Storage Maker Quantum Acquires Library Specialist ADIC

Quantum, a long-time storage maker that used to do a pretty hefty disk drive business but which in recent years has specialized in tape drives and libraries, disk-based backup, and removable disk drives, said last week that it would buy rival Advanced Digital Information Corporation (ADIC) for a cool $770 million in stock and cash.

The combination of the two companies, which will bear the Quantum name, will create one of the largest non-captive storage companies in the world, and one of the largest specialists in tape and disk backup technologies. Quantum rakes in about $750 million a year, compared to ADIC’s $365 million, yielding a merged company with about $1.2 billion in annual sales. Quantum says that the deal will start adding to its bottom line immediately, and over time about $45 million in costs can be eliminated from the two firms after the merger. Quantum had already bought Certance, a provider of LTO tape drives and libraries, for $60 million in October 2004; Quantum itself was a specialist in SDLT tape technology. ADIC has some SAN appliances, but is best known for its tape libraries.

ADIC is growing revenues, while Quantum has been in a slight decline lately, and it seems clear that Quantum needs ADIC a little bit more than the other way around. In its fiscal fourth quarter ended on April 31, Quantum reported sales of $206 million, down 14 percent, but sales were up 5 percent for the year to $834 million. The company reported a loss of $23 million, but that loss included $18.6 million in settlement costs for a patent infringement lawsuit that it settled with the StorageTek unit of Sun Microsystems. If Sun had not bought STK, this suit might have dragged on quite a while longer, but Sun is a big Quantum reseller and partner, and the STK acquisition by Sun meant Quantum could not afford to stand its ground in the case. ADIC reports its financial results next week, and has said it expects sales in the range of $115 million to $117 million.

Quantum has not said what it will do in terms of merging the product lines, but there is only a little overlap in disk-based backup and tape libraries. So not much will change, except the labels.