Tape drive maker Exabyte has been cast out of paradise and must fight hard to restore its fortune.
Boulder, Colorado, is rated as one of the top five places to live in the US. Based at the foot of the Rockies, with access to skiing, one of the best universities in the US, and surrounded by fast-growing businesses, it is regarded as an idyllic location. Indeed, Boulder was one of the main reasons why Exabyte CEO and president Peter Behrendt joined the company.
Exabyte has had an idyllic life up to now as well. Established in 1985, the business has been one of America's fastest growing companies since it invented 8mm helical scan technology for the storage market.
Chris Wening, Exabyte international accounts manager, said: 'We had the luxury of having a monopoly for two to three years. Those were the days when we had a nice lot of money and fast cars.
'In the 1980s, Exabyte completely mopped up and took the market by storm. Not an RS/6000 machine went out the door without an Exabyte drive,' one observer agreed. And Ken Smith, owner of the Pargent group, became rich on the back of his exclusive European distributorship of Exabyte drives.
But last year struck a different note for Exabyte's directors, most of whom have been with the company for nine years or more. '1995 was not our best year,'conceded Behrendt, and it was deemed 'extremely painful' by chief financial officer Bill Marriner.
A series of problems hit the company, resulting in a loss for the third quarter of 1995 - the first since 1988: the market was soft; Mammoth, its new product due to ship that year, was delayed; Sony did its manufacturing and the yen was strong against the dollar, which increased costs; and Exabyte had to pull out of the 4mm market.
Above all, the heritage of having a monopoly took its toll on Exabyte, which was unprepared for competition. Quantum was able to fulfil the market with its DLT offering, while Exabyte anxiously waited for Mammoth. As Werning indicates, last year was pretty desperate. 'I could cry when I think how we handed over (market share) to Quantum,' he said.
Now Exabyte is eager to tell the world that Mammoth has finally arrived, and that by implication its problems are over, but this is doubtful. 'If someone ordered a bundle of drives I couldn't fulfil the order,' said one distributor. To date, the manufacturer has shipped only 2,000 drives.
It started making them itself for the first time in an attempt to get away from its dependence on the yen.
Other problems loom for the company as competition toughens. This year Sony entered the market with a rival 8mm product to Mammoth. In a report on its quarterly performance, ended March 30 1996, Exabyte stated: 'The company believes that the Sony introduction represents the first 8mm offering by a competitor. Sony's competitive position may also adversely affect the company's ability to procure 8mm mechanical decks and tape media (as Sony is its sole supplier for media) at required volumes and competitive prices.'
One source said: 'Sony got upset when Exabyte walked away so it decided to try to hurt them in their own market.'
With regard to Quantum, one industry source said: 'No one doubts that Exabyte has a huge captive market, but its customer base has been chipped away with every year that has passed since DLT came along.' It is interesting to note that Quantum has put the pressure on locally by building a facility in Boulder. Although Exabyte lost some staff to its rival as a result, it says it didn't lose anyone it didn't want to lose.
To forestall future problems, Exabyte is trying to move away from its dependence on the 8mm market with its Eagle products for the PC market.
But 8mm still accounts for 62 per cent of its business, as of last year.
Its successful entrance into the even more competitive market of the PC tape arena, is important to the company. 'We're counting heavily on the quarter inch business growing in the future,' said Behrendt.
With competitors closing in on its traditional stronghold of the 8mm market and with a poor track record at doing anything but 8mm, Exabyte must be keeping its fingers crossed that it makes it in the PC market.
It is a massive change of approach for the company. The Eagle division is being treated as a start-up company so that it is not polluted by the 8mm business, and the traditionally OEM-oriented company is having to run its first advertising campaign to keep up with companies with strong brands, such as Hewlett Packard.
While other storage companies have diversifed, Exabyte is still solely concentrated on tape, although it is understood to have bought Datasonix' software business - US-based storage company Datasonix was set up by former founders of Exabyte but went bust earlier this year.
Robin Courtenay, sales and marketing manager for Sony computer peripherals and components UK, said: 'With the likes of Quantum and ourselves, we have an advantage over Exabyte as R&D costs can be shared out over a wide product range. The secret is to have as many technologies as possible, whereas Exabyte is committed to one technology.' Such a commitment may be dangerous.
As Behrendt said: 'We are focused solely on tape. Many of our competitors are doing other things. We know what we have to do. If we do not succeed in the tape business then we will go out of business.'
Such a statement underlines the critical nature of this year for the Boulder-based company, which up to now has been cosseted by the good life.
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