Quantum Corporation

We are in the business of data protection--we know what it takes to meet today's demands. From the desktop to the data center, our solutions combine the most reliable and cost-effective technologies with ease of integration. Together with our worldwide partner network of trusted technology vendors, we protect your business-critical data with scalable systems. Quantum Corporation is a leading supplier of digital linear tape (DLT) technology used to backup data. It has sold more than 100 million half-inch cartridge tapes for the two million DLT tape drives in use. Quantum was the largest hard disk drive manufacturer in the world before these operations were sold off to Maxtor. Quantum also produces disk-based data backup systems. The company's revenues remained at the same level in 1986, but production delays with its new generation of 3.5-inch disk drives led to a loss of all but two of its customers. Displeased with what they regarded as complacent management, Quantum's board of directors replaced Patterson with Stephen M. Berkeley, the head of the company's subsidiary, Plus Development Corporation. In addition to a new chief executive officer, the board also appointed David A. Brown, a former associate of Berkeley at Plus Development, as Quantum's new president. Realizing that Quantum had fallen behind its competitors in the market for hard disk drives, Berkeley and Brown were determined that their company should take the lead in the industry-wide move toward smaller computers. This decision meant that Quantum would have to phase out its production of 5.25-inch disk drives in order to concentrate on the 3.5-inch disk drive market. The two men immediately plotted a strategy that was unusual for companies within the disk drive industry. Ordinarily a firm either buys the components it uses to build disk drives or it manufactures its own. Either road has both benefits and liabilities: if a firm buys its components, it avoids high fixed costs but may run short of parts when demand increases; conversely, if a firm makes its own components, it can outfit production easily to meet an increase in demand, but if demand slows then high fixed costs take their financial toll. Having already established a working partnership with Matsushita Kotobuki Electronics Industries, Ltd., a Japanese firm that had grown into the largest manufacturer of videocassette recorders, Berkeley and Brown hired MKE to facilitate Quantum's entry into the 3.5-inch disk drive market. The two companies reached an agreement whereby Quantum took on the responsibility of designing and marketing new products while Matsushita manufactured them. Although the Japanese company had never built a disk drive before, its skills in manufacturing electromechanical equipment had already been proven. Quantum's arrangement with Matsushita instantly led to benefits for both companies. Matsushita required Quantum to completely redesign and overhaul the manner in which it developed disk drives, which led to the implementation of design by robotic assembly. Although this redesign frustrated some of Quantum's engineers, the end result was more than the company could have hoped for. Since Matsushita spent nearly $150 million in developing automated plants, Quantum derived all the benefits of manufacturing in-house without any of the usual fixed costs. In contrast with most of Quantum's competitors, over 95 percent of all the disk drives built on Matsushita assembly lines needed no reworking. This efficiency meant that Quantum had one of the highest gross margins in the entire disk drive industry--even after what was paid to Matsushita. Quantum's strong revenue growth was partially due to the introduction of new products and the upgrade of existing ones. The company brought out 11 new models of its 3.5-inch and 2.5-inch drives and improved its product line of Passport removable disk drives. The company also put a significant effort into reducing the amount of development time for a