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Exabyte Corporation


1685 38th Street
Boulder, Colorado 80301

Telephone: (303) 442-4333
Fax: (303) 442-4269

Public Company
Incorporated: 1985
Employees: 1,242
Sales: $382 million
Stock Exchanges: NASDAQ
SICs: 3572 Computer Storage Devices

Company History:

Exabyte Corporation designs, develops, produces and sells tape subsystems for data storage applications. The company primarily makes a full range of eight-millimeter, four-millimeter, and quarter-inch minicartridge tape drives and tape libraries, as well data cartridges and media supplies. Exabyte also provides worldwide service and support for its full line of products. These products provide reliable compact data storage for discreet but fast growing segments of the computer industry, including mid-range systems, networks, workstations, and personal computers. Exabyte's products offer a range of storage applications for data acquisition and interchange, data and software distribution, automated storage management, and archiving.

In 1985, Exabyte was founded by Kelly Beavers, Juan Rodriguez and Harry Hinz, a camera buff who saw the possibilities of turning camcorder technology into an ultrafast, high-capacity data storage medium. Rodriguez had 20 years of computer experience at IBM and then as co-founder of Storage Technology, a producer of disk drives. Hinz and Beavers were fellow Storage Technology employees. The founders initially sought to produce and sell high-capacity, self-operating, eight-millimeter tape drives for use as data backups for mid-range computers. Before the creation of Exabyte, producing backup data was a laborious process, requiring the use of conventional tape technology and the presence of operators tediously changing reels or cartridges as they slowly filled with data. This process could take hours, sometimes days. With Exabyte's innovation, backup operations could be performed quickly and without the presence of manual operators. The company's success relied primarily on the quickly changing computer industry and the increasing need to manage, store, and retrieve vast amounts of essential data.

The innovation of high speed backup systems was a relatively recent phenomenon. Early computers were designed for calculating rather than for storing and managing data, which was largely done on punch cards. Rapid advancements in computers rendered these machines obsolete, giving way to workstations, minicomputers, networks of personal computers, and supercomputers used for a host of academic, commercial, and scientific purposes. Central to these advancements were rapid innovations in the microprocessor, governing the speed and power of computer systems. Equally important were advancements in the ability of computers to collect, store, and retrieve huge quantities of data. The phenomenal growth in storage capacity, usually in the form of nonremovable disks, created a parallel need for efficient backup systems in case of data loss. While computer manufacturers had considerably increased disk drive capacities, innovations in tape backup systems lagged far behind. Exabyte was originally conceived for this purpose.

Exabyte's beginnings were not without difficulty. Rodriguez's reported run-ins with venture capitalists over product marketing, after only six months of testing the technology, almost torpedoed the company's chances. When the venture capitalists withdrew their backing, Exabyte had to fire all 11 of its employees. Enough local investors came forward, however, for the company to rehire them. After overcoming these obstacles, Exabyte's early success relied mostly on forging strategic partnerships to gain additional capital and manufacturing expertise. In 1986, the Japanese giant Sony Corp. agreed to produce mechanisms for the tape drives. Other agreements with Japan's Kubota to make tape drives and Solectron of Silicon Valley to produce circuit boards permitted Exabyte to limit its manufacturing role to final assembly, testing, and customization. The 1987 partnership with Kubota also brought in a large cash infusion which considerably boosted Exabyte's cash flow.

With the backing of these partnerships, Exabyte introduced in 1987 the EXB-8200 eight-millimeter tape drive to support minicomputers and networks of personal computers. The tape backup system packed 2.3 gigabytes of data onto a videocassette and sold for $2,055. As anticipated, the tape drive was self-operating and represented a breakthrough in adapting consumer video recording technology to the storage of computer data. Applying helical scan recording technology, which had been used in video products for 30 years, Exabyte produced a compact, relatively inexpensive eight-millimeter tape cartridge drive which could hold unprecedented amounts of data. Unlike other backup systems at the time, the tapes could also be conveniently removed and stored in a vault. The EXB-8200 was the world's first "eight-millimeter helical scan computer storage subsystem," reducing considerably both the labor and media cost for saving backup data. The product was also designed for other conventional data processing uses, including data acquisition, software distribution, archiving, and data interchange. In the realm of data acquisition, the EXB-8200 could record and archive seismic, satellite, telemetry and other scientific information. It also proved useful for medical and other imaging systems. In contrast to conventional tape drive technology, Exabyte's helical scan device employed relatively slow-moving tape using heads mounted on a rapidly rotating drum. This method offered several advantages contributing to high recording density. The need for "tight tolerance" was considerably reduced as the tape drive used only one or two short tracks at a time, rather than multiple, lengthier tracks found in conventional parallel track recording. This method meant that recording tracks could be run closer together. In addition, the helical scan technology permitted the tape to run at a slower rate producing far less stress on the tape. In turn, less stress meant that thinner metal particle tape could be used to record at high densities.

In 1987, Peter Behrendt joined Exabyte as president, after more than 26 years at IBM, where, along with other positions, he directed its worldwide electric typewriter business and international marketing strategy for storage products. When Behrendt arrived at Exabyte, the company employed just 50 people and had sold only 69 tape drives worth $170,000. With Behrendt, sales tripled to $89 million in 1989 and then increased to $287 million in 1992, making Exabyte one of Fortune magazine's 100 fastest growing companies in America. In 1991, Behrendt became CEO. He then succeeded co-founder Juan Rodriguez as chairperson, after Rodriguez left in January 1992.

