Exabyte Makes a Mammoth Impression on Wall Street
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Holmes Report

Exabyte Makes a Mammoth Impression on Wall Street

Exabyte Corporation became a public company in 1989, and after the initial IPO road show it had never again proactively communicated with Wall Street.

Paul Holmes

Exabyte Corporation became a public company in 1989, and after the initial IPO road show it had never again proactively communicated with Wall Street. When the company made an effort to communicate, the pre-announced product introductions were well behind schedule, causing great damage to management’s credibility. Reestablishing management credibility, so that the investment community will act on the outlook provided by the company, is extremely difficult. If management is to rebuild its credibility and gain sponsorship among the investment community, the process usually takes a very long time, and is labor intensive. Metzger Associates was able to plan and execute a program that assisted Exabyte in rebuilding management credibility in record time with record results.


Exabyte Corporation is a leading supplier of tape storage devices and network storage solutions, including tape media, tape drives and libraries. Founded in 1987, and becoming a public company on January 26, 1989, Exabyte’s early product lines dominated the market, commanding more than 80 percent market share in certain market segments. Exabyte manufactured the first high-capacity tape drive in 1987 and launched the first automated tape libraries for the open systems market in 1990. 

Exabyte enjoyed the comfortable leading market position until 1996 when it announced its Mammoth drive, but was unable to deliver the product on time. During the delay, the company lost significant market share to new products and competitors and Exabyte’s closest competitor, Quantum, jumped into the leadership position. As a result, the investment community grew frustrated, lost faith in management and sold off the stock. 

By September 1999, Exabyte’s reputation was damaged and Wall Street responded as the stock fell to a historical low of $3.375. The company that was once a darling on Wall Street, having been taken public by Goldman Sachs, had now dropped off of the radar screen. Exabyte’s management team knew they would need assistance in regaining the confidence Wall Street once had in their company and retained Metzger Associates for its investor relations services in the third quarter of 1999.

Metzger Associates and Exabyte recognized that the timing on the second-generation of Mammoth — Mammoth-2 (M2) — was crucial for Exabyte to recapture the market leadership position and restore Wall Street’s faith in the company. This was the most important product launch in the company’s history, and Metzger Associates was challenged to create and implement an effective IR effort to maximize its visibility among the investment community, all within a very low budget of $5,000 a month plus out-of-pocket expenses. 


Metzger Associates spent one month researching appropriate target audiences for Exabyte’s road show. Metzger Associates analyzed every public competitor’s institutional shareholders and analyst coverage, adding those analysts and institutions that were not involved with Exabyte to the target list. The company also targeted select financial media to add as additional appointments where necessary.

Metzger Associates’ objectives were to facilitate an increase in EXBT’s trading volume and price by reestablishing management credibility and effectively communicating Exabyte’s new product line and business strategy to the company’s existing shareholders; to introduce the company to new, specifically targeted, potential shareholders; and to create a presence for the company among the financial media.


In an effort to ensure a successful launch for M2 and to facilitate Exabyte’s return to Wall Street, Metzger Associates worked with Exabyte’s executives to create a five-month M2 launch plan, spanning from October 1999 to February 2000. This plan focused on delivering the M2 message to key press and analysts who could restore Exabyte’s credibility while vouching that M2 was indeed going to be the fastest, highest-capacity tape drive in the mid-range market. 

In order to create a steady stream of news about Exabyte and M2, Metzger Associates distributed 15 press releases during the first three months of the campaign. Generating this flow of news and excitement about Exabyte and M2 was crucial to stimulating the interest of the investment community. Coupled with this steady stream of news, Metzger Associates developed targeted databases of new prospects, and contacted existing shareholders to reconnect and update them on the M2 launch. Once M2 began to ship on time in late December, Metzger Associates recommended to Exabyte’s management that they take advantage of its significant time-to-market advantage over the competition and “hit the road”. Metzger Associates then coordinated Exabyte’s first East and West Coast financial road show in more than ten years. 


During the eight-day financial road show, the Exabyte management team hosted 44 meetings and met with over 60 individuals. Meeting participants included the financial media, Wall Street analysts and institutional investors. However, Metzger Associate’s efforts did not end there. Following the road show, Metzger Associates implemented a rigorous follow-up strategy that was recorded in a debriefing book prepared for Exabyte’s senior management. The follow-up strategy included the following: 1) each meeting participant received a follow-up call and was asked to comment on a pre-determined set of questions. Their answers were recorded in the debriefing book; 2) Each meeting participant received an updated investor relations kit, a hand-written thank you note, an Exabyte key chain and any other additional items he/she may have requested; 3) Each meeting participant who was not yet on the lists was added to Exabyte’s teleconference and news release lists; and 4) Each meeting participant was given the opportunity to participate in a follow-up conference call with the management team. Metzger Associates scheduled these calls
upon request.


Metzger Associates successfully evaluated Exabyte’s situation and implemented a well-designed strategy that successfully caught Wall Street’s attention again. Exabyte, with the help of Metzger Associates, not only generated interest with new shareholders, but also solidified important existing relationships. The proof is in the results:

Trading Volume and Stock Price Increase

Wall Street’s reaction to the road show proved positive when the volume picked up to over one million shares traded in a single day, a level the company has not seen since April of 1998. The company’s stock price also responded and steadily climbed from $7 ¾ to $10/share.

Analyst Coverage:

Austin Lewis, analyst of Branch Cabell, initiated coverage on the stock in March. His price target is $21.00 based on 1.5 x 2000 revenues of $315 million. He covered the stock in a one-page format that included additional pertinent information on the stock.

Brion Tanous, analyst of Van Kasper, expressed interest in initiating coverage on the stock when Exabyte’s management team met with him. He visited Exabyte’s headquarter twice after the meeting and initiated coverage on the stock in September 2000 with a Strong Buy rating and a $23 Stock Target.

Andrew Saland and Kimberly Alexy, analysts with Prudential Securities, wrote an industry review titled “A Review of the Competitive Dynamics in the Tape Drive Industry.” The report’s information, in part, came from Bill’s presentation. Ultimately, they remained neutral on the sector.

Institutional Results:

John Graves, portfolio manager of Pacific income Advisors, placed a limit order that was executed at approximately $9/share.

Peter Lerner, analyst of Kaufman Fund, bought 200,000 shares of Exabyte immediately following the meeting. He did not know the exact price at execution, but estimated he paid just under $10/share.

Media Hit
Janet Haney, reporter of CBS MarketWatch, interviewed Bill Marriner and posted it on the CBS MarketWatch Web site. She also wrote a positive article labeling Exabyte as a “comeback kid”. Both of these will be archived on CBS MarketWatch’s Web site for one year.

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