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Vanishing OEM robs Quantum of black ink

'There's a bunch of people who need to improve'

Internet Security Threat Report 2014

Why Dxi sales fell short

Gacek bluntly explained the reasons why DXi sales lagged: "We had plenty of opportunities to meet and exceed our DXi revenue plan. We just didn't get the deals closed by quarter end. We still are not getting uniform and consistent results from our team or our channel partners."

There was a DXi6000 product-positioning issue as well: "I believe the introduction of DXi 2.0 software on the 6500 while the 6700 remained on a previous generation software for several months, made it more complicated for our channel partners and our own sales team to drive the intended level of sales velocity. With today's announcement of our new DXi6701 and 02 appliances, which includes the DXi 2.0 software, this is obviously no longer an issue."

A compounding issue was increased competition: "We saw a much more aggressive competition in Q1 and our [overall] win rate was reduced to approximately 45 per cent [from 55 per cent]. However, with today's launch of the DXi6701 and 02, we believe we have a disruptive solution that will get us into significantly more opportunities, enable us to increase our win rate and overall revenue."

StorNext stumbled

Gacek also fingered StorNext sales: "The other main driver of the revenue shortfall was StorNext. Q1 was the first time in five quarters where we didn't grow StorNext either sequentially or on a year-over-year basis. While this fact has our attention, we do not think this is a start of a trend that will continue."

"There's a bunch of people who are doing very well and there's a bunch of people who need to improve."

"Most of the shortfall was in sales and into installed base as we still added a significant number of new customers. Q1 also did not include any revenue contribution from our new StorNext partnerships or the new StorNext appliance products."

Tape was a bright spot: "We also continued the trend of new customer acquisition, adding approximately 120 new mid-range Enterprise tape customers. We believe tape is far from dead." Indeed, and there is the recent OEM deal with HP for Quantum's Scalar i6000 library that encourages this view.

Coach Gacek says the team will pull back

Gacek drilled down deeper in answer to a question on the call: "I think the first issue ... is uniformity of execution... We have some channel partners and we have some salespeople who absolutely are doing great. And we have channel partners whose business have grown 400 per cent, 500 per cent year-over-year. We have salespeople who are way over their quota. So the number 1 issue that I would say, is we don't have uniform performance yet."

He said there were a number of factors that had contributed to this, including stronger competition in some accounts, some inadequately trained partners and salespeople that "lacking opportunities".

Gacek summed it up like this: "There's a whole bunch of tactical things... And it isn't just any one thing. There's a bunch of people who are doing very well and there's a bunch of people who need to improve, and we're trying to drive execution across all of that. I'll say this is a growth business and we're going to grow, but we have to start playing better to grow."

Gacek is determined to make up the missing revenue: "Q1 put us $6.5 million behind for the year, but we intend to make it up and achieve our growth objectives for fiscal 2012... Q1 put us behind, but we are driving to make it up for the year. We are not stepping back internally from our annual goals."

He added this: "As everybody knows on the call, this is a growth year for us. We expect everything to grow, but we expect the bulk of the growth to be driven by DXi and then StorNext. So to answer your question, yes, we think we're going to grow this quarter."

Ted Stinson has a job to do. ®

Internet Security Threat Report 2014

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