January 28, 2000

Y2K over, data storage firms optimistic on 2000

Boulder County’s evolution as a high-tech hub is in many ways inseparable from the presence of data storage companies in the area. Louisville’s Storage Technology Corp. has long been an anchor for the area’s high-tech industries; time and time again, successful start-ups have been founded and guided by the company’s ex-employees. 1999 proved a stormy year for StorageTek. 2000, in many ways, represents the dawn of a new era.
Despite increasing specialization in the data storage industry and marketplace, 2000 is also a turning point for two of the county’s other data storage players: Exabyte Corp. and Ecrix Corp., both based in Boulder. Management from each company commented on their opinion of the past and coming years, revealing three companies in very different positions.Storage Technology Corp.In October 1999, the company announced lower-than-expected earnings – a $16 million net loss for the third quarter – and a subsequent restructuring strategy.
Randy Chalfant, direction and technology assistant to StorageTek’s Chief Executive David Weiss, attributed the loss to the lack of a competitive economy of scale in the company’s end-to-end consulting operations. “We just weren’t getting that much money out of it,” Chalfant explained. “It was draining the other parts of the company.” Thus, the company has taken the “bold step to turn it off and move forward,” he added, emphasizing a return to the company’s core competencies of tape and network storage. “We’re back to acting like a subcontractor rather than a prime contractor,” Chalfant said.
On the positive side, 1999 was a record year for the company in product introductions. StorageTek also saw a 68 percent revenue growth in ’99 in the client-server tape automation area, as well as several new arrangements with original equipment manufacturers (OEMs). The year represented an increased focus on marketing the company’s storage area network (SAN) products. “We are pressing a large amount of development resources in the SAN area,” Chalfant said.
While the Y2K rollover occurred uneventfully, it might have inhibited the 1999 data storage market, Chalfant said. “The upside to it was a smooth transition,” he noted. “The downside was that most of these data centers were locked down in their decisions. They weren’t buying what they normally were buying. Revenues were impacted. How much is difficult to say.”
However, “What they weren’t buying (in 1999), they probably will be buying” in 2000, Chalfant added. “We think this is going to be a good year.” Much of the optimism is based on the aggressive push into SANs and the growth in client-server-based products, he said. “We’ve never been better positioned with technology and marketplace focus than we are now.”Ecrix Corp.”1999 was their baptismal year,´ said Ray Freeman, data storage industry analyst and president of Santa Barbara-based Freeman Associates Inc., of Boulder’s Ecrix Corp. “The results aren’t in yet.”
The baptism was the release of its VXA-1 drives during 1999’s second quarter. The company has touted the product, a 5.25-inch, 66-gigabyte helical-scan drive, for its reliability and durability. “We’re coming up the ramp,´ said Marty McCoy, Ecrix’s vice president of sales and marketing, of demand for VXA-1. “It’s just a question of how steep of a ramp it’s going to be. Sales are growing beyond expectations.”
Marty McCoy, vice president of sales and marketing at Ecrix, said the Y2K issue was a nebulous one for Ecrix: “Some of the large customers and some of the large users I was talking to were in Y2K lockdowns.” It was “hard to gauge,” however, because ’99 was the VXA-1’s debut year, leaving no comparison to years past. “Y2K, of course, had significant impact on the industry as a whole. I imagine that people were a little more religious about backing up data.” Some purchase moratoriums, he added, were in place until Jan. 15.
In 2000, the company will market a Macintosh-compatible VXA-1, as well as release the 110 gigabyte VXA-2 in the latter half of the year, McCoy said. He noted a priority above product releases, however: “The main thrust we’re working through is getting OEMs in place.” Once Ecrix technologies are qualified by OEMs, new products will be the focus, he said. “And selling a lot of tape drives and making a lot of money,” McCoy laughed.Exabyte Corp.Freeman summed up 1999 for Boulder’s Exabyte Corp.: “Exabyte waited through the agony of waiting for Mammoth 2 to deliver. It’s very meaningful that they got it out there (during the fourth quarter 1999.)”
Stephen Smith, chief financial officer at Exabyte, said Y2K had no impact on the Mammoth 2 release: “It (Y2K) was fairly neutral.” He cited high demand for media due to more pervasive backups, but that purchasing lockdowns might have depressed the market somewhat.
A pioneer in the unattended backup segment in the data storage market, Exabyte has recently worked on developing the Mammoth platform and vertically integrating manufacturing capability into their operations.
Competition from digital linear tape cut into their niche dominance beginning in the mid-’90s. The combination of heavy investment and lost income put a damper on growth in the following years. “We lost a significant market share at the same time we became vertically integrated,´ said Smith. “One of the big challenges of 1999 was to resolve investments.”
In 2000, the company is pinning its comeback hopes on Mammoth 2 (M2). “M2 is an extremely competitive product,´ said Smith, citing its improved capacity and speed over M1 — from 20 gigabytes at 3 megabytes per second to 60 gigabytes at 12 megabytes per second. “The early introduction of M2 is very significant in our comeback story.”
Smith noted that the M2 beat its competition to market, while M1 (which he termed “a marginally competitive product”) did not do so. Being first to market gives Exabyte a boost in qualifying its products with OEMs.
Beyond M2, Exabyte is looking to offer a more integrated set of services, Smith said. We as a company have to move past the pure supply of components,” he explained. “To continue that, we have to be more into the software side and the integration side of the business.” Smith brimmed over with optimism. “It’s a great comeback story here.”

Boulder County’s evolution as a high-tech hub is in many ways inseparable from the presence of data storage companies in the area. Louisville’s Storage Technology Corp. has long been an anchor for the area’s high-tech industries; time and time again, successful start-ups have been founded and guided by the company’s ex-employees. 1999 proved a stormy year for StorageTek. 2000, in many ways, represents the dawn of a new era.
Despite increasing specialization in the data storage industry and marketplace, 2000 is also a turning point for two of the county’s other data storage players: Exabyte Corp. and Ecrix Corp., both…

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