Tape drive revenue rises, but unit shipments fall

Posted on September 01, 2001

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BY HEIDI BIGGAR

The tape industry is undergoing a sea change, says Bob Abraham of Freeman Reports, an industry research firm in Ojai, CA. While overall drive shipments continue to fall, revenue for all classes of compact tape drives is expected to post a 6% increase this year-in sharp contrast to last year's 19% decline (see figure).

Abraham defines compact tape drives as small-form-factor devices, such as Quarter-Inch Cartridge (QIC), Digital Audio Tape (DAT), 8mm, Mag star MP, Digital Linear Tape (DLT), and Linear-Tape Open (LTO) Ultrium.

The shift, says Abra ham, author of the recently published study Compact Tape Outlook 2001, reflects two underlying trends: the displacement of low-cost tape products on desktops by CD and DVD alternatives, and the growing popularity of network storage architectures (such as storage area network [SAN] and network-attached storage [NAS]) over more -traditional direct-attached models.

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Abraham predicts that unit shipments will decrease from about 3 million last year to 2.2 million in 2006, for a compound annual growth rate (CAGR) of -5%. Revenue, meanwhile, will increase from $2.1 billion to $3.2 billion, for a CAGR of 7%, over the same period.

Network storage environments require a richer product mix, says Abraham. The drives that fit the bill are the so-called "super drives" (e.g., Super DLT, Ultrium, and third-generation Advanced Intelligent Tape [AIT] from Sony and Exabyte's Mammoth). These newer technologies are more robust and have capacities and throughput rates that justify higher price tags, explains Abraham. He expects them to account for 84% of the market's unit shipments and 96% of revenues, in 2006.

"This explains the unrelenting uptick in the average drive price over the long term," says Abraham. He projects the average OEM price of a compact tape drive to increase from about $900 this year to more than $1,400 in 2006, although the per-megabyte price of these devices will continue to decline. The average cost of these drives at the OEM level is less than $0.04 per MB, according to Abraham.

Sony is expected to begin shipping

AIT-3 drives next quarter; Quantum plans to deliver a more robust version of its first-generation Super DLT product later this year (see sidebar); and Exabyte is scheduled to ship Mammoth-3 early in 2002.

Unit shipments of DLT, 8mm, and Ultrium will increase over the forecast period, as will revenue for both DLT and Ultrium; 8mm revenue is expected to rise through 2005 to $630 million but will drop to $624 million in 2006 despite a slight uptick in unit shipments over the period.

DLT's gains through the period will be modest, with shipments reaching 753,000 units in 2006 and revenue approaching $1.3 billion. Nonetheless, Super DLT shipments are expected to double this quarter, compared to third-quarter results.

As for Ultrium, Abraham expects it to undergo a steep ramp despite recent slowness in its growth rate, from just 20,000 units in 2000-the drive's inaugural year-to about 115,000 this year and 691,000 in 2006. Revenue from this technology is expected to reach $330 million this year and $1.2 billion in 2006.

Despite projections of declining revenue and shipments for all other compact tape drives, there is still opportunity at the low end (see figure), according to Abraham. He says that Ecrix's VXA technology, for example, has a lot of upward migration, DDS still has significant life, and there is still residual business in the QIC market (see "Seagate invests in Travan," left).

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Ecrix expects to begin shipping second-generation VXA drives to OEMs next quarter, with general availability early next year. Ecrix recently announced that Compaq will begin shipping its SCSI and IDE VXA-1 drives into desktop and workstation markets-segments previously served by DDS and Travan, respectively.

DAT shipments and revenue are down significantly from 1999. Last year, shipments fell 21% to 1.5 million units, while revenue fell to $743 million, according to Abraham. This sharp downward trend is expected to continue through 2006, when unit shipments are expected to be just 361,000 for about $128 million in revenue.

Shipments of QIC drives, meanwhile, will decrease from an estimated 439,000 units this year to zero in 2006. Likewise, overall revenue will gradually decrease from about $103 million to zero over the same period, with revenue from minicartridge (i.e., Travan NS) sales falling more precipitously, according to the study. Final customer shipments for this product type are expected in 2004; shipments for data cartridge models (i.e., Tandberg SLR) are expected in 2005. The difference is due to data cartridge's more-aggressive migration path, says Abraham. Of the 784,000 QIC drives shipped last year, 83% were minicartridge.

Currently, there are 13 vendors of compact tape drives, though Exabyte and Ecrix have announced plans to merge by year-end. This compares to 15 last year and 46 more than a decade ago. These 13 vendors manufacture 60 different models of compact drives.

Quantum remains market share leader with 37.9% of total revenue last year, followed by Hewlett-Packard (18%), Sony (16.2%), Seagate (10.9%), and Exabyte (5.5%). HP dropped 4% but was able to hold onto its second-place ranking due to strong DAT sales; Sony, meanwhile, gained 4% on the strength of its 8mm family, according to Abraham.

IBM (3.9%), Tandberg (3.8%), and OnStream (1.5%) rounded out the pack. Notably, however, IBM increased its market share by 2% due to Ultrium sales.


Quantum announces aggressive road map

Quantum says that its newly released Super DLT road map is proof of its commitment to the Super DLT platform over the long term. The road map calls for four generations of drives and media spanning 10 years.

"We're the first [tape-drive] manufacturer to detail plans for a greater than 1TB, greater than 100MBps product," says Barbara Nelson, president of Quantum's Super DLTtape group. To be introduced in 2007, the SDLT 2400 will be capable of 1.2TB of native capacity on a single cartridge and will be backward read-compatible with the previous-generation drive.

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In the interim, Quantum will introduce at least three new drives, starting with the SDLT 320 later this year. A new-generation drive will follow every 18 months thereafter.

The SDLT 320 will be backward read/write-compatible with the SDLT 220 and will have a 160GB native capacity and a 16MBps native throughput.

Freeman Reports projects moderate growth for DLT through 2006, with an expected annualized growth rate of 7%.


Seagate invests in Travan

Despite shrinking market opportunity, the Travan tape format still has supporters. Last June, Seagate Removable Storage Solutions (RSS) and Imation announced plans to continue to develop this low-end tape technology. Earlier in the month, Overland sold its Travan drive designs, as well as options to its manufacturing assets and inventories, to Seagate RSS.

"Travan is a cash cow for Seagate," says Bob Abraham of Freeman Reports. "The strategy in the long term doesn't fit, but it is a viable business opportunity right now. It's not a growing market, but there is residual business."

Seagate can expect unit shipments and revenue to decline steadily over the next few years, with final shipments in 2004, says Abraham. His forecast for the Quarter-Inch-Cartridge (QIC) market, which includes both minicartridge (Travan) and data cartridge (SLR) drives, calls for revenue of about $32 million in 2004, down from $103 million this year and $162 million last year.

Though Seagate has not revealed specifics about the technology's capacity and performance road map, it says the new drives will center on Overland's three-year-old Variable Rate Randomizer (VR2) technology, a partial response maximum likelihood (PRML) recording format that can reportedly improve the native capacity and throughput of linear tape technologies by up to 2x.

The drives will also be value-priced to compete in the under-$3,500 server market and will reportedly not compete directly with Seagate's DAT family (see "Seagate holds out on DDS-5," , June 2001, p. 10). "Travan makes sense for a certain segment, DDS for another," says Bob Hawkins, director of DDS/Travan product-line management at Seagate. He says that despite analysts' forecasts to the contrary, Seagate has seen an uptick in growth in both Travan and DDS sales over the last few quarters.

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