Quantum Completes Acquisition of ADIC for $770 Million

The annexation of Quantum's former diehard storage industry competitor only took three-and-a-half months; the result is an $850 million combined company.

Data storage disk and tape drive maker Quantum announced Aug. 22 that it had completed the acquisition of a former diehard competitor, Advanced Digital Information Corp., for approximately $770 million in cash and stock.

ADIC, based in Redmond, Wash., claims to be the worlds largest supplier of automated tape systems using client-server drives.

Quantum, based in San Jose, Calif., acquired ADIC and its outstanding shares under the terms of the agreement announced May 2, 2006, and following approval of the transaction by ADIC shareholders on Aug. 18. The $357 million companys stock price closed at $2.15 Aug. 22.

ADICs market value is about $493 million; its stock closed at $12.24 Aug. 22.

If the two companies reported combined revenues over the last four quarters, the total would exceed $1.2 billion—$814 million of that from Quantum, the spokesperson said.

Quantum is funding the transaction through a combination of cash on hand and approximately $500 million in financing from a group of banks and other lending institutions, a company spokesperson said.

/zimages/6/28571.gifQuantum boosts backup and cuts prices for small and midsize businesses. Click here to read more.

Quantum expects the transaction to earn up to 15 cents per share accretively, with the accretion beginning to appear in its financial results in the March quarter of next year.

"We are bringing together two long-standing leaders in backup, recovery and archive to create the largest independent company in this market, with more than 50 years of experience in meeting customer needs," said Rick Belluzzo, chairman and CEO of Quantum.

"By combining our complementary strengths and intelligently integrating our broad range of assets, we are well positioned to provide even greater value to customers, expand our branded channel and OEM base and pursue new opportunities for growth. We will have more to say about this over the next 30-45 days, as we begin integrating the two companies."

With the acquisition of ADIC, Quantum will add substantially to its portfolio of platform-independent systems, software, devices and media. Both companies have been pioneers in developing disk-based virtual tape libraries for open-systems environments and in building remote monitoring and intelligent diagnostic capabilities in tape automation systems.

"The data protection market is evolving rapidly, as IT professionals enhance their tape-based data protection strategies with disk-based backup and archive solutions and new software functionality," said John McArthur, group vice president and general manager of IDCs Information Infrastructure and Enabling Technologies Group.

"Quantums acquisition of ADIC positions the company as a more critical player in this expanding data protection market. The combined company will have the scale and capability to offer not only tape solutions but also a strong set of disk-based solutions, an expanded software portfolio and a broader range of services."

Like all of Quantums previous acquisitions, this one makes sense, said analyst Dianne McAdam of The Clipper Group, in Wellesley, Mass.

"ADIC has been stronger in the large enterprise market, while Quantum has had a large presence in the mid-tier market. ADIC has a much larger direct sales force; Quantum is accustomed to selling large volumes through channels," McAdam said.

"Both companies have developed innovative, though different, hardware and software products. We expect that the merger of their research and development teams will allow products to be developed and brought to market faster; and that is good news for Quantum/ADIC in this competitive market," McAdam said.

A Quantum spokesperson said Quantum will continue to sell and support all current ADIC products, sell all products through the companies respective partners and distribution channels, and maintain existing service contracts and product warranties.

Quantum also said it would finalize its sales, marketing and service organization by the week of Aug. 28.

Quantum now will have nearly 1,000 sales, marketing and service employees located around the world, the spokesperson said.

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Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor-in-Chief of eWEEK and responsible for all the publication's coverage. In his 13 years and more than 4,000 articles at eWEEK, he has distinguished himself in reporting...