part with their data to third parties and, in some cases, to third parties with questions as to how long they would be around.