Quantum Corp has received a single-B’-plus rating from Standard & Poor’s Corp for its proposed issue of $200m of convertible subordinated notes due 2003, and the agency affirmed its single- B’-plus subordinated debt rating and double-B’ corporate credit rating on the company. It says the ratings reflect its strong market position and customer base, successful strategy of contracting out manufacturing strategy, tempered by a high degree of business risk, because demand is tied to the volatile microcomputer market, and Quantum is vulnerable to sudden market shifts and rapid technological change. The acquisition of Digital Equipment Corp’s storage business provided Quantum with needed technology and broadened its high-end product offerings, but profitability and cash flow have been pressured because of the overall lower gross margins and higher capital intensity requirements of the high-end business. The move to transfer high- end manufacturing to existing partner Matsushita Kotobuki Electronics Ltd is applauded, as it will lessen Quantum’s capital requirements significantly, and enable it to respond quickly to changing order rates. Quantum’s ratings outlook is stable.
