Making good on its
promise to seek a buyer, Exabyte has
revealed that Tandberg Data ASA has agreed to purchase its
assets, including staff and intellectual property, for $28
million.
Tandberg, which is based in Oslo, Norway, and is the owner of
Delaware-based IBM tape supplier Tandberg Data Corp., is also
assuming "certain liabilities", that is debt, for Exabyte.
According to Tandberg, $22.5 million of the purchase price will go
to pay off an outstanding Wells Fargo loan and money owed to some
of Exabyte's original equipment manufacturers (OEM), including
Imation, Hitachi and Solectron.
"Following the closing of the acquisition, the company will
retain certain liabilities owed to creditors; however, Exabyte is
not expected to have any significant assets remaining for the
payment of these obligations," Tandberg said in a release. "In
addition, subsequent to closing there will be no assets available
for distribution to [stakeholders]."
It's an unfortunate ending to what was once a dominant player in
the midrange and low-end tape market, but it was not unexpected,
said Arun Taneja, founder of the Taneja Group, a consulting
firm.
Overall, according to Taneja, the acquisition by Tandberg is the
best that the remaining users of Exabyte products -which are
estimated to number in the tens of thousands worldwide -could
expect under the circumstances.
"Users should be happy that they're getting support from a company
with more assets," he said. "The worst case scenario is that the
company completely goes under and users are left totally holding
the bag."
Exabyte was an early pioneer in the tape market and introduced
the first high-performance 8 mm helical scan drive in 1987.
Following the introduction of its MammothTape helical scan drive in
1996, Exabyte was popular as
direct attached storage (DAS) and tape
drives on PC servers were on the rise.
But the company did not develop its products quickly enough to
scale to hundreds or thousands of servers as these deployments
became more common, according to Taneja. Delays in the release of
new products effectively killed the company just after the turn of
the millennium, according to Taneja.
"After that, they were what I like to call 'the living dead,' "
Taneja said. "They had such a big install base that they kept
getting injections of revenue from support contracts, but they
weren't going forward anymore."
Exabyte's reliance on a proprietary tape format, VXA, also led
to the company's demise, according to industry experts, while the
rest of the industry went for standards, such as
Linear Tape-Open (LTO).
The company's most precipitous decline came in 2003, when the
company entered the year with no working capital, was delisted from
NASDAQ after its stock price plummeted below $1, announced a $43
million net loss for the year and survived only by taking out $26
million in loans.
If left to rot, Taneja said, the company would eventually spiral
down completely. "It takes a long time for companies like this to
die, but die they will," he said.
The acquisition of Exabyte will double the Norwegian parent
company's worldwide revenues, and the newly merged player "will …
take a clear second place" to Quantum in the tape market, according
to Tandberg chief executive Gudmundur Einarsson, quoted in a
company press release.
According to Tandberg, the total combined expected revenue of
the newly merged company is $215 million for 2006. The final
closing of the agreement is expected to take place by the end of
calendar 2006.
Tandberg plans to keep Exabyte's products. Despite its
struggles, Exabyte was more successful in the U.S. channel and at
the low end of the tape autoloader market, experts said.
The shrinking tape market -More consolidation is on the wayThis recent news comes as the latest of what is sure to be
continued consolidation in the tape market, according to Greg
Schulz, founder and analyst with the StorageIO Group. The wheels of
this new trend were first set in motion with the acquisition of
Advanced Digital Information Corp. (ADIC) by Quantum for $770
million in May.
Continued pricing pressures, a continued shift to disk-to-disk
data protection for the enterprise and midmarket, and the evolution
of network-based distributed backup for small to medium-sized
businesses (SMBs) means that the tape market needs even further
consolidation, Schulz said.
Previous consolidation within the disk market, when
Seagate Technologies acquired Maxtor Corp.
for $1.9 billion last December, led some analysts to speculate
that disk pricing could stabilise. That also could be the case
for the tape market in the short term as consolidation
continues, Schulz said, but in the long term, as tape is phased
out of more and more primary storage environments, prices will
probably continue to drop.