Snapping at the heels of a storage stalwart

Saving Syquest Technology must seem an insurmountable task. CEO Syed Iftiker has admitted he faces an uphill struggle, having bought in four senior managers from the storage industry to share his responsibility and prop up the business.

Net losses of $51.1 million on net revenues of $47.4 million have raised doubts about the US-based firm's chances of survival and indicate that Iftiker is in need of urgent help.

In the UK, northern European sales director Andrew Graham defected to Iomega after three years at the firm. This shows how Syquest has lost out to its competitor.

Syquest's dependence on the declining Mac market hasn't helped the storage firm either. Joe Jura, European storage analyst at market research firm Dataquest, said Syquest used to be 'king of its niche'. But then Iomega discovered a wider PC audience, with its low-cost easy-to-use Zip, Jaz and Ditto drives aimed at the consumer market. Syquest took 14 years to sell two million drives; Iomega took just 18 months.

Syquest's troubles will be compounded in June when Xyratex rolls out Maxit, a removable storage product which is Syquest-compatible. It has twice the capacity of Syquest's 270Mb product for about the same price.

Ursula Connolly, Xyratex channel manager, said: 'Syquest has no obvious upgrade path for its 275Mb product.'

The fact that Xyratex is taking on Iomega by targeting the PC market shows the industry is becoming ever more competitive. Iomega's weakness has been its inability to fulfil demand - this is a weakness Xyratex could exploit. But John Milner of Iomega distributor Ambar Systems thinks this is impossible at its present production rate. 'I don't see Xyratex having any impact on Iomega when it is only producing 3,000 units per month,' he said.

Vendors always say competition is healthy, but Iomega has run away with the market so far, and should make the most of it while it can. Other companies such as Sony and Panasonic are carefully monitoring the situation, waiting for Iomega to hot up the market in readiness for them to move in. One thing is for certain, an ailing Syquest does not need bigger competitors that the ones it has got.