Feeds

EMC offers Quantum solace

Helps it cope better with that darn ADIC debt

Choosing a cloud hosting partner with confidence

EMC has given struggling tape, disk and deduplication vendor Quantum a sorely-needed $100m financial lifeline.

Quantum will use the cash to refinance its convertible debt, which dates back to 2003. A different credit line, Quantum's senior debt, was used to finance the ADIC acquisition for almost $800m in May 2006. As of December 31, 2008, that debt was $249M, and it is due in 2014.

Quantum has been paying for it ever since, spending tens of millions of dollars a year. It needs to refinance the majority of this convertible debt by February 2010 and the current financial environment suggests it would have been burdened with an unduly high rate of interest.

Quantum formally announced that it has "commenced a tender offer for up to $142m in aggregate principal amount of its outstanding 4.375 per cent Convertible Subordinated Notes due 2010." It intends to finance the tender offer with "the net proceeds of a term loan it expects to receive from EMC Corporation, pursuant to a financing commitment for a term loan credit facility of up to $100 million." The closing of the EMC loan is subject to the execution of definitive loan documentation and customary closing conditions.

This refinancing will help with the threatened delisting of Quantum from the New York Stock Exchange, which was suggested because Quantum's stock price had fallen below the $1 minimum required. Quantum said earlier this month that the NYSE had accepted the company's proposed business plan for continued listing.

Why is EMC bothering?

Why should EMC bother giving a cash lifeline to Quantum? One reason is that it licenses Quantum's DXi deduplication technology for its own use and needs to ensure that Quantum can continue to invest in the DXi technology enhancements required by EMC. There is another possible Quantum-EMC relationship that could be influential, as EMC resells ADIC tape libraries, as El Reg referenced here.

Rick Belluzzo, Quantum's chairman and CEO, said: "[this] further reinforces the strength of the Quantum-EMC partnership and the work we've been doing together to bring the benefits of data deduplication to customers. Despite the significant improvements in operational performance Quantum has made over the past year, our capital structure has clearly been a hindrance in the current economic environment."

In other words, Quantum's tape revenues have been tumbling faster than its newer disk-based protection product revenues have been rising, and it would have had to spend money needed for DXi development both on the ADIC senior debt and convertible debt repayments. The recession has already caused layoffs and losses at Quantum.

At the end of January, Quantum announced fiscal 3rd quarter 2009 revenues of $204m and a net loss of $340 million, or $1.63 per share. It said that: "Compared to the same quarter in the previous year , Quantum's total revenue was down 19 per cent, due to the weaker economic environment, the company's strategy of continuing to shift its sales mix toward higher margin opportunities and a year-over-year decline in branded tape sales and media royalties."

However ADIC, although a financial millstone, was not a disastrous buy as it brought the DXi technology into Quantum.

Rich Napolitano, an EMC SVP, said that with this EMC loan, "Quantum will be able to focus more energy on continued innovation and working with EMC to remain front and centre in one of the storage industry's hottest trends."

It's interesting to see how important DXi deduplication and replication technology is to EMC and its partner Dell. It is using Quantum's DXi technology to develop a common dedupe product across its EMC-sourced and its in-house EqualLogic storage arrays.

The repayment or interest terms on the EMC financing have not been revealed. Both EMC and Quantum are stressing that this is not a takeover. I should think not; spending a hundred million to buy Quantum would be a steal. ®

Security for virtualized datacentres

More from The Register

next story
It's Big, it's Blue... it's simply FABLESS! IBM's chip-free future
Or why the reversal of globalisation ain't gonna 'appen
'Hmm, why CAN'T I run a water pipe through that rack of media servers?'
Leaving Las Vegas for Armenia kludging and Dubai dune bashing
Bitcasa bins $10-a-month Infinite storage offer
Firm cites 'low demand' plus 'abusers'
Facebook slurps 'paste sites' for STOLEN passwords, sprinkles on hash and salt
Zuck's ad empire DOESN'T see details in plain text. Phew!
CAGE MATCH: Microsoft, Dell open co-located bit barns in Oz
Whole new species of XaaS spawning in the antipodes
Microsoft and Dell’s cloud in a box: Instant Azure for the data centre
A less painful way to run Microsoft’s private cloud
AWS pulls desktop-as-a-service from the PC
Support for PCoIP protocol means zero clients can run cloudy desktops
prev story

Whitepapers

Why cloud backup?
Combining the latest advancements in disk-based backup with secure, integrated, cloud technologies offer organizations fast and assured recovery of their critical enterprise data.
A strategic approach to identity relationship management
ForgeRock commissioned Forrester to evaluate companies’ IAM practices and requirements when it comes to customer-facing scenarios versus employee-facing ones.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
New hybrid storage solutions
Tackling data challenges through emerging hybrid storage solutions that enable optimum database performance whilst managing costs and increasingly large data stores.