Quantum Corporation Essay, Research Paper
Overview
In the past two decades, Quantum Corp.
of Milpitas, California, has become one of the leaders in the design,
manufacturing, and marketing of digital storage products including hard
disk drives and digital tapes. By following its own path and making decisions
criticized by the rest of the industry, Quantum has managed, not only
to survive in an industry that has destroyed lesser companies, but to
thrive and be recognized as one of the industry’s quality leaders.
Quantum Corporation was founded in 1980 as a manufacturer of 8-inch disk
drives. Not long after its establishment, it moved into also manufacturing
5 ?-inch drives. Its business was to provide OEM (original equipment manufacturers)
like Apple and IBM with the drives they needed to produce their computers.
By 1987, sales of 5 ?-inch and 8-inch disks were falling and Quantum
was losing business to competitors who were able to get new products to
market faster and in greater quantity. Although the HardCard, an add-on
disk drive being produced by the Japanese company Matsushita-Kotobuki
Electronics Industries, Ltd. (MKE) for Quantum, was doing well, Quantum
needed to move into the 3 ?- inch disk drive market or lose its customers
to the competition. Because of Quantum’s successful relationship
with MKE and its own lack of resources to start up or rework a manufacturing
facility for the new smaller drives, Quantum entered into an agreement
with MKE which would allow Quantum to focus on design and marketing while
MKE produced the disk drives.
This wasn’t a very popular move with some other American manufacturing
firms. Quantum was accused of selling out to the Japanese and providing
them with valuable technological information. Many thought Quantum was
signing its own death warrant by giving up control of its manufacturing.
Some industry insiders felt Quantum should have followed the lead of other
disk drive manufacturers, like Seagate, and opened its own manufacturing
plants in the Far East rather than give up control of its manufacturing
to the Japanese.
At first it appeared that some of these criticisms might be accurate.
Quantum was late getting into the market and then couldn’t meet the
demand for its products. But Quantum persevered in its decision and, eventually,
the high quality of the products coming out of MKE swung the tide in Quantum’s
favor. By 1989, Quantum’s 3 ?-inch disk was gaining acceptance in
the industry. In late 1991, Quantum was listed as the best California
large business by California Business magazine, following a three year
revenue increase of over 135 percent and a net income increase of over
265 percent.
Another major problem Quantum faced was its historical dependence on
only a few customers. For several years, orders from Apple Computer constituted
80 percent of Quantum’s business. But when Quantum couldn’t
supply the quantity of 3 ?-inch disks Apple needed, the computer company
began to look elsewhere. Once well back in the 3 ?-inch disk drive business,
Quantum realized it couldn’t rely on just a few customers but needed
to expand its client list. It began developing new relationships with
major companies in the industry and soon its client list included companies
like AT&T, Hewlett-Packard, Intel Corp., NEXT Inc., Sun Microsystems
Inc., and Unisys Corp., as well as others in Europe and the Far East.
In late 1994, Quantum acquired most of Digital Equipment Corporation’s
storage business, including its hard disk drive and tape drive manufacturing
plants in Colorado, Massachusetts, Malaysia, and Indonesia. Quantum hoped
to use this $400 million dollar purchase to enhance its standing as a
major supplier of high-end disk drives (2, 4, and 9 gigabyte drives) for
use in mainframes, minicomputers, and other large computer systems. But
after spending hundreds of millions of dollars, Quantum realized the high-end
disk market was not making money. In 1995, Quantum made the painful decision
to close the Colorado plant and move the remainder of its disk drive manufacturing
to its plant in Malaysia. By early 1996, Quantum closed its disk drive
plants in California and Malaysia and transferred all of its disk drive
manufacturing to MKE.
But not all of Quantum’s acquisitions from DEC were unsuccessful.
In another former DEC plant in Colorado, Quantum found it needed to expand
its blossoming tape drive business. Tape drives store data on magnetic
tape and are generally used for back-up storage or archiving of data off
of a computer network. Many large computer companies, like Hewlett-Packard,
Digital, and Compaq used the drives in their computer systems. With the
massive amounts of data being generated every day, companies across the
country and the world were clamoring for back-up storage tapes. Quantum
had found a new niche.
Not only was 1995 the year that Quantum began changing its business strategies,
but the company also changed its executive line-up. With a new CEO, Mi
Brown, the company is changing the way it looks at the future. The company’s
emphasis will be on developing and selling disk drive and tape storage
units, but will leave the disk drive manufacturing up to MKE. It will
also try to expand its customer base by going into the general consumer
market with drives designed to expand the capacities of desktop PCs. Industry
insiders predict that growth in the PC disk-drive market will compound
annually at 20 percent to 25 percent over the next five years, eventually
even outstripping PC sales, as people upgrade and add memory to existent
equipment.
