Tandberg CEO on turnaround strategy
- 05 May, 1999 13:05
While in Singapore recently, Erik Normann, president and CEO of US storage specialist Tandberg Data, spoke with IDG about the company's current plans and financial position.
IDG: You are entering the Digital Linear Tape (DLT) market. How are you positioning this technology with your traditional scalable linear recording (SLR) offerings?
Normann: We have segmented the market based on the two product lines so that SLR is focused on departmental storage, at the entry level of the professional market. That's where we have the large install base. And because of our DLT agreement (with Quantum), we can also benefit from the DLT install base in the heavy network or mid-range segment. So it allows us to play both segments and use our own technology where we feel most comfortable.
One of the main reasons we were able to have a second source agreement with Quantum was that we have tremendous knowledge in the linear recording area.
So we will continue to develop and leverage that technology. We see that a cooperation with Quantum allows us to penetrate both market segments in a more professional and effective way.
The beauty of the Quantum agreement is that Tandberg Data is not adding any research and development resources. So we will have the ability to manufacture coming DLT products developed by Quantum. We can then cater to the market without having to be penalised by heavy investments in R&D. At the same time we can also continue to focus on where we feel the SLR products are easier to sell.
In September, we will start to manufacture the (DLT) drives based on the same concept as Quantum itself. And we have access to the same suppliers as Quantum has or we can buy directly from Quantum.
In 1997 you enjoyed a profit before tax of $US9.1 million, but last year you suffered a small loss. How did that happen?
In 1996, we decided to focus on Compaq as a major customer of the MLR multi-channel platform. We invested a significant amount of money on machinery, in R&D and manufacturing to cater to this. So during 1997, we ramped up everything in order to meet Compaq's expectations. Unfortunately, when we got to March/April 1998, the merger between Compaq and Digital Equipment appeared on the horizon. As a consequence of that, all launches of new products were stopped. The whole loading dock was full of Compaq boxes ready to go and it was stopped. It was pretty tough.
We had to do many things. And this came simultaneously with the Asian crisis and a slump in the US market. So we were hit both ways. In the second quarter of 1998, we lost over $US4 million. We decided to reorganise the company, so in the last quarter we made over $US2 million and this trend I can say is pretty consistent. We are really back in business.
There were certain things we did. We needed to invest more in the marketing area. So we invested significant amounts specifically in the third quarter in additional market activities in the US and with the major original equipment manufacturers (OEMs). At the same time, we started a staff reduction of 80 which was completed by the end of the year.
But the full effect does not really appear until the first quarter of this year. Then we changed the whole financial policy of the company. So instead of risking profits or losses through currency hedging which was done in the past, we decided to float the currency.
Having not succeeded with Compaq allowed us to turn the company around.
We invested significantly in the sales arena plus the sales market was picking up. We bundled certain products, specifically SLR in the European market. We gave more discounts on the multi-channel products to boost the activity, then with major OEMs, invested significantly in campaigns through their distributor and reseller networks, to get awareness out. At the same time the market picked up worldwide and we got a very nice share, so we had an increase of revenue from Q2 to the last quarter.