Will Bidders Wish To Nibble Exabyte?

After logging a larger-than-expected fourth quarter loss, Exabyte Corp. is looking at its strategic alternatives, including a sale of part or all of the company. And one equity analyst believes that Exabyte, a $60 million market cap company, would have an easy time on the auction block. The Street however, seems to think differently. When asked if the company would have a difficult time finding a buyer, Brion Tanous, an analyst at Wells Fargo Van Kasper, said, “Not at all.” He added that the most likely scenario would be Exabyte selling its tape library business for two times library [business] revenues. In other words, the unit could fetch around $8 a share, or $200 million, he said. On February 28, however, Exabyte’s stock closed at $1.88, suggesting such a takeout level for a unit which generates 50% of the company’s revenue was a long shot. Boulder, Colo.-based Exabyte makes tape-based data storage products for archiving and data backup, including tape drives and tape libraries, and products for storage area networks. Tanous said that Sony Corp., which has a successful tape drive business that it wants to build, might be interested in the Exabyte’s tape library business. Exabyte’s division would help Sony accelerate its penetration into the North American market, he said. Sony did not return a call seeking comment. Exabyte could see a takeout range of less than one times company revenue, or $8 a share, to 1.25 times revenue, or $12 a share, added Tanous. He said that the lower takeout range factors in Exabyte’s poor fourth quarter performance. Indeed, for the fourth quarter, Exabyte posted a loss of $43 million on revenue of $61 million, compared with a year-earlier loss of nearly $12 million on revenue of $59 million. It could not be determined by press time whether struggling Exabyte had retained an investment bank.