As part of its DEC acquisition, Quantum received an 81 percent share
of Rocky Mountain Magnetics Inc., a joint venture with Storage Technology
Corporation in the development of magneto-resistive (MR) heads. By incorporating
MR head technology into its disk drives, Quantum was able to increase
areal density (the number of data bits per square inch). This allowed
Quantum to increase drive performance and reduce the cost per megabyte
by putting more data under a single head. Quantum was the first independent
supplier to combine MR heads and Partial Response Maximum Likelihood (PRML)
technologies in a hard disk drive. Through their joint connection, Quantum
also partnered with StorageTek to supply Quantum DLT 7000 tape drives
to the StorageTek TimberWolf family of automated robotic tape storage
libraries.
In March, 1997, Quantum and Exabyte Corporation announced the Exabyte
18D, Exabyte’s first automated DLT library. The library uses Exabyte’s
robotics and Quantum’s DLT 4000 or DLT 7000 tape drives to provide
backup, remote storage, and automated archiving of digital tape cartridges.
After a few years making up for the heavy expenditures from the DEC acquisition,
Quantum reported substantial income increases in the beginning of 1997.
Growth and increase in income was attributable to the success of Quantum’s
switch in emphasis from hard disk drives to back-up tape drives.
Quantum now manufactures and sells 5 ?-inch and 3 ?-inch hard disk drives,
solid state disks, and tape drives. Its customers include large domestic
and international OEMs, like Apple Computer, Compaq, Digital, Hewlett-Packard,
and IBM and, through commercial and industrial distributors, to smaller
OEMs, system integrators, value-added resellers, dealers and retailers
in more than 25 countries. Quantum provides products for use in minicomputers,
disk arrays, servers, workstations, and entry-level to high-end desktop
PCs. Quantum’s manufacturing partner, MKE, has plants in Japan, Ireland,
and Singapore for producing the high-volume products. Quantum produces
solid state disks, DLT tape drives, and mini-libraries at its facilities
in Colorado Springs, Colorado Initial design and production of magnetic
disks, MR heads DLT drives, and mini-libraries also take place in Shrewsbury,
Massachusetts and Louisville, Colorado. The Penang, Malaysia, plant continues
to produce disk drives.
BIBLIOGRAPHY
Bean, Joanna "California-Based Quantum, Computer
Storage Device Maker, Posts Record Sales" Knight-Ridder/Tribune Business
News, January 29, 1997
Bean, Joanna "California’s Quantum Corp. to
Stop Making Its Own Computer Disk Drives" Knight-Ridder/Tribune Business
News, January 31, 1996
Bean, Joanna "Colorado Springs, Colo.-Based Quantum
to Move to New Headquarters" Knight-Ridder/Tribune Business News,
November 8, 1996
England, Robert Stowe "What Could Have Been (Quantum
Corp.)" Financial World, October 13, 1992
Gomes, Lee "Quantum Corp. Ends Manufacturing, Will
Lay Off 2,250" Knight-Ridder/Tribune Business News, January 31, 1996
Hostetler, Michele "Taking quantum leap into high-tech"
The Business Journal, December 11, 1995
Krause, Reinhardt "Quantum shifts all production
to MKE" Electronic News (1991), February 4, 1996.
McCreadie, John "Quantum rebuilds profits with the
help of a friend" Electronic Business, October 16, 1989
Rawson, Bob "Quantum plays a winning hand in disk
drive game; booming sales prompt hiring drive" EDN, April 4, 1991
Scouras, Ismini "Transition Mars Quantum 2Q"
Electronic Buyer News, November 11, 1996
Sprackland, Teri "Quantum flies high in the race
for disk drive sales" Electronic Business, July 23, 1990
Stevens, Tim "Multiplication by addition: hot companies
in hot markets capitalize on strategic acquisitions to ignite growth"
Industry Week, July 1, 1996
Walsh, James "100 Best Large Companies" California
Business, November-December 1991
"Exabyte and Quantum Announce the Exabyte 18D – the
First DLT ™ Library in Exabyte’s Family of Library Offerings"
PR Newswire, March 18, 1997
"Quantum buys DEC storage units" Electronic
News (1991), July 25, 1994
Quantum Corp. web page at http://www.quantum.com