Will You Give This Data Leader Another Chance?

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What a difference three months can make. Last quarter, shares of bulk data storage specialist Quantum (NYS: QTM) jumped nearly 11% overnight on a so-so fourth-quarter report accompanied by a rosy next-year forecast. Fast-forward another quarter, and the same stock fell 18% on an only-slightly-worse first-quarter report.

So what happened in the three months in between? For starters, Quantum's sales of disk systems -- mostly rebranded by system builders such as Dell (NAS: DELL) , Hewlett-Packard (NYS: HPQ) , and IBM (NYS: IBM) and then resold as part of the whole package -- fell a bit short of management's expectations. That's not immediately obvious because these OEM sales are a very small part of Quantum's operations and also include sales from the better-performing tape drive segment.

Quantum-branded DXi disk-based backup systems and StorNext content sharing machines are supposed to provide fuel for Quantum's growth these days, and on top of that, fiscal 2012 is supposed to be a year of growth for the company. But sometimes things don't work out according to plan, and both the DXi and StorNext systems underperformed in the first quarter.

Some companies fail because they don't know what they're doing; Quantum has a solid plan but just isn't executing.

However, I'm convinced we're looking at a short-term problem. Trailing gross and net margins have been pretty stable for a long time, and the trend in cash flow margins is actually on the rise. Quantum just needs to figure out how to win more contracts in competition with storage giants NetApp (NAS: NTAP) and EMC (NYS: EMC) without sacrificing margins in the process.

It's basically Sales 101, and I think Quantum's management knows it. The company recently overhauled its leadership by replacing the CEO, CFO, and chief of worldwide sales -- all in the last seven months. The new team reportedly has structural changes to the sales process brewing, and these things often take some time.

Quantum is sitting on some valuable technology, particularly in the much-vaunted field of data deduplication and other storage efficiency tools. I still see a big, red takeover target painted on the company's back, though the most likely suitor fell away when Cisco Systems (NAS: CSCO) decided to stop buying and start simplifying its business instead. By hook or by crook, I don't see how Quantum can fail to reward shareholders given these assets and the new, low buy-in prices.

Big Data is, you know, big, and Quantum is an important player in the field. To learn more about this steaming-hot industry, including an in-depth profile of a stock that has provided 250% returns in less than two years, you should grab a copy of this free report. It was constructed by top analysts from our Stock Advisor team and full of directly investable information for storage and data hounds, and best of all, it's totally free. Just click here to get informed.

At the time this article was published Fool contributorAnders Bylundholds no position in any of the companies discussed here. The Motley Fool owns shares of EMC. The Fool owns shares of and has created a bull call spread position on Cisco Systems.Motley Fool newsletter serviceshave recommended buying shares of Cisco Systems. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. You can check outAnders' holdings and a concise bio, follow him onTwitterorGoogle+, or peruseour Foolish disclosure policy.

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