Storage Soup

Nov 10 2017   10:27AM GMT

Quantum CEO Gacek’s a goner after poor quarter

Dave Raffo Dave Raffo Profile: Dave Raffo

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Quantum

Quantum CEO Jon Gacek is out following poor sales results for the data protection and scale-out storage vendor last quarter.

The Quantum board named director Adalio Sanchez as interim CEO. Chairman Raghu Rau said he will head a search for a permanent CEO, with the help of an executive headhunter firm.

Quantum Thursday reported revenue of $107.1 million for last quarter, down from $135 million last year and more than $15 million below Wall Street expectations. Quantum lost $7.9 million in the quarter compared to a $4.1 million profit last year.

The results prompted the Quantum CEO change. Gacek joined Quantum through the 2006 acquisition of rival tape vendor ADIC. He had been ADIC’s CFO and assumed that role at Quantum. He was promoted to COO in 2010 and became the Quantum CEO the following year.

Chairman Rau described the quarter as a disappointment “that fell short of all our expectations” and a “very eventful” quarter for Quantum.

The Quantum CEO change was hardly shocking considering moves the company made over the past eight months. After years of up-and-down quarters, Quantam agreed with demands from investor VIEX Capital Advisors to change the board last March, and Rau joined then. IBM veteran Sanchez and Marc Rothman joined the board in May, pushing Gacek off the board. Rau became chairman in August. Quantum added VIEX’s Eric Singer to the board Thursday.

After Rau became chairman, he, Sanchez, Rothman and Alex Pinchev formed a committee to conduct a strategic review of Quantum.

Sanchez said his work on the review gave him a head start in as interim Quantum CEO.

“I am hitting the ground running,” said Sanchez, who spent 32 years at IBM and a year at Lenovo.

Rau said Quantum is “intensely focused on taking aggressive actions” to reduce cost and he predicted increased revenue and profitability over the next six months.

Sanchez said Quantum will cut around $35 million in costs over the next year. Quantum also secured $20 million in funding from TCW Direct Landing and PNC Bank to go with $170 million in funding from those lenders a year ago.

Sanchez said the board reviewed Quantum’s strategy, go-to-market model and cost structure. He described StorNext scale-out storage as Quantum’s growth engine and data protection as its profit engine. But while Quantum is looking for LTO-8 to give the tape products a boost, CFO Fuad Ahmad said the vendor must “reorient” its strategy for its DXi disk backup platform. He said Quantum will maintain its partnership with Veeam Software to integrate backup software on DXi and tape products, but will scale back development on the DXi data deduplication appliances.

“We are a small player in that market with less than three percent market share,” Ahmad said. “While it’s a fairly profitable business for us, it is not core to what we want to do long term.”

Sanchez said Quantum will build a software-defined storage business around StorNext and its Rook.io open source project to build cloud-native file, block and object storage.

“We will reposition our company over time as a modern software-defined provider as new products rollout,” Sanchez he said.

Sanchez described his priorities over the next 90 days as “re-ignite the sales engine,” reduce costs and “execution, execution, execution.”

Product revenue last quarter slipped to $63.6 million from $88.6 million last year. Overall Scale-out storage revenue of $33.8 million was down from $46.6 million. Disk backup fell from $18.7 million to $11.7 million, and tape automation slipped from $59.7 million a year ago to $52.2 million.

Quantum executives blamed the poor results partly on industry conditions and the failure to close large deals before the end of the quarter. They expect a bit of improvement this quarter but will still fall below last year’s results. For this quarter, Quantum forecast revenue of $120 million to $125 million compared to $133 million last year. Its six-month guidance is for revenue of $250 million to $260 million.

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