Tandberg Storage: Fiscal 1Q08 Financial Results

  NOK 1 = US$ 0.20

Tandberg Storage ASA has announces the financial results for its 1Q08.

Highlights

• Best quarter of LTO shipped volumes ever
• Revenues and earnings lower than previous quarter due to weaker USD
• Maintained market share of 24% in growing market – second largest supplier in the HH market
• Shipment to new OEM to commence in Q2
• Equity issue of 11,1 MNOK completed

Customers and markets
Shipped volumes in Q1 increased over Q4/07 and reached all time high. However the corresponding revenues in Q1 were lower than the previous quarter due to weaker USD versus NOK. The effect on the gross margin from change in the exchange rate corresponds to MNOK 1.

LTO is established as the industry standard for professional tape storage and continuous its growth. Tandberg Storage is maintaining its market share for LTO Half Height (HH ) products of 24% at year end, Hewlett Packard, one of the largest server suppliers to the market, and who also manufacture LTO products, had 56% market share. There are only two other suppliers of HH LTO, IBM and Quantum.

There are two different market channels for Tandberg Storage’s LTO products:
1) to major OEM’s and
2) through distribution networks to end users.
So far both channels have been served through Tandberg Data ASA (TAD). The Company is now preparing to serve OEM’s directly, whilst TAD will remain an important distributor of the LTO products, both integrated in their own design automation products and as LTO tape drives to end users.

Agreement with a major European OEM for supply of LTO3 drives has been previously announced. Deliveries under this agreement will commence in Q2. Though the volumes are expected to be limited in 2008, these shipments mark an important milestone for TST in its strategy towards direct OEM sales.

Financials

• In Q1, the operating revenue was 67,8 MNOK compared to 73,4 MNOK in Q4/07. The gross margin for Q1 was 15,9 % compared to 15,7 % in Q4/07. The margins will vary depending on the product mix at any given time.
• TST’s EBITDA and EBIT were 0,5 MNOK and -7,1 MNOK respectively in Q4/07, while the corresponding numbers in Q1were 0,2 MNOK and -7,7 MNOK.
• The depreciation of the capitalized development cost for the LTO2 project accounts for approximately 4 MNOK per Q1 and 2,7 MNOK for LTO3.
• Net result before taxes was – 9,2 MNOK in Q1. Net financial items were -1,5 MNOK
• TST’s net cash balance was 5,1 MNOK by the end of Q1.
• During Q1, Tandberg Storage ASA has issued equity in the range of 11,1 MNOK. The equity was raised in order to strengthen of the working capital.
• Equity was 83,5 MNOK in Q1.
• The capitalized development cost amounted to 112,9 MNOK in end Q1.

Operations
Tandberg Storage’s LTO drives are manufactured by Lafé Technology Limited in China. The company has in Q1 increased production capacity to meet the continuous demands from the market. The manufacturing capacity can accommodate further growth.
The existing LTO2 drive has been redesigned to be based on the same electronic platform as LTO3 and LTO4. The redesign simplifies the supply chain activities and improves the volume of the electronic components. The reduced number of components and complexity of the electronics will facilitate lower material cost and improved quality by the middle of Q2.
A portion of the units shipped in Q4/07 has shown field performance below requirements. This has been solved and the field analysis now shows that the products are in compliance with end-user targets.
The development of the LTO4 HH drive is running according to plan and the approval of the product was given in December 2007. This demonstrates the competence and capability of the company regarding technology development within the applicable disciplines. Less than one year has lapsed since the introduction of the LTO3 HH drives to the market. LTO4 HH will be released for general availability world-wide in May and is currently under evaluation by key OEM’s.

Future prospects
The total market for LTO tape drives is expected to continue to grow and so is Tandberg Storage’s market volume. With focus on optimizing the market channels and the costs of goods sold, higher margins are expected. This is important in order to secure the relevant long term return on investments in the development of different LTO tape drive generations.
The introduction of Tandberg Storage LTO4 HH in the market will mark another milestone in the development of the company and its business.
Tandberg Storage is continuously in search of new applications and partners for its technology and competence to maximize shareholder value long term. The O-Mass technology appears to be interesting for applications also outside the tape storage business.

Tandberg Storage ASA