"Storage Will Be 75% Of All IT Spending Over The Next Couple of Years".

Michael Brown 

Mark Ferelli: Everybody's asking, no doubt, in the midst of economic uncertainty, where is Quantum going to be?

Michael Brown: I think we're pretty well positioned given the environment we are in. We see a number of trends going on as I'm sure you do. One is that even though there is a slowdown in IT spending, it's still growing. Not only have people talked about IT spending growing this year in single digits percentage terms, which is growth not decline, they're also talking about storage spending being up a greater proportion than that. Salomon Smith Barney did a report that says storage spending will still grow 15 to 20 percent this year. There has been a lot of work done that says storage will be three-quarters of all IT spending over the next couple of years. That's certainly a positive. Another positive is obviously as people continue to create content or information at an unprecedented rate, they need to be able to not only store it but access that and protect it. As a leader in that market we've seen studies that show up to 30% of IT budgets are spent in this area of data protection: snapshotting, replicating, backup archives: making sure that the data is protected, and can be restored becomes an increasing part of what people are spending on. We feel like we're well positioned being a category leader in those markets.

MF: I had a statistic recently that says by 2003 the mass storage industry will be about a $40 billion business. Nice numbers in anybody's books, even in the immediate economic softness. The tape market is looking like a softer segment right now, yet Quantum version 2.0 is very much a tape and tape automation company. How can you reconcile these?

MB: We see, near term, our tape and tape automation business as very much tied to server growth. IDC has said that they expect server unit sales to actually decline, December to March, by 15%. But then they're expecting the market to grow from that point for the rest of the year. We're certainly in the middle of that right now, we're seeing the effects of that, but we feel that this is not the end of server growth. Servers will continue to grow and our tape and tape automation will grow with them. At the same time, we're focusing increasingly on doing more than tape and tape automation. We're expanding into the area of solutions; just since summer we've started offering with Network Appliance, solutions that back up their filers that we're selling to end user customers. Those involve both Fibre Channel and Gigabit Ethernet as the transport protocol, so we're able to install entire networks with Cisco switches, VERITAS backup software, if the customer wants it, and if they don't have a site license, to be able to aid customers like Texas Instruments, JP Chase Morgan put in an entire SAN. In fact we installed over 300 SANs last year. So it's an increasing part of our business, in fact if you look out over the next couple of years you'd probably look at our enterprise solutions business and say half of that is going to be installing network storage, service, and support, as opposed to a hardware business only. So we're pretty excited about how we're reshaping that business going forward.

MF: How is the SDLT business going?

MB: Great. SuperDLT, we've just launched widespread availability of that with Compaq; that was earlier this month, and we've seen tremendous reception. In fact, now that the backward compatible version is out, we've seen a number of people and OEM customers saying why do we need to carry anything else now? Perhaps there was some question about whether we'd be able to deliver on backwards compatibility. Now that it's out there, I think a lot of the fuss has gone away about SuperDLT. Now it offers everything that LTO does from a spec point of view. It already is the standard and accepted by more people than anybody else, more server companies, has better brand recognition, and you've got the compatibility to the 16 million DLT cartridges that are out there.

MF: Is the key to success in the SDLT space the American or European or Pacific Rim markets?

MB: With 87% share, it's really all of the above. But it's concentrated in North America.

MF: Tell me a little more about your professional services activities. That isn't one of the better known areas of Quantum, even 2.0.

MB: Absolutely right. The fact that we're offering storage solutions beyond tape and tape automation isn't very well known. Our whole storage systems business, a product of acquisitions, has grown tenfold in the last three years. Two of the areas that we've been expanding in recently are direct sales and service, which complement each other. Of the people that are involved in our enterprise solutions business--we have three solutions groups, just to refresh your memory, DLTtape, ATL enterprise solutions, and SNAP appliances--about a thousand people or a third of our work force are on enterprise solutions. 15% or 150 people are in service. And this really is everything from consultative selling on the front end, to look at the network, the policy, and what are the storage requirements, to installation not just of our hardware/software but our partners', and troubleshooting, benchmarking performance, of course maintenance and repair, as well as preventive maintenance services. A service that we offer, as an exa mple, to data centers we call Site Care. Basically this allows the data center to turn over to us the management of large installations of tape automation systems so we can look and make sure that the drives are functioning properly, cartridges are being rotated, whatever needs to be done. In fact, we have software installed in these tape automation systems so they can be managed remotely over the web, and they also have the ability to go in and do some self diagnostics and even email us to let us know if there is an issue with the system that needs to be taken care of.

MF: So bottom line we've got Quantum 2.5, the storage service provider.

MB: Well we're heading more that way, but we don't see ourselves as a provider of storage the same way as StorageNetworks is. We really see ourselves as trying to provide services to the data center, as opposed to, we'll keep all your storage on tap and supply. That really is a totally different business model.

MF: You're more in the managed services space. Who's leading your team for that, Michael?

MB: Kevin Daly, who you know was the CEO of ATL and of course has stayed for these three years as that business has basically quadrupled. So now he's an officer of Quantum on my staff.

MF: How are you doing in the SNAP space?

MB: You might have seen an announcement at the CeBIT show in Hanover. We introduced a new product there: the SNAPserver ES 12. It's 12 drives in a package that's 3U high, if I remember. It's a rack mountable and almost a terabyte of data. This product will move us rapidly up into more enterprise-class Network Attached Storage.

MF: What is the pet project of Michael Brown? What is nearest and dearest to your heart?

MB: What I'm really finding great about Quantum's future is we're starting out with a great business to go forward with, very strong financially and an opportunity to grow in the new areas where networking is being applied to storage. This presents so many opportunities, we're obviously fielding a number of them both in the SAN/NAS space and as that, over time, merges together so that we see hybrids of network storage occur, there's going to be a lot of opportunities. We see that while storage solutions or storage systems were a third of our revenue in the December quarter, we're well on our way as we exit next fiscal year to having that be half of our revenue. That's pretty exciting. I'm pretty excited about leading Quantum through that change.