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Digital tape storage manufacturer Tandberg Data announced Aug. 30 that it is acquiring a competitor, U.S. data storage company Exabyte, for $28 million in cash and stock.

In the transaction, Oslo-based Tandberg Data will pay $22 million in cash at the closing of the deal, which is expected to take place in Q4.

The merged company will have projected revenue of $215 million for 2006, Tandberg executive vice president Ken Cruden told eWEEK.

If so, it will trail only Quantum/ADIC ($814 million in 2005 revenue) among manufacturers of tape drives and tape automation equipment, he said.

Tandberg Data, whose U.S. headquarters is in Poway, Calif., makes professional-level tape information storage hardware and software based on the SLR, LTO and DLTtape linear technology platforms.

Exabyte, based in Boulder, Colo., makes tape backup, restore and archival systems for small to midsize businesses.

“This is a good deal for both companies and the industry,” said Robert Amatruda, storage analyst with IDC in Framingham, Mass.

“It’s a reprieve of sorts for Exabyte, which has been on shaky financial ground for some time—not because of any missteps on its own part, but mainly because the SMB tape drive market is dominated by so many large suppliers, like IBM and HP; its main problem has been a market-access issue.”

Amatruda also said the deal gives Tandberg a good foothold in the U.S. market.

“These guys had no previous U.S. market presence at all,” Amatruda said. “They do share a major customer—IBM—which buys their drives. Spiritually, it’s a good move for both companies.”

Amatruda questioned whether the new Tandberg-Exabyte company will actually be No. 2 in the tape drive market.

Click here to read more about Exabyte’s tape drives aimed at SMBs.

“This is an industry that is loaded with OEMs,” Amatruda said. “It’s really hard to sort out who’s really the leader in this market. Everything is sold, re-branded and re-sold through channels, so it’s a tangled area. Certainly, IBM, HP, Quantum, NetApp, Sun StorageTek, EMC, and a few others are all key players in this category.”

The new company will be able to offer an enhanced menu of advanced storage and automation systems to small and medium-sized enterprises.

The merged company will have a strong sales and marketing position in Europe and Asia, thanks to Tandberg’s channel presence in those areas, the spokesperson added.

“Tandberg Data and Exabyte complement each other well in terms of both products and markets, and will jointly take a clear second place,” said Tandberg Data chief executive Gudmundur Einarsson.

The complementary strengths of the two companies in the various geographic markets around the world will result in a new global competitor in the storage industry, said Exabyte CEO Tom Ward.

“The combined product portfolios of the two companies will provide the full range of state-of-the-art, cost-effective products and technologies to meet [customers’] needs,” Ward said.

“The operational synergies resulting from the combination will allow the new company to operate from a position of financial strength and stability in the future.”

This merger opens opportunities which the two companies on their own could not have succeeded in realizing in the short term, Einarsson added.

“That’s important at a time when the computer industry is characterized by a powerful process of consolidation. We find that our dealers constantly want more complete answers to data security. With Exabyte’s technology, we’ll be able to offer better solutions for data storage and automation,” Einarsson said.

To finance the acquisition, Tandberg will issue a $35 million bond loan, which has been fully committed by Cyrus Capital.

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