SecProbe.io

CORRESP
1
filename1.htm

Correspondence

 April 14, 2009

 Via EDGAR

 Securities and Exchange Commission

 100 F Street, N.E.

 Washington, D.C. 20549

Attn:
Craig Wilson

Re:
Quantum Corporation

Form 10-K for Fiscal Year Ended March 31, 2008

Filed June 13, 2008

Form 10-Q for Fiscal Quarter Ended December 31, 2008

Filed February 9, 2009

File No. 001-13449

 Ladies and Gentlemen:

 Quantum Corporation (the “Company” or “Quantum”) submits this letter in response to comments from the Staff of the Securities and
Exchange Commission (the “Staff”) received by letter dated March 31, 2009 relating to the Company’s Form 10-K for Fiscal Year Ended March 31, 2008, filed June 13, 2008, and Form 10-Q for Fiscal Quarter Ended
December 31, 2008, filed February 9, 2009.

 In this letter, we have recited the comments from the Staff in italicized, bold type
and have followed each comment with the Company’s response.

 Form 10-K for Fiscal Year Ended March 31, 2008

 Cover Page

1.
The cover page to your Form 10-K indicates that you currently have registered pursuant to Section 12(b) of the Exchange Act a class of common stock titled
“Quantum Corporation—DLT & Storage Systems Group Common Stock.” We note that this class of stock appears to be a vestige of your former tracking stock structure and no longer appears to be authorized by your amended and
restated certificate of incorporation, which provides only for “Common Stock” and “Preferred Stock.” Please advise.

 Securities and Exchange Commission

 April 14, 2009

  Page
 2

 Response:

 We confirm that the reference on the cover page to securities registered pursuant to Section 12(b) of the Exchange Act should simply state
“Common Stock.” We will revise this reference in future filings.

 Part I

Item 1.
Business

 Customers, page 7

2.
We note that Dell represented 16% of your revenue in fiscal 2008. We also note the risk factor disclosure on page 12 that a significant decline in revenue from Dell could
materially and adversely affect you. Please tell us if you have considered including in your Form 10-K a description of your contractual arrangements with Dell, or in the absence of an ongoing contractual relationship, a clarification of that status
and a descriptive summary of the manner in which the parties conduct business. To the extent the parties have entered into written agreements, please analyze the basis of your determination that the agreement need not be filed. As applicable,
discuss the basis of your conclusions regarding the lack of substantial dependency upon any such agreement. See Item 601(b)(10)(ii)(B) of Regulation S-K. Also, please tell us if you are substantially dependent for purposes of
Item 601(b)(10)(ii)(B) on your agreements with those contract manufacturers who are your only source for certain tape drives and tape automation products, as disclosed on page 17.

 Response:

 The agreement with Dell is a standard “no
commitment” distribution agreement containing basic provisions such as pricing, warranty and support. The agreement does not require Dell to buy any of the Company’s products. Therefore, we do not believe that describing the specific terms
of this contract would provide meaningful disclosure to investors.

 In addition, we do not believe that the Dell agreement should be filed as an exhibit to
our periodic reports since it is an ordinary course agreement upon which our business is not substantially dependent. As noted above, the agreement does not require Dell to buy any of the Company’s products; rather, the agreement sets forth
only the terms to which a sale will be subject if and when Dell places an order with us for specified products.

 Securities and Exchange Commission

 April 14, 2009

  Page
 3

 For purposes of
Item 601(b)(10)(ii)(B) of Regulation S-K, we are not substantially dependent on our agreements with contract manufacturers that are our only source for certain tape drives and tape automation products. In order to improve our cost structure, we
have tried to consolidate our manufacturing as much as possible; however, we continue to use numerous contract manufacturers. There is nothing proprietary in the manufacturing process relating to these products that could not be transferred to
another contract manufacturer, and many items are interchangeable. In the past we have successfully transitioned tape automation products from one supplier to another existing supplier of different products. In addition, a significant dollar volume
of our products is manufactured in our own manufacturing facility located at Colorado Springs, Colorado. This facility is staffed with employees who have product knowledge and experience, and if needed, we could transfer manufacture of tape drive
and automation products here.

