The launch of Quantum Corp’s entry-level ProDrive ELS series (CI No 1,977) heralds a change of direction, the hard disk drive manufacturer says. The Milpitas, California company is eager to get a foot in the entry-level systems door and shift emphasis away from its traditionally higher-priced products. The new range offers more capacity for roughly the same price and will replace the existing ProDrive family. This move follows forecasts from industry analysts at San Jose market researchers Dataquest that the personal computer market is to grow between 10% and 20% by 1995 – and demand is being boosted by the current price war. Low-cost 80386 and 80486-class systems are expected to make up the majority of sales, with 80Mb to 200Mb drives in the highest demand. The market for entry-level hard disk drives is expected to be in excess of $3,000m. Thus, in the belief that the price-sensitive 80386 and 80486 systems market is opening up major opportunities for disk vendors, Quantum has decided to try and cash in. And ProDrive ELS is the result. The primary aim of the new product was to improve margins, by fitting in with present pricing levels. Quantum says it wants to be pro-active about stemming the margin decay that is hitting many major vendors. So it moved to reduce the number of components in its drives by about 40%. Material costs make up 70% of product prices. By simplifying design, but using mature technology from both the GoDrive and ProDrive LPS lines, it has facilitated the high volume production that minimises costs. Quantum also claims to have cut the number of manufacturing steps in half, by designing the manufacturing process and the drive in parallel.
Change of direction
A further change of direction is in a somewhat altered sales strategy. Quantum aims to place much more emphasis on putting its products through distribution channels rather than in the OEM market, its traditional customer base. Again, Quantum has taken the advice of industry analysts very seriously. By 1995, some 43% of personal computer sales are expected to go through indirect channels. Overall hard disk drive sales via this outlet are forecast to grow at two or three times the rate of the industry as a whole. Although 3.5 drives presently constitute the highest volume of sales, by 1993 distribution of 2.5 drives is expected to grow by 144%. This is attributed to increased levels of knowledge and sophistication on the part of end-users and the higher availability of drives and systems, which now are being sold by non-traditional outlets, such as mail-order catalogues and superstores. Quantum’s own sales through distribution rose to $406m in 1992 from $272m in 1991 and now account for 35% of business, up 49% on the previous year. The figure is expected to hit 50% within two years, partly on reorganisation of the sales effort and partly on the way the market is developing. In October 1991, the company established Quantum Commercial Products to provide a corporate focus to the distribution side of things. This $400m business unit was formed by merging Quantum’s industrial distribution group with its wholly-owned subsidiary, Plus Development Corp. Nonetheless, at present OEM business still accounts for a hefty 65% of sales, and Quantum claims most of the big computer manufacturers as customers, including Apple Computer Inc, AT&T Co, Dell Computer Corp and Siemens Nixdorf Informationssysteme AG. Quantum was founded in 1980 and has risen to become the third largest independant hard disk drive manufacturer worldwide. Employing 1,870, it continues to grow at an impressive rate. In 1992, revenue increased 28% on the previous year to $1,130m and the company forecasts that by the end of this fiscal year, sales will be more like $1,560m. Although it manufactures disk subsystems sold specifically to the end-user marketplace, it is better known for its 3.5 and 2.5 OEM drives. According to Dataquest, the worldwide market for 3.5 disk drives is to grow to 38m in 1995 from about 24m units in 1991, for average annual growth of 12%.
By Catherine Ever
ett
Unit shipments of 3.5 drives with capacities ranging from 200Mb to 500Mb are to increase by 57% per year, while 3.5 drives with capacities higher than 500Mb are expected to grow annually by a massive 175%. The surge in popularity for higher capacity drives is based on the belief that more and more people will be using multiple drives within a single system. In addition, 3.5 drives are forecast to become increasingly popular replacements for 5.25 and even 8 drives in multi-user systems. Likewise, the number of 2.5 drives sold is forecast to grow to nearly 14m by the end of 1995 from 3m in 1991, a 47% annual growth rate. Such estimates are based on the rapid growth of the notebook market and the anticipated use of these drives in notebooks, small desktop computers and, as prices fall, in such things as facsimile machines and laser printers. Nonetheless, if other markets start to open up, Quantum does say that it is quite prepared to examine their potential with the 1.8 market the most exciting proposition. Quantum’s disks are aimed solely at the workstation, desk-top and notebook markets. Although demand for both workstations and notebooks continues to grow, in terms of units and revenue the desktop market is where it’s at and low-end systems are said to be the major cause for recent surges in demand. The company currently balances its manufacturing between sites in Silicon Valley and Ipponmatsu, Japan. The US site specialises in producing Quantum’s highest capacity, most technologically complex products, while the Japanese facility does its high-volume, more mature products and drives designed for the retail market. The Japanese concern belongs to Matsushita-Kotobuki Electronics Industries Ltd, with which Quantum has had a partnership agreement for over seven years. The relationship is based on mutual interest, for while Matsushita may be responsible for making a large proportion of Quantum’s drives, the work accounts for a hefty two thirds of the Japanese firm’s business. Quantum is also quick to assert that it designed Matsushita’s manufacturing process, while the latter contributed its expertise as an established manufacturer of electro-mechanical products. A third plant is to open in the autumn, in Dundalk, Ireland. Operated by Ireland Kotobuki Electronics Industries Ltd, a Matsushita subsidiary, it is to focus solely on Quantum drives for desktops and notebooks for the European market. After deciding to move to Ireland, Quantum set up a configuration and systems centre in Dundalk, not only to be closer to European customers, but also to be in a better position to customise products. Logistics centres exist in Amsterdam, Singapore and California. Since 1984, Quantum’s European headquarters have been in Frankfurt, Germany but from January 1993, they will move to Neuchatel, Switzerland for financial reasons, in particular lower tax rates. The Neuchatel site is to be the central co-ordinating point for European and Asia-Pacific operations. It will deal with order-taking, devising manufacturing schedules, invoicing and collection.
Neuchatel
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European employees currently number 72, and there are sales offices in Frankfurt, Paris and London. Frankfurt also has a service and repair centre. While some 48% of sales are made in the US, 31% of revenue comes from Europe and 21% from the Pacific Rim. South America is cited as a rapidly emerging market, after years in the doldrums. The company boasts 43 distributors in Europe, Israel and South Africa, sales and marketing subsidiaries in Singapore and Japan, and a sales office in Taiwan, and is looking still further afield as well as expanding its international support network. Quantum attributes its success to corporate emphasis on automation and high yields as the way to achieve the greatest level of flexibility, enabling it to respond rapidly to changes in the market. It proudly states that, unlike its competitors, it has not as yet laid off any staff, as labour accounts for only a tiny proportion of the cost of its drives. Quantum also stays in close contact with i
ts computer-making customers – very important as it often designs drives from scratch, to work in computers still at the drawing board stage. Under its Supplier Partnership Programme, it works with vendors on component design and is eager to develop long-term partnerships with them. Advanced Recording Technology group and Advanced Products Engineering groups have been set up to develop new technologies. The main areas of interest here are the continued increase of product areal density, development of advanced recording channels and the design of custom chips and signal processing techniques.
