Asset raider busts in, demands seat at Quantum table
Cash in/cash out types clearly don't know the tape vendor
As if tape storage vendor Quantum doesn't have enough to worry about with its plummeting stock price, it's now facing an assault by Starboard Value, an asset raider, which says it has 16 per cent of the shares and wants board representation.
Starboard Value "invests in deeply undervalued small cap companies and actively engages with management teams and boards of directors to identify and execute on opportunities to unlock value for the benefit of all shareholders."
Quantum shares rose 12.4 per cent overnight to $1.18 on the news. The 15.9 per cent holding might represent the biggest individual stockholder investment in Quantum. If that's the case then board representation ought to be almost guaranteed.
Activist investor might be a polite term for what is in effect, taking a stake in distressed companies and giving them shock treatment to get some money out of the sick puppy for its shareholders, and itself of course. Starboard Value recently became the largest shareholder in Office Depot and is prodding its management to improve that company's performance.
Starboard Value has not said how it intends to proceed regarding Quantum other than wanting a seat at the board table.
Quantum has suffered a huge drop in share prices, 63 per cent in nine months, as its management struggles to replace falling tape-related revenues with income from new products providing virtual machine backup, file management across disk, tapes and object storage and its DXi data deduplication backup products.
The StorNext data management is a niche product. Deduplication appliance sales are dominated by EMC's Data Domain unit. Other suppliers fight for the scraps. Quantum has no obvious high-growth product and the likely end-game for Starboard Value is an asset sale of the bits or the whole - break-up or outright sale - rather than increasing Quantum's operational cost-efficiency. This is the opinion of El Reg's storage desk.
A note in thedeal.com said: "Quantum management had been trying to sell itself in early 2009, but reversed course the following year, saying it would be in the market to make strategic acquisitions. It acquired data protection company Pancetera Software Inc in 2011 for $12 million."
Interestingly, Quantum's market capitalisation of $283.8m is less than its fiscal 2012 revenue of $652.4m. Look at it this way: you could buy a $652m annual cash flow for $284m, a ridiculous state of affairs.
We asked Quantum for a statement but it was'nt immediately able to make one.
What's next? Quantum could adopt some sort of poison pill to block any takeover. Or it could play nice and ask Starboard Value to help it. But, think on this: it's not that Quantum's management doesn't know how it could help increase profitability at a stroke. It could cut off loss-making businesses for a start. It just doesn't want to do that because it has long-term aims for the business and its constituents. It will naturally see Starboard Value as a short-term investor with different aims; get in, get cash, get out.
So yes, it could play nice, and, hey, pigs could fly. ®