Xyratex: Fiscal 2Q09 Financial Results

(in US$ millions)	2Q08	2Q09	*Growth*	6 mo. 08	6 mo. 09	*Growth*
Networked storage solutions	232.6	184.3	-21%	420.4	340.0	-19%
Storage infrastructure	33.9	10.5	-69%	63.1	28.6	-55%
Total Revenues	266.5	194.7	-27%	483.5	378.6	-22%
Net income (loss)	2.2	(9.6)		.025	(25.8)

Xyratex Ltd announced results for the second fiscal quarter ended May 31, 2009. Revenues for the second quarter were $194.7 million, a decrease of 26.9% compared to revenues of $266.5 million for the same period last year.

For the second quarter, GAAP net loss was $9.6 million, or $0.33 per share, compared to GAAP net income of $2.2 million, or $0.07 per share, in the same period last year. Non-GAAP net loss was $6.7 million, or $0.23 per share, compared to non-GAAP net income of $4.6 million, or $0.15 per share, in the same quarter a year ago.

Gross profit margin in the first quarter was 12.9%, compared to 15.3% in the same period last year due to the reduction in Storage Infrastructure revenues and a change in the sales mix of Networked Storage Solutions products.

Revenues from our Networked Storage Solutions products were $184.3 million as compared to $232.6 million in the same quarter a year ago, a decrease of 20.8%. Gross profit margin in the Networked Storage Solutions business was 12.7% as compared to 14% a year ago. Revenues from our Storage Infrastructure products were $10.5 million as compared to $33.9 million in the same quarter a year ago, a decrease of 69%. Gross profit margin in the Storage Infrastructure business was 18% as compared to 24.9% a year ago.

"Though the global economic environment has continued to pose some challenging business conditions, we are starting to see some positive indications that our customers are experiencing signs of market demand stabilization. We continue to work with our customers in ensuring we are executing effectively in meeting their product demand and technology requirements," said Steve Barber, CEO of Xyratex. "I was satisfied with the actions taken in reducing expenses through the quarter and remain focused on demand creation and expense management as we enter the second half of the fiscal year. I believe we have taken the right actions to position ourselves for growth within the markets we serve."

Comments

Here are some abstracts of the conference call transcript:

Richard Pearce , CFO
"The decline in revenue as compared to the same quarter a year ago primarily reflects the implementation of our license agreement with NetApp, as I previously discussed, whereby a maximum of 25% of their volume can be undertaken through an authorized manufacturer.
"As a result of our restructuring actions, headcount at the end of the May quarter was 1,680 employees, a reduction of 85, or 5% over the previous quarter.
"Given the limited visibility, the company believes that it is not appropriate to provide formal financial projections, however, the most recent customer forecasts do provide me with confidence that the company will return to profitability in the second half of 2009."

Steve Barber, CEO
"Our fiscal second quarter revenue was above our expectations, growing 11% sequentially to $184.3 million, as a result of relatively stronger demand from our larger customers, including Dell, IBM, and NetApp. Demand for the remainder of the year remains limited, however there are signs of our customers becoming more confident in their near-term planning assumptions.
"We shipped 373.34 petabytes of external storage in our fiscal second quarter representing a 28.8% growth over the prior quarter and 31.0% growth over a year ago. Based on recently published data on the total petabytes shipped in calendar Q1 2009, we estimate that Xyratex once again maintains its position as a leading player in the market, supplying over 14% of capacity on an annual basis.
"The breakdown of shipping capacity by interface type for Q2 was: fiber channel, 80.02 petabytes; SATA, 279 petabytes; SAS, 14.31 petabytes; and FSBs with software interface, 13.6 terabytes."