News

posted on 13 March 2008 03:21

The Tandberg Data Extraordinary General Meeting on March 12th saw the shareholders back the refinancing recovery plan and give the greenlight to CEO Patrick Clarke and his team to save the company.

Clarke was appointed in January and his team discovered that the company was in a perilous situation, so much so that emergency refinancing via a debt for equity swap was needed. The bondholders agreed to this on March 10th and the EGM supported them.

A new share issue will take place which involves share consolidation because of a structural financing issue. The share consolidation was originally proposed as 1000 to one share, but the shareholders` meeting couldn't accept that and decided upon a consolidation from 100 to one share.

Assuming that the new share issue subscriptions are taken up then the company will have NOK100 million (Norwegian Kronor) - NOK120 million additional capital and Clarke and his team can turn their attention to implementing the reconstruction plan.
This is going to involve about 80 people losing their jobs and other cost reduction items.

But it is also going to involve a cold, hard look at the product line with under-performing products destined for end-of-life.

The company sells three main groups of products: RDX removable disk; tape automation; and disk-to-disk backup, plus tape media and some services.

The RDX removable disk is a bright spot with increasing revenues and a quite eager and growing market. The tape automation line consists of autoloaders and rackmount libraries for small and medium enterprises. They come in three formats: LTO4; SLR; and VXA. The VXA line was acquired with the Exabyte purchase which also gave Tandberg additional channel members, particularly in the USA.

SLR is a defunct format. The tape world is rapidly consolidating to LTO and, unless Tandberg has a strong, enduring and profitable niche market for SLR, that format will, it's feared, have to go. LTO4 migration beckons.

The same is true for VXA, notwithstanding its many strengths as a helical and not longitudinal format. But LTO rules the roost and, unless there is a secure, profitable and defensible VXA niche, such as Apple tape backup users, then the best thing to do would be to migrate VXA customers to LTO4.

For both SLR and VXA customers another pair of alternatives are RDX migration or disk-to-disk (D2D) backup. The RDX removable drive technology has the portability of tape and is newer, with fewer competitors. The D2D line is quite restricted with Tandberg having a StorageCab 6000 product and not much else.

Other suppliers have stronger D2D lines with virtual tape libraries, deduplication, replication and back-end tape library integration. It will take a lot of development cash to gain those technologies.

The probability may be that Tandberg will look to convert its SLR and VXA users to either LTO4, where it has a strong offering with both full height and half height drives, or to RDX products.

Longer term Clarke and his team have to find a direction for the company that builds on its strengths. This will have to wait. The good ship Tandberg has hit an iceberg. Is the outcome going to be like the Titanic, with a sinking, or recovery? Sink prevention is the first objective.

The bondholders and shareholders think they have a handle on stemming the financial side of things.

The executive team has to rearrange the deckchairs and lighten the ship by dumping unwanted cargo. Then they have to find somewhere welcoming to sail to. It's going to be a really busy time for them over the next few months. They deserve our best wishes and good luck.

[Chris Mellor.]