Loss-making Quantum claims it is ‘now a self-sustaining business’

Jamie Lerner
Jamie Lerner

In 2007 Quantum was a billion dollar a year tape automation-led business. Today it is a $343.2m run rate tape and file data management business. It aims to transform into a primary, secondary and archive storage software subscription business. But the pandemic is making this work more complicated.

Revenues for Quantum’s second fiscal 2021 quarter ended September 30, were $85.8m, down 18.9 per cent Y/Y from $105.8m, The net loss of $4.6m was a bit worse than same time last year (- $2.3m). The company expects next quarter’s revenues to be $93m plus/minus $2m, down from $103.3m a year ago.

Jamie Lerner
Jamie Lerner

Chairman and CEO Jamie Lerner said in last week’s earnings call: “We are executing a profound, pervasive and somewhat rapid transformation. And I think it’s only appropriate given the time that we’re using this crisis to accelerate our transformation.”

Lerner said the results exceeded our forecasted outlook, benefitting from the strength of our Federal government business, and solid sales execution. We are … maintaining discipline with our expenses while increasing our investment in research and development to support the introduction of new software products.”

The federal gains partially offset pandemic-related declines in other vertical markets and lowered sales to hyperscaler customers due to to fluctuating purchase cycles.

Lerner said: the company experienced a gradual recovery throughout the quarter, with purchasing and procurement activity ramping up across most end markets.” But the recovery in the video market, where there were signs of light, “may take more than one or two quarters, given how the pandemic has impacted movie and TV production and professional sports.”

He added: “Even with lower revenue levels, we are now a self-sustaining business.”

Hyperscalers ahoy

Quantum has three hyperscaler customers for its archival tape library, including two that signed up in the quarter and will start production purchases in the next quarter. A fourth is evaluating Quantum’s products. CFO Mike Dodson said: “We believe it could be a multi-year period to ramp the new hyperscaler production buys to full capacity levels that we have experienced with our long-standing hyperscaler customer.”

Quantum also revealed it has a newly developed primary storage product and hopes to begin selling to hyperscalers and others in the fiscal fourth quarter.

Lerner is looking ahead to a annual recurring revenue software-led Quantum. “On November 10, 202 we take the first step in this regard, with the launch of next generation data management software to classify, visualise, and orchestrate data, both on premises and in the cloud, along with new ways to automate data movement in the highly anticipated release of StorNext 7.” 

“We’re actually going to be providing the entire software stack that is needed to run that [tape archive] at exabyte scale. And we’ll be the first vendor to come out with a complete multi-exabyte scale software stack that can be literally rolled directly in production with cloud players.”

Quantum is moving away from selling its software running on hardware appliances. “With this launch, we are separating the software from the underlying hardware … and setting the stage for running the software in the cloud or on premises regardless of the underlying infrastructure.”

This will shift its business over time to a recurring revenue model “driving improved gross margins and more predictable revenue streams.”