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Quantum Corp. marked its debut on Nasdaq this week with an acquisition. The NAS vendor picked up the ActiveScale object storage platform from Western Digital Corp. to address the convergence of dense file and object data.
The deal with Western Digital to buy ActiveScale boosts Quantum object storage with an additional target for data centers that creates lots of video data, Quantum CEO Jamie Lerner said. The companies did not disclose financial terms. Pending regulatory approval, the transaction is expected to close before April.
For Quantum, getting approval on Nasdaq culminates a two-year-long odyssey after accounting irregularities allegedly involving several former top executives. Quantum shares had been trading over the counter since being delisted last year from the New York Stock Exchange.
Adding Western Digital's ActiveScale enables Quantum to offer additional targets for managing dense media workloads, Lerner said. Quantum has sold ActiveScale branded as Quantum Lattus for five years through an OEM deal with Western Digital. Quantum also was an investor in object storage startup Amplidata, which developed the ActiveScale platform before getting acquired by Western Digital in 2014.
Lerner said the big attraction for Quantum was the engineering IP for ActiveScale. Quantum plans to maintain ActiveScale separately from its scale-out StorNext file system technologies for now.
He said Quantum will retain its Lattus object storage and use ActiveScale as part of a broad product alignment with the StorNext file system. The StorNext file system ships on Quantum Xcellis, M-Series, Pro Solutions and Artico Archive NAS gateways.
"We have been seeing file and object converging slowly," Lerner said. "Our StorNext file system is extraordinarily fast. We don't want to compromise the speed. We're currently going to make them two tiers [and use] our hierarchical storage technology so you can tier data between them in a transparent, fluid way."
For Western Digital, the ActiveScale selloff continues the drive maker's exit from the storage systems business. Western Digital in November 2019 sold its IntelliFlash flash systems to DataDirect Networks, which sells all-flash and hybrid storage to enterprise with demanding compute needs.
"We determined the best way to address the data-centric needs of our customers was to optimize our Data Center Systems portfolio around storage platforms and fabric-attached technologies," including its OpenFlex composable infrastructure, Western Digital spokeswoman Laura Bakken said.
Quantum: Anatomy of a turnaround
The Quantum object storage acquisition comes as the scale-out file vendor resumed public trading of its common stock on Feb. 3. Quantum shares are listed on Nasdaq under the ticker symbol QMCO. Quantum was delisted from the New York Stock Exchange a little over a year ago.
Federal regulators said former Quantum top executives reported revenue earlier than securities rules allow. Quantum last year settled with the U.S. Securities and Exchange Commission, paying a $1 million civil penalty and $8 million to settle shareholder lawsuits.
Quantum's board hired Lerner and CFO Mike Dodson to engineer a turnaround. Lerner said fine-tuning storage products was a secondary priority to stabilizing the company's finances.
Jamie LernerCEO, Quantum
"When Mike Dodson and I joined 18 months ago, Quantum was rudderless and its future was certainly at stake," he said. "We were losing money. We had an SEC investigation that was very large and complex in scope. The cost of the investigation was so high that it created finance and cash pressures.
"We really didn't have a stated strategy and hadn't released any demonstrable new products in many years. There had been heavy management turnover at the VP and board level. It all culminated with us being delisted."
Enterprise customers helped steer new strategy
Lerner said after taking over as CEO, he said he spent time visiting face to face with Quantum's data center IT customers. He credits the customer feedback with helping to galvanize the company's direction.
"The true anatomy of our turnaround was an overarching strategy [made of] gigantic lists," he said. "We met with customers and came away with a list of over 170 items that we had to fix. We took the list and ranked things we thought would have the biggest impact."
During the first phase of the process, Quantum focused on trimming costs and optimizing its products and physical facilities. Instead of building storage gear with expensive servers and hardware, Quantum switched to more commodity-priced hardware and "value-engineered" its products. An example of that strategy is seen in the F-Series NVMe NAS systems introduced in 2019, including an entry-level model.
Lerner said Quantum has trimmed annual operating costs by about $70 million, partly by reworking how it compensates salespeople. Quantum also slashed 75% of its top executive positions and laid off 300 people in 2019 to bring overall headcount to about 900.
Quantum product innovations coming
Lerner joined Quantum after serving as senior vice president at Pivot3, a hyper-converged infrastructure vendor with a strong focus on video surveillance storage. Prior to that, Lerner was president of Seagate's cloud systems and solutions business, where he helped turn around several business units.
"I had the elements of a playbook for doing turnarounds, but this one was the most stressful. I liken it to threading a needle," Lerner said.
Although Quantum still sells tape and disk backup, its forward focus is on storing unstructured data.
In addition to adding Quantum object storage, the vendor is planning to ramp up a software-defined version of StorNext in 2020. That includes building in more features for cataloging and data management, and is the first step of a larger plan to make software-defined versions available for all its storage to run in on-premises and multi-cloud environments.