Jon Gacek CEO, Quantum

Quantum Corp. announced that Jon Gacek has been appointed CEO, succeeding Rick Belluzzo, who has led the company since September 2002. The leadership transition, which is effective immediately, is the result of a planned management succession begun last year. Gacek has also been appointed to Quantum’s Board of Directors.

Gacek has been president and COO of Quantum since January of this year and had previously served as executive vice president, COO and CFO since May 2009. He joined Quantum as executive vice president and CFO in August 2006, upon Quantum’s acquisition of Advanced Digital Information Corp. (ADIC). Before that, Gacek served as CFO at ADIC for seven years and as an audit partner at PricewaterhouseCoopers LLP, where he led the Technology Practice in the firm’s Seattle office.

Belluzzo will continue as chairman of Quantum’s Board of Directors and also assume the newly created position of executive chairman. In this role, he will assist in the leadership transition, primarily engaging with key customers and partners, as needed.

"During my time as CEO, and particularly since the merger with ADIC, we have been focused on moving Quantum to a position of delivering consistent profitability, with a strong foundation for future growth," said Belluzzo. "Over the past year, we have largely completed this transition, as evidenced by gross margins consistently above 40 percent, improved profitability, and significant revenue growth in disk systems and software, where we have established ourselves as a key player in high opportunity market segments. Jon has played an instrumental role in this success and has clearly demonstrated the ability to lead Quantum moving forward."

"I am very excited to be taking on this new role and building on the work we’ve done," said Gacek. "Quantum is well-positioned as we begin the new fiscal year, with expanded market opportunities, increased channel momentum and new product platforms and enhancements across our portfolio. These include our new DXi 2.0 backup, deduplication and replication software, which recently began shipping and enables us to deliver both significantly higher performance and better price-performance than competitive offerings."

"I will talk more about our plans and expectations for FY12 when we announce our March quarter financial results on May 17, but we do expect to grow both total revenue and branded revenue for the year as we capitalize on the opportunities ahead," Gacek added.

The company stated that it expects March quarter revenue to be approximately $165 million, with preliminary results indicating growth in total branded revenue and disk systems and software revenue over the comparable quarter last year. Quantum also reported that it had paid down $40 million of senior debt in the March quarter. Finally, the company said it has experienced minimal disruption to date from the disaster in Japan.

Comments

There was high hopes at Quantum when Rick Belluzzo replaced Mike Brown as CEO in September 2002, as he had formerly an exceptional position, president and COO of Microsoft - but after failing as chairman and CEO of Silicon Graphics.

He was finally far to be successful. At this time Quantum was a $1.4 billion company. For FY2011 ending last March 31, revenues are estimated at $672 million. Since 2002, Quantum has accumulated a total of more than $790 million in net loss. It ended 3FQ2011 with $93 million in cash and cash equivalents and $280 million in total debt.

Following the acquisition of ADIC by Quantum in 2006, a good but expansive deal ($770 million), the dominant team has been progressively replaced by people from ADIC, notably new CFO Jon Gazek that was then promoted president and COO in January 2011. Some years before, there was already rumors concerning the departure of Belluzzo, and later that Gazek was becoming the most influential executive in the company.

We met always optimistic Belluzzo for an interview in October 2009 and asked directly the question: "What specifically are you doing to avoid being fired by your board?" He quietly answered:" That's easy. Let me be clear. We are doing two things, and the board agrees with me, and our employees understand what we have to do, and if we do this well as a company, I'm not going to be fired. The first one is to manage our tape business, to continue to improve our profit margin, not our revenues, but our profit margins. For us, that means operating income that's in double digits. In the past with tape, for both ADIC and Quantum, were only in single digits, often low single digits. We want to be 10-11-12-13% profitability. And to manage the tape business to do that, because it's a mature business. And secondly it's to grow our disk systems and software business, every quarter. Stronger and stronger and stronger. Those are the two things that if we do them well, the company will be successful, I won't be fired, and our employees understand that as well, that this is what's important for the company as we go into this next phase."

He has not been fired but has just lost his CEO position becoming executive chairman to "assist in the leadership transition, primarily engaging with key customers and partners."

Belluzzo took time to understand that tape was no more a viable and growing market, the firm acquiring tape drive maker Certance in 2004 - after the acquisition of Benchmark also in tape cartridges in 2002 -. Quantum completely lost its battle against LTO with its own highly successful DLT/SDLT that beats 8mm format from Exabyte, to finally adopting LTO. Entering into removable HDDs was also a failure. The firm lost OEMs and this market was never totally compensated by branded products. Quantum had the good opportunity to be acquired by its partner EMC needing to get de-dupe technology. But the storage giant finally preferred Data Domain bought for as much as $2.2 billion in 2009 and became a more aggressive competitor in this field.

In earnings call following Quantum's fiscal quarter results ending December 31, 2010, Belluzzo said:" In FY2011 our goal has been to deliver our first year of overall revenue growth in more than four years." One more mistake since total sales will be lower.

At the same time, Gazek added:" Q4 is typically seasonally down to Q3. We expect revenue of 165 to 175." He is luckier in his forecast as the company just stated that it expects March 2011 quarter revenue to be approximately $165 million.

Now Quantum will have to continue to capitalize more and more on two excellent technologies in its portfolio:

de-dupe (with D2D DXi), that Quantum got from ADIC, a product coming from start-up Rocksoft acquired by ADIC in 2006 for $63 million, even if it's becoming a commodity product offered by many storage companies

StorNext shared disk file system, a unique software originally named CentraVision File System and created by MountainGate Imaging Systems also bought by ADIC, in 1999.

Quantum's FY Results

in US$ millions

Revenues

Growth

Net income (loss)

2002

1,087.8

-23%

42.5

2003

870.8

-20%