With the acquisition of another tape drive vendor and the shedding of much of its manufacturing capacity to a contract manufacturer, Quantum is tackling a massive restructuring of its DLTtape business.
Officials of the company, based here, said Thursday that Quantum will acquire the 80 percent of Benchmark Storage Innovations it does not currently own, for $11 million in cash, about 13.1 million shares of Quantum stock, and up to 1.9 million additional shares of Quantum stock based on performance in the first year after the deal closes.
Total value of the deal is estimated to be about $55 million to $56 million, said Andy Grolnick, vice president of marketing for Quantum's DLTtape Group.
Benchmark currently produces entry-level 80-Gbyte and 160-Gbyte DLTtape drives under the ValuSmart Tape brand name, as well as media and tape autoloaders. OEMs of Benchmark include ADIC, Dell, Hewlett-Packard, IBM, Overland Storage, and Tandberg Data.
Benchmark had revenue of about $80 million over the past 12 months, and was a profitable company, Quantum officials said.
The acquisition of Benchmark closes a circle in the relationship between it and Quantum, Grolnick said. Benchmark was formed about four years ago, at a time Quantum wanted to focus on its high-end DLTtape and SuperDLT business. Quantum acquired a 20 percent share in Benchmark and licensed DLT technology to it, letting it focus on the value side of the tape business, he said.
Plans call for Quantum to integrate Benchmark into the Quantum organization, meaning Benchmark will no longer exist as a separate company, said Grolnick. Quantum is expected to unveil a combined product roadmap and discuss the impact of the acquisition on employees in about a month, he said.
For OEMs and solution providers, the result of the acquisition will be more efficient shipping and a lower cost of doing business in the tape drive and related market, Grolnick said. "Because the product lines are so complementary, and address different market spaces, both Quantum and Benchmark felt it is better to go to market as a unified company," he said.
In the second part of the restructuring, Quantum will outsource its current tape drive manufacturing to Jabil Circuit, one of the world's largest contract manufacturers.
Grolnick said Quantum will sell to Jabil its production equipment and inventory in Penang, Malaysia. Quantum will also lease its facilities there to Jabil, said Grolnick. Jabil is expected to hire about two-thirds of Quantum's Penang-based work force, he said.
"We are trying to improve our overall efficiency," he said. "This is critical in this environment. It continues to be competitive, and we don't expect this to change."