 Backlog, page 9

3.
We note your disclosure that you do not believe that your backlog levels are a meaningful indicator of your future revenues or are material to an understanding of your
business. Notwithstanding your opinion regarding the utility of backlog information to investors, you may be required to disclose information concerning backlog levels. Please tell us the dollar amount of your backlog, if any, as of a date close to
the time you filed your report and as of a comparable date in the preceding fiscal year.

 Response:

 Our sales come from purchase orders, and we do not have long-term sales commitments. The nature of our business is that we ship most of the backlog that we accumulate
during any particular fiscal quarter in the same quarter in which the backlog is first reported. Therefore, our backlog generally grows during each fiscal quarter and shrinks during the latter part of the quarter to reach its lowest levels at the
end of that same quarter, by which time significant shipments have occurred. As a result, our backlog as of the end of any fiscal quarter is not material.

 Our backlog as of June 15, 2008, the date closest to which we filed our most recent Form 10-K, was approximately $9.8 million. We were in the process of converting to a new ERP system in May 2007, so backlog information as of a
comparable date in the preceding fiscal year is not meaningful. Our backlog as of February 8, 2009, the date closest to which we filed our most recent 10-Q, was approximately $4.5 million and was approximately $2.3 million as of March 31,
2009. We will disclose backlog in our future filings at such time as it becomes material.

 Part II

 Securities and Exchange Commission

 April 14, 2009

  Page
 4

Item 5.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, page 24

4.
We note your disclosure in this section that the information required regarding equity compensation plans is incorporated by reference from your definitive proxy statement.
However, your definitive proxy statement filed on June 27, 2008 does not appear to contain the Equity Compensation Plan Information table. See Item 201(d) of Regulation S-K. Please advise.

 Response:

 We confirm that the Equity Compensation Plan
Information table was not included in the definitive proxy statement. We will ensure in future filings that the table is included in either the Form 10-K or the related definitive proxy statement in accordance with the applicable rules.

Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

 Results of Operations for Fiscal 2008, 2007 and 2006, page 28

5.
We note your disclosure on page 14 that increased competition in the tape drive and tape automation markets has resulted in lower prices and lower margins earned on tape
drives and media and your disclosure on page 15 that competition among tape media suppliers has periodically resulted in intense, price-based competition for media sales. Please tell us if these pricing pressures have had a material impact on your
results of operations in any of your three most recent fiscal years. It appears you should provide quantitative information about any material changes in prices that affect your operations or results materially. Additionally, to the extent changes
in prices had a significant impact on your revenues from one period to the next, quantitative information regarding such an impact should be provided. See Item 303(a)(3)(iv) of Regulation S-K.

 Response:

 Pricing pressures have not had a material impact on
our results of operations in the three most recent fiscal years, as it relates to our tape drives, media and tape automation systems.

 Our revenue from
tape drives and media decreased in fiscal 2007 and fiscal 2008 from fiscal 2006, primarily due to our changed focus to sell our newer, higher margin products and due to our older tape drive products nearing end of life. Although competition among
media suppliers has periodically resulted in price-based competition for media sales, during fiscal 2007 and fiscal 2008 we have generally chosen not to compete for such sales. To date, foregoing such revenues

 Securities and Exchange Commission

 April 14, 2009

  Page
 5

has not materially impacted our results of operations, as evidenced by our relatively consistent media revenues in fiscal 2006, fiscal 2007 and fiscal 2008,
with modestly higher material margins for these media revenues by fiscal 2008.

 Our tape automation systems revenues have increased significantly in fiscal
2007 and fiscal 2008 compared to fiscal 2006 without a significant change in estimated average unit prices. We estimate average unit prices using product line installed base data. In addition, we have had significant increases in material margins
for tape automation systems in both fiscal 2007 and fiscal 2008.

 We will revise the risk factors and management’s discussion and analysis in our
future filings in order to clarify the impact of pricing pressures on our business.

 Liquidity and Capital Resources

 Long-Term Debt, page 40

6.
We note your disclosure regarding the covenants on your revolving credit facility and term loan. Please explain to us what consideration you gave to disclosing the details of
these covenants. See Item 303(a)(1) of Regulation S-K and Section IV.C of SEC Release 33-8350.

 Response:

 We considered Item 303(a)(1) of Regulation S-K and the guidance set forth in Section IV.C of SEC Release 33-8350 when developing our MD&A
disclosures related to liquidity and capital resources, including our revolving credit facility and term loan and the related covenants.

