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Quantum StorNext is next challenge, following relisting
Quantum StorNext storage will be available as a software-only license for any server hardware this year, targeted at companies that create large volumes of rich media.
Quantum Corp.'s journey back to public status following improper revenue recognition is over. Now the data protection and storage vendor can focus on its next challenge: to turn Quantum StorNext into a software-defined storage power.
Quantum will begin selling its common stock on Nasdaq Monday, Feb. 3. Following a disclosure that it incorrectly reported revenue going back to 2015, the New York Stock Exchange de-listed Quantum in January 2019. Quantum restated three years' quarters of earnings before it could become publicly traded again. The vendor also paid $1 million in civil penalties to settle shareholder lawsuits arising from a probe by the federal Securities and Exchange Commission.
"Our relisting marks the end of phase one of our turnaround and transformation. We now enter a second phase of transformation, where we will be moving from making the organization sustainable and stable on a long-term basis to growing on a long-term basis," Quantum CEO James Lerner told financial analysts during a quarterly earnings call this week.
A linchpin to the growth strategy, Lerner said, involves selling Quantum StorNext scale-out file storage as a software-only license for use on commodity servers. The plan is to go after more cloud and hyperscale customers by combining automated storage services with StorNext technologies.
Lerner came on as a turnaround specialist to shepherd Quantum through negotiations with the SEC. He said Quantum's growth will come from "leaner product and technology focus" that provides flexible storage infrastructure to support rich media.
"We will not repeat the mistakes of the past. We're focused on [generating] high-quality revenue" that produces high margins and sustainable customer support, Lerner said.
Quantum has work to do
Despite returning to the public markets and posting a profit of $4.7 million, the reported results suggest that Quantum is below its revenue targets. Revenue for the quarter that ended Sept. 30, 2018, was "less than expected," coming in at $103.3 million, up 1% from last quarter. Quantum's revenue forecast for this quarter is between $90 million to $100 million.
Quantum CFO Mike Dodson said product revenue grew 5%, driven by nearly $10 million in sales of primary storage and $4 million in media sales. Most of the gain was offset by a 4% decline in services revenue.
Sales of secondary storage products fell by $10.6 million, which Quantum blamed on fluctuating purchasing cycles within its hyperscale business. Dodson said royalty revenue of $4 million "continued to be relatively light" last quarter.
Lerner said a strong pipeline exists for Quantum F-Series NVMe flash NAS arrays. The products include the F2000 that was introduced last year and the recently released F-1000 entry system.
The Quantum StorNext file system allows users to access shared block storage. To date, the software has been available on integrated StorNext-based appliances like the F-Series. Lerner said the growth forecast for Quantum hinges on meeting pent-up demand from customers that want a software-defined storage option to run StorNext on industry servers or directly in their preferred cloud.
"Part of the transformation we're making is to sell our software independent of the hardware -- to not have them bolted together or technically combined. That will allow us to transform into more of a software company," Lerner said.
He said the software-defined version will be rolled out "within the next couple of months."