Several months later, in September 1992, eight complaints were filed against Exabyte in the U.S. District Court for Colorado, alleging that top officials hyped Exabyte's earnings potential in order to sell off large blocks of personal stockholdings before having to release bad news. The complaints came immediately after a 38 percent one-day drop in Exabyte's stock price following news that its 1992 third-quarter earnings would fall far below analysts' predictions. On January 21, 1993, the plaintiffs filed a consolidated amended complaint alleging primarily the same action. The District Court dismissed the consolidated complaint, however, after the plaintiffs failed to establish an actionable claim.

In 1990, Exabyte introduced the EXB-8500, the first in a series of second generation eight-millimeter tape subsystems, which included improved data recording capabilities, storage capacity, and retrieval and transfer speed. Exabyte produced its family of eight-millimeter drive subsystems with capacities ranging from 2.5 to ten gigabytes largely for the high end of the market. The products accounted for approximately 80 percent of total revenue from 1991 through 1993. In 1994, the company also introduced the Mammoth eight-millimeter cartridge tape subsystem, the industry's fastest, highest capacity tape drive. When shipped, the product would offer a major technological leap forward with a storage capacity of 20 gigabytes.

In addition, starting in 1992, Exabyte began a series of strategic acquisitions to move from focusing exclusively on eight-millimeter data storage products to providing a full range of eight-millimeter, four-millimeter, and quarter-inch tape solutions. In 1992, it entered the low to mid-range tape system market with the acquisition of R-Byte, a producer of four-millimeter cartridge subsystem tape products. In 1993, Exabyte purchased the Mass Storage Division of Everex Systems, Inc. which designed and produced quarter-inch minicartridge subsystems for the low-end and mid-range network and high-end personal computer market. The company then bolstered its position in the eight-millimeter market through the 1994 acquisition of German-based Grundig Data Scanner GmbH, adding helical-scan tape component research and manufacturing capabilities. The production and distribution of automated tape libraries made Exabyte the leading supplier of this product in the world.

These strategic acquisitions considerably enhanced Exabyte's share of the tape drive market. In 1993 alone, the company announced nine new products spanning three tape drive technologies, as well as automated tape libraries. Between 1987 and 1993, the company's work force went from just 50 to more than 1,000. Moreover, Exabyte had also installed approximately 650,000 eight-millimeter tape drives throughout the world worth more than $1 billion. From a product line of one eight-millimeter tape drive subsystem with 2.5 gigabytes, by 1994 Exabyte was producing more than 30 distinct products in the eight- and four-millimeter, and quarter-inch formats, as well as library products that automatically stored between 50 gigabytes and 3.2 terabytes of data, a huge jump in storage capacity.

Exabyte's full range of products proved remarkably efficient and gained wide use among operators of personal computer networks, workstations, and mini and personal computers. Even before the advent of its second generation products and acquisitions, Exabyte counted among its customers IBM, Sun Microsystems, Motorola, NCR, Nixdorf, and Northern Telecom, to name a few. Since then, Exabyte added other customers including AT&T, Data General, Hewlett-Packard, Unisys, and many others. By 1990, the company had installed more than 100,000 tape subsystems to backup computers.

Exabyte produced its eight-millimeter and quarter-inch tape drives at its facility in Boulder, Colorado. The California firm, Solectron, manufactured Exabyte's four-millimeter products at its plant in Penang, Malaysia. The company's production strategy relied on "just-in-time" manufacturing techniques, which emphasized flexibility and continuous flow. Exabyte also customized its subsystems for selected customers. In 1993, the company acquired Tallgrass, a marketer of storage products, to sell and support Exabyte's full range of subsystems and tape libraries to distributors in North and South America. Exabyte also established a wholly owned subsidiary in the Netherlands and sales and technical support offices in Amsterdam, Frankfurt, Manchester, Paris, Singapore, and Tokyo to sell its products throughout Europe and Asia. In 1990, Exabyte established another subsidiary in Cumbernauld, Scotland, to provide repair services to European customers. The company later relocated these services in 1994 to a large facility in nearby Falkirk. In 1995, the company announced the opening of its Shanghai, China, office to meet the needs of the burgeoning Chinese market.

Since Exabyte went public in 1989, the storage market became highly competitive and subject to rapid technological innovation. A number of manufacturers with alternative technologies entered the market and competed for a limited number of customers. Many companies, some considerably larger than Exabyte, were also engaged in producing and commercializing data storage systems, including IBM, DEC, and Hewlett-Packard, which sought to incorporate their own storage systems in their computer products. The industry had also undergone consolidation. In 1992 and 1993, the industry experienced ten mergers and acquisitions, resulting in fewer but much larger multi-billion dollar competitors. This trend was attributed to the move toward single suppliers providing multiple products. In addition, these companies moved to restructure themselves and to form strategic alliances to adapt to changing market conditions and growing competition. While Exabyte appeared to have a lock on the market for eight-millimeter tape subsystems for data storage in the mid-1990s, some speculated that other companies would soon enter the lucrative market. At that time, Exabyte's competition came primarily from companies manufacturing and distributing four-millimeter products, which because of their lower cost and smaller size rivalled the eight-millimeter products at the low-end computer workstation market. Exabyte's four-millimeter products also competed directly with these offerings. In 1994, the company stated that "more than ever before, Exabyte is running a tough race for market leadership. While the company's expansion into new technology areas is designed to enhance its future growth prospects, it also means there are more fronts on which to fight the competition." Still, Exabyte's history of technological innovation and aggressive strategic acquisitions proved highly successful and seemed to have positioned the company well for the future.

Further Reading:

Alan Deutschman, "America's Fastest Growing Companies," Fortune, October 5, 1992, pp. 59-82.
Kathleen K. Wiegner, "Attention Packrats!" Forbes, May 14, 1990, p. 126.

Source: International Directory of Company Histories, Vol. 12. St. James Press, 1996.

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