 SEC Release
33-8350 lists two scenarios in which companies should consider whether discussion and analysis of material covenants related to their outstanding debt may be required. First, if a company is, or reasonably likely to be, in breach of a covenant, it
must disclose material information about the breach and analyze the impact on the company if material. Second, if covenants limit, or are reasonably likely to limit, a company’s ability to undertake financing to a material extent, the company
is required to discuss the covenants in question and the consequences of the limitation to the company’s financial condition and operating performance.

 With regard to the first scenario, at March 31, 2008 and through the date of our Form 10-K filing on June 13, 2008, we were not in violation of any of the financial or non-financial covenants of our revolving credit facility and
term loan, and we did not consider a violation to be reasonably likely.

 Securities and Exchange Commission

 April 14, 2009

  Page
 6

 With regard to the second
scenario, our revolving credit facility and term loan include a covenant that restricts our ability to undertake certain debt and equity financings. However, as of March 31, 2008 and through the date of our Form 10-K filing on June 13,
2008, we believed that our projected cash flows from operations and existing cash and credit facilities as of March 31, 2008 were adequate to support our operations and that undertaking a material financing was not necessary. As a result, we
did not include specific disclosure related to this covenant. We did include in our Form 10-K filing on June 13, 2008 (in the Long-Term Debt section on page 40) a description of the provision in our revolving credit facility and term loan that
the facilities were subject to accelerated maturity on February 1, 2010 if we did not refinance our existing $160 million convertible subordinated debt prior to that date, though we also believed at that time that we would be able to refinance
this convertible subordinated debt prior to February 1, 2010.

 In addition, because we believed that our projected cash flows from operations and
existing cash and credit facilities as of March 31, 2008 were adequate to support our operations and that undertaking a material financing was not necessary, we also believed that we had complied with Item 303(a)(1) of Regulation
S-K’s requirement that we “indentify any known trends or any known demands, commitments, events or uncertainties that will result in or are reasonably likely to result in [our] liquidity increasing or decreasing in any material way.”

 However, in light of the protracted global credit crisis and worldwide recession that began in the second half of 2008, we reassessed the nature of the
covenants in our revolving credit facility and term loan and our ability to continue to comply with these covenants, particularly the covenant requiring us to refinance our convertible subordinated debt prior to February 1, 2010. By the end of
our third fiscal quarter on December 31, 2008, we concluded that further disclosure was required in our periodic filings regarding the covenants in our revolving credit facility and term loan, the risk that we may default on these covenants and
the impact of these defaults on our liquidity. Therefore, in our Form 10-Q for the third quarter ended December 31, 2008, we included the following additional disclosure in the MD&A of the Form 10-Q (under Capital Resources and Financial
Condition on page 32):

 “Under the terms of our senior secured credit agreement (“current credit agreement”), in order to avoid an
acceleration of the maturity date of our outstanding obligations, we must refinance at least $135.0 million of our convertible subordinated notes by February 2010. While we are currently exploring various options to refinance these notes, there
has been nothing finalized at this time. In addition, on January 30, 2009, our credit rating was downgraded by Moody’s due to their concerns about our ability to retain sufficient liquidity in light of the potential accelerated
maturity of our long-term debt in February 2010. Due to the continuing adverse developments in the global financial markets and crisis in the credit markets, there can be no assurance that we will be successful in refinancing the convertible
subordinated notes by February 2010 on terms acceptable to us and the lender, or at all. If we are not successful in completing such refinancing and are unable to obtain an amendment or waiver from the lender, all outstanding principal and

 Securities and Exchange Commission

 April 14, 2009

  Page
 7

accrued interest under the current credit agreement will immediately become due and payable. We do not currently have sufficient cash and cash
equivalents to repay our outstanding debt under the current credit agreement. For additional discussion of the risks associated with this refinancing covenant, see the various risk factors addressing our long-term debt, our convertible subordinated
notes and related matters in the “Risk Factors” section below.”

 In addition, we added the following risk factor regarding our refinancing
covenant to the Form 10-Q and cross referenced it in the MD&A passage above:

 “In the event that we are unable to refinance at least $135
million of our outstanding convertible subordinated notes by February 2010, we will need to repay all our obligations under our senior secured credit agreement, whic