EMC Bails Out Quantum

Last week, when EMC provided financing to Quantum, the storage industry saw its version of an economic rescue -- really without much fanfare. Sure there was the defense of the move from a few of the EMC bloggers and, of course, the response from Data Domain. But let's face it, this deal just made sense for both parties. That said, there are some interesting questions if you read between the lines of the press release.

The loan by EMC makes sense, because it has a fair amount of cash on its balance sheet -- about $9 billion -- and it needs Quantum to continue for a while. The relationship does seem to be working out for EMC, although I am not sure I can 100 percent back its claim of de-dupe leadership. Data Domain and Exagrid are also making similar claims, and they are in the conversation.

The first thing to read from this is that Quantum, despite being considered a player in the de-dupe space, a space that is growing like wildfire in this tough economy, was unable to get financing elsewhere, and EMC jumped in to loan it $100 million. The reason stated is that those very same tough economic times made it difficult for Quantum to get funding. I find that interesting.

Storage vendors in general, and de-dupe vendors in particular, are still getting funding. For example, Ocarina Networks secured $20 million at the end of February. Others in the de-dupe space like Exagrid and Septon are approaching profitability. In fairness, they were not asking for $100 million, and they were not going to use that to convert a credit facility -- but they are getting funding. Maybe it was just easier to get the money from EMC, maybe the terms were better, there could be a dozen reasons.

The point here is Quantum needed outside help. Despite being in a hot market, it was not able to overcome the debt, and it was clearly a problem, as I predicted in my original post about the issue. The other point is Quantum got it, so one of the major concerns I had last year about the firm has been put aside.