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Dot Hill To Cut Salaries and Reduce Workforce

By 10%

This is a Press Release edited by StorageNewsletter.com on June 16, 2010 at 2:41 pm
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Dot Hill Systems Corp. provided guidance for the second quarter of 2010 and announced a restructuring plan