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.
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 way
This 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.