10 September 2002 Storage tape specialist Quantum is to cut nearly one-third of its workforce in the company’s latest attempt to offset a slump in its hardware sales.
Quantum said it will cut 1,100 jobs from a total headcount of nearly 3,000 over the next two financial quarters. This means the company will incur a total restructuring charge of around $100 million (€102.4m).
Nearly 80% of these job losses are a result of Quantum’s decision to outsource the manufacturing of its P-Series automated tape libraries, devices that robotically shuffle back-up tape cartridges, to Jabil Circuit, a supplier of components for electronic devices, in early September 2002.
This follows on from Quantum’s implementation of several major strategy changes in 2002. In August 2002, Quantum appointed Rick Belluzzo, former president at software giant Microsoft, as its CEO, replacing former chief Michael Brown.
Belluzzo, known more for his management skills than his knowledge of storage, said the Jabil outsourcing decision followed “the most aggressive series of new product launches in the company’s history.”
During 2002, Quantum has diversified its range of storage products to address a sales slump in its core hardware business. Quantum derives the bulk of its revenues (80%) from its digital linear tape (DLT) drives and libraries. But for its latest financial quarter ending June 2002, the company reported revenues of $211.5 million (€216.6m), a sharp fall of 24% on sales of $279.3 million (€286m) in the same period a year ago.
Its product expansion has so far focused largely on network attached storage (NAS) devices, file sharing devices that plug into an Internet protocol network. In 2002, Quantum released a new family of Guardian mid-range NAS devices that will compete against suppliers such as EMC, Network Appliance and Dell. Previously, Quantum had only offered low-end NAS devices under the Snap brand.
However, Quantum is still heavily reliant on sales of its DLT products. This was reinforced when Quantum announced it will acquire Benchmark Storage Innovations, a privately held supplier of DTLtape technology, in the first week of September 2002.
Quantum, which already owned a 20% stake in Benchmark, said the acquisition would enable it to offer a broader range of tape drives and expand its customer base. Benchmark generated sales of $80 million (€81.9m) during the last 12 months.