Quantum to Purchase ATL Products

By P.J. HUFFSTUTTER

May 20, 1998 12 AM PT

TIMES STAFF WRITER

Reacting to more demands to preserve computer data, disk-drive powerhouse Quantum Corp. said Tuesday that it will buy Irvine-based ATL Products Inc. for about $300 million in stock.

ATL makes automated tape libraries, or systems used for archival and backup storage of network computer data.

“It’s a very fast-moving industry, and it makes a lot of sense for these two companies to get together,” said Neil Cooper, an analyst with Cruttenden Roth Inc. “When combined, they’ll have control of about 15% of the tape library market.”

Tape libraries look like high-tech jukeboxes. When a person accesses information on a particular tape, robotic arms inside the machine pull the tape storing the data and put it into the drive.

ATL is a leading maker of high-end tape libraries, while Milpitas-based Quantum is one of the world’s largest makers of the drives that go into the machines.

“This is a move that will enhance both companies,” said Kevin C. Daly, chief executive of ATL.

The proposed buyout, which is subject to shareholder and regulatory approvals, is expected to close by September. Quantum also decided to buy back as many as 14 million of its shares--valued at $311.5 million--to offset dilution from the ATL deal.

ATL’s stock price dropped 19 cents to $26.56 a share, after climbing to a 52-week high of $28.50 earlier in the session. More than 1.7 million shares changed hands in Nasdaq trading, compared with average daily volume of 240,400 shares the last three months. Quantum shares rose 25 cents to $22.50.

The acquisition announcement did not surprise analysts, who noted that ATL was spun off from its former parent company--Odetics Inc. of Anaheim--only last November.

Quantum has suffered financially for more than 10 months as its industry has been battered by oversupply and weak demand.

Industry watchers say that Quantum, in buying ATL, will be able to diversify its product line further, as well as bolster its existing tape-storage business. The deal also will allow ATL access to additional research funds and more credibility in an increasingly competitive market, analysts said.

Several other events paved the way to Tuesday’s announcement, said Robert Amatruda, an industry analyst with IDC Research. For example, ATL uses only Quantum drives inside its tape devices. And earlier this month, ATL announced at a trade show that it would resell some of Quantum’s products--ones that the Irvine company had not built.

“Clearly, they were planning for this sort of thing for some time,” Amatruda said. “The demand is growing. Today, more companies are data-intensive by their very nature.”

And lost information, particularly for a small company, can mean disaster. Tape libraries can be a relatively cheap way of storing data, said Tom Kelleher, an analyst with the Santa Monica-based brokerage firm B. Riley & Co.

“The downside is it takes longer to access the information. So nearly everyone uses these products for data backup, and as an protective step against disaster,” Kelleher said.

Quantum plans to merge its 60-person tape automation group into ATL’s staff of nearly 350, said Peter van Cuylenburg, president of Quantum’s specialty storage products group.

The combined company will compete with Storage Technology Corp. and International Business Machines Corp., both of which make drives, libraries or both.

Some analysts wondered whether ATL’s competitors--and fellow Quantum drive users--such as the Colorado-based Storage Technology and Overland Data Inc. in San Diego would feel a squeeze on their supply of components.

Quantum officials insist that ATL will continue to operate at “arm’s length,” which should not affect their existing relationships with other manufacturers in this arena.

Overland Data and Storage Technology could not be reached for comment.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Disk-Drive Deal

Irvine-based ATL Products Inc. will be acquired by Quantum Corp. in a stock deal valued at about $300 million. ATL’s stock closed down 19 cents Tuesday, at $26.56.

ATL Products Inc.

Headquarters: Irvine

Chief executive: Kevin C. Daly

Founded: 1997 (spinoff from Odetics Inc.)

Product: Makes automated tape libraries for storing computer data

Employees: 350

Sales, fiscal ‘98: $97.6 million

Profit, fiscal ‘98: $8.1 million

Stock market: Nasdaq

ATL Stock Prices

(monthly closings)

1998