Archive Pins Its Hopes on Data-Saver
Anyone who has ever endured the agonizing experience of losing computer data to a technical glitch will appreciate the potential market for backup-information storage.
One type of backup product is made by Archive Corp., and securities analysts believe that the Costa Mesa firm is poised for rapid growth in the year ahead.
Archive manufactures magnetic-tape devices that back up the hard disks used to store computer information on personal computers, multiuser systems and engineering work stations.
As the storage capacity of hard-disk units has grown, so has the potential for loss of data. And that potential has provided a window of opportunity for Archive.
Archive is the market leader in 5.25-inch, magnetic-tape storage systems. The firm has captured an estimated 40% of the 5.25-inch market, about twice the market share of its closest competitor, Wangtek.
The firm is expected to introduce a new generation of 3.5-inch storage devices, thus opening up a large new market for the company.
Several large manufacturers are among its clients, including Apollo and Sun, which manufacture engineering work stations, and NCR, which makes personal computers.
On Monday, Archive is expected to release its earnings for the quarter ended in June, and analysts anticipate impressive results.
Marshall J. Leisten, a securities analyst with Volpe & Covington, a San Francisco brokerage, said he expects Archive to report net income of $2.7 million on sales of $29 million. That would compare to net income of $2 million and sales of $24.4 million a year earlier.
Leisten said Archive stock represents “an attractive value” at current prices. The company’s shares, which trade over the counter, closed at $6 on Friday, unchanged for the day. They have fluctuated within a range of $5.875 to $6.50 a share for the last three months. Before the October stock market crash, the stock traded up to $12.
Leisten said he believes that investor concerns about other storage technologies is putting downward pressure on the stock. In fact, several new data-storage technologies could soon provide competition for tape backup systems, including high density floppy disks and optical disks. But such systems will be expensive, Leisten noted.
Another factor keeping a lid on Archive stock is a pending patent-infringement lawsuit with Cipher Data, according to James Frankenthaler, a securities analyst with Kuhns Brothers & Laidlaw, a New York brokerage. The lawsuit involves a technology used in the tape-storage units that Cipher Data contends that it developed first.
Cipher Data won a similar case last month. Archive competitor Wangtek agreed to pay damages and royalties to Cipher Data after a San Francisco federal court upheld the firm’s patents.
Despite that uncertainty, Frankenthaler is recommending purchases of Archive stock for long-term investors. In addition to the potential 3.5-inch, tape-storage market, Frankenthaler likes Archive’s strong balance sheet, heavy investment in research and development and a recent agreement to work with a unit of Matushita to develop high-capacity tape drives.
