Tape Industry Consolidation Part 2: Tandberg To Buy Exabyte

It is the second major move to consolidate the tape industry following the close last week of Quantum's $770 million acquisition of ADIC.

The two acquisitions come during a crucial time for the tape industry, as the growth in disk-to-disk backup and archiving, as well as the increasing use of online services for backup and archiving, threatens tape's dominance in this space.

However, said Bob Abraham, president of Freeman Reports, an Ojai, Calif.-based tape industry analyst, things are not as bad as they seem in the industry.

In his most recent report on the industry, Abraham said that tape market revenue has declined for five straight years while volume has dropped for 10 straight years, but that he expects both unit sales and revenue to grow from 2006 to 2011 as businesses continue to adopt higher-end tape for safe long-term archival and data retention requirements.

With the acquisition, Tandberg, Oslo, Norway, gets access to Exabyte's VXA tape technology, along with new tape autoloaders and small tape libraries, said Ken Cruden, executive vice president and general manager of Tandberg's U.S. subsidiary, based in San Diego. Both companies offered tape automation products using LTO tape drives.

Tandberg also gets Exabyte's OEM relationship with Apple to go with its own OEM relationship with Dell. The two companies both count IBM and Fujitsu-Siemens as OEM partners.

Tandberg also gets access to a larger channel in the U.S., as the two companies had little overlap in their channel partner base, Cruden said.

The Exabyte spokesperson said the acquisition will be good news for Exabyte's channel, as the Boulder, Colo., vendor had been struggling financially for five years while Tandberg is financially strong.

Kevin Murray, owner of Compuplus, a Costa Mesa, Calif.-based solution provider, said he hope little changes as a result of the acquisition

"I'm a premier Exabyte partner, and get the premier discount," said Murray. "I wonder how this will impact me."

Cruden said the need to consolidate in the tape industry drove his company's acquisition of Exabyte.

"We've been looking at various alternatives," he said. "It's very clear that with the consolidation in tape, businesses need to get bigger. The key issue is, companies need to get bigger to stay in the game."

The Exabyte spokesperson said all of Exabyte's rank and file employees are going to be offered a position in Tandberg at the same salary, and the top executives, including Exabyte CEO Tom Ward, will stay with the company for the near term.