"As Soon As LTO Drives Are Available We Will Start Shipping".

Interview with Bill Gervais, president of Qualstar Corporation

Storage of data on tape has a history extending back more than 45 years, with magnetic storage being developed more than a century ago. Bill Gervais, President of Qualstar Corporation, is at the helm of a company that has roots in the past, manufacturing nine track tape drives, as well as the present and future with tape automation products.

MARK: Qualstar has a reputation for being in nine track tape, as well as automation. Storage Inc. is looking at storage for the past twenty years, as well as storage now and in the future.

BILL: Although people are saying that nine track is headed for zero, our business has picked up over the last six months. Every time someone throws in the towel (on nine track), we pick up more business. For the time being, there is no reason to discontinue the manufacture of nine track drives, although they represent less than 10% of sales now, but nine track is still good; it still meets some needs.

MARK: Nine track has been good for you, then.

BILL: Qualstar started in 1984. Our first product was a nine track drive. We are still in production. When we were founded, people said, "don't do it. It's a dead product." Fortunately, they were wrong. We have been in continuous production since then. Nine track is the longest running tape format for data recording in the history of the world. We're still selling nine track drives into brand new installations--this is not just replacement stuff. New computer systems are being installed that are using it for data interchange. Data interchange is the whole reason for its longevity--we call it sneakernet.

MARK: You're also in the tape automation business. Where was that when you started?

BILL: We started with automation in 1995. At that time, nine track was a big part of our business. Now it's less than 10%.

Our initial product line supported the older Exabyte drives. Today, we support Benchmark (DLT1), (Ecrix) VXA, (Sony) AIT 1 and 2, and (Exabyte) Mammoth. We announced LTO libraries at (November) Comdex.

MARK: Do your libraries support Mammoth 2?

BILL: The interesting thing about Mammoth 2 is that they've been touting it as the next great new thing, but we've been shipping 50GB drives for more than a year on Sony AIT2. What does Mammoth 2 bring to the party other than a high transfer rate?

MARK: And LTO?

BILL: (LTO) libraries are all ready and they're certified with that tape. As soon as drives are available, we will start shipping.

We're shipping (libraries using) Benchmark (DLT1) drives now and they provide a tremendous price advantage. At $1,200 for the drive the price we charge, this represents a serious challenge to DLT libraries. A big part of the cost of a library is the tape drives. If you have a library with 2 or 3 drives in it, mostly what you're paying for is the drives. Benchmark is a significant threat to DLT.

The Benchmark drive is at least $2,000 less than the DLT8000. The price of the Benchmark drive will lower the bar for DLT--to keep market share, Quantum will have to lower the price on the 7000 and 8000. The capacity is the same as the DLT8000 drive, 40GB, but the Benchmark drive has half the transfer rate of the 8000, 3MB/sec instead of 6MB/sec.

MARK: Wouldn't many library customers prefer the higher performance drives? Wouldn't that justify the cost difference?

BILL: The transfer rate in smaller boxes is not all that important. If it's used for backup and backup is run in the background, as long as the backup is finished by next morning, transfer rate doesn't matter. The transfer rate of the DLT8000 is not worth the extra cost.That's the only advantage you get.We sell a lot of Quantum products and Benchmark is just beginning to become a serious challenge. Benchmark is just one of the serious challenges that Quantum has to face up to.

MARK: You mentioned the Ecrix VXA drive. Is that one of the technologies that you're referring to?

BILL: The VXA drive stores 33GB (native) at the same transfer rate as a Benchmark drive, but for less money (The street price for internal drives is below $900 - ed.).The VXA uses a 5-inch form factor and it will fit in our libraries designed for 5-inch form factor drives. Is Ecrix a challenge to Quantum? I think LTO will be a big challenge to Quantum.

I don't think that the tremendous installed base that Quantum has will help them in the gattle against LTO. SDLT (Quantum's next generation drive) is not very backward compatible (so choosing either LTO or SDLT will be like buying a new drive technology). Right now, there are four guys (HP, Seagate, IBM, and Fujitsu) each thinking that they'll get 50% of the market share. In the end, the consumers are the beneficiaries (as competition forces reduced prices).

MARK: Where do you see storage going in the future?

BILL: There's an explosion going on. There is a tidal wave in the amount of data being saved. This is more than just the expansion of existing data and existing businesses. People are saving more and more data for less and less important reasons. People are saving photos of their family now. New applications are adding to this wave of data that needs to be stored.

Here's one good example: in the past, video images from a gaming casino were stored on VHS tape. The (surveillance systems) are now being converted to digital video. The video is being dumped to hard disks. The image on hard disks is being moved to tape after so many hours. This is a brand new application that didn't exist five years ago. Tape has come down in price where it makes sense to use digital video instead of a VCR.

So, this is a whole new application that didn't exist a few years ago. It's become a significant part of the applications that AIT is filling. People are storing new things digitally that weren't even stored years ago.

Another new phenomenon in storage is that Internet providers store copies of your e-mails and files that go back and forth over the Internet for a few days as a service. You can recover what you received a few days or weeks ago. Before the Internet, that storage never existed.

Our attorney tells us that it's cheaper to go buy more hard drives than to pay a lawyer $250 an hour to figure out what to throw away. For $189, you can buy an 18GB hard drive. How long will it take a lawyer to sift through 18GB and figure out what to store and what to keep? It's cheaper just to keep it all.

In the next few years, what is happening is that, even though the cost per megabyte is going down with time, the amount of megabytes that are being stored is going up faster. The net effect on library company revenue is that the revenue is going up about 30% or so a year, if you look at the aggregate of all tape library companies. If you look at ADIC, the biggest example, their revenues grew 50%. Some of this is Y2K driven, but I don't know how much; we'll find out in February.

MARK: What do you see for the future of Fibre Channel?

BILL: We have been shipping Fibre Channel interfaces on our libraries for a while. The volume is a trickle. Ask anybody, even ATL or ADIC, the volume is still very small because Fibre Channel is still too expensive. Those who need it will pay for it, but most won't pay for it yet.

MARK: Tape drives don't have Fibre Channel interfaces yet, do they?

BILL: Tape drives aren't yet using fibre. We have a bridge that converts SCSI to fibre so you can traverse distance or get speed. In a few years, when you gang six or 12 tape drives, you will get high throughput. If you have each drive running at 6MB/sec or 1OMB/sec, you're getting up to where you need fibre if you're trying to keep all the drives streaming at once.