Quantum: Fiscal 1Q10 Financial Results

Quantum Corp. announced that revenue for its fiscal first quarter (FQ1’10), ended June 30, 2009, was $160 million.

This represented a 28 percent decline from the same period last year (FQ1’09), primarily reflecting the significantly weaker economy, a continued sales mix shift toward higher margin opportunities and lower-than-expected branded tape automation system volumes outside North America. Despite the lower revenue, Quantum increased its GAAP gross margin rate to 38.4 percent, up from 33.7 percent in FQ1’09.

The company reported GAAP net income of $5 million, or 2 cents basic earnings per share, compared to a GAAP net loss of $14 million in the same quarter last year. The $5 million profit included an $11 million net gain related to the retirement of convertible debt, as well as $9 million in amortization of intangibles, $3 million in restructuring costs and $2 million in stock-based compensation charges. The net impact of the last three items reduced basic earnings per share by two cents.

Quantum generated $33 million in cash from operations for the quarter and paid down $41 million of its senior debt.

"Although the economic environment remained challenging in the June quarter, we continued to drive further improvement in our business model, with increased year-over-year gross margin rates and operating margins," said Rick Belluzzo, chairman and CEO of Quantum. "At the same time, we again showed strong cash generation and significantly improved our capital structure and flexibility. Although we are disappointed with our disk systems and software revenue performance, we are in the early phase of a significant new product cycle and are taking a number of actions to build sustained growth in this area, particularly by capitalizing on the opportunity in deduplication and replication."

"These actions include increased targeting of our large installed base of tape automation customers and better leveraging of our DXi product strengths, such as scalability, flexibility, and close integration with tape," continued Belluzzo. "We will also introduce a new midrange DXi platform this calendar year that will greatly improve our NAS position and help drive increased channel business. Finally, we are currently in discussions with new, potential go-to-market partners that have become more interested in the deduplication space as a result of recent industry developments."

Quantum’s product revenue, which includes sales of the company’s hardware and software products, totaled $105 million in FQ1’10. This represented a net decrease of $52 million from FQ1’09, primarily reflecting expected reductions in devices and media revenue as well as weaker-than-expected tape automation sales in EMEA and APAC.

Disk systems and software revenue, inclusive of related service revenue, was $19 million in the June quarter. This was down approximately $800,000 from the same quarter last year, due to a decline in branded DXi sales and overall StorNext’s revenue. However, Quantum expects to grow in these areas moving forward, as it recently kicked off a broad-based new product cycle that will continue throughout the year.

In just the past two months, the company has introduced:

• The esXpress backup software module for Quantum’s DXi-Series, providing a scalable and easy-to-use data protection solution for VMware environments using DXi systems.
• The industry’s first deduplication solution (Quantum’s DXi7500) qualified with Symantec OpenStorage direct-to-tape capability, enabling users to create copies on tape in a fully automated process managed and tracked by NetBackup.
• DXi2500-D, a high-performance, low-cost deduplication appliance for remote and branch offices optimized for replication back to a central data center. It offers 4-5x the capacity of the leading competitive alternative at the same list price.
• Quantum Vision 3.0, a new version of Quantum backup management and reporting software that works across sites and Quantum disk and tape systems.