Disk Drive Maker Quantum to Buy ATL Products
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, and Milpitas-based Quantum is one of the world’s largest makers of drives used in the machines.
“This is a move that will enhance both companies,” said Kevin 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--in an effort to offset dilution from the ATL deal.
ATL’s stock price dropped 19 cents to close at $26.56 a share on Nasdaq, after climbing to a 52-week high of $28.50 earlier in the session. More than 1.7 million shares changed hands, compared with an average daily volume of 240,400 shares during the last three months. Quantum shares rose 25 cents to close at $22.50 on Nasdaq.
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’s purchase of ATL would enable it to diversify its product line further, as well as bolster its existing tape storage business. The deal would also allow ATL access to additional research funds and enhance its 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 in 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 firm 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.”
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.
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 IBM, both of which make drives, libraries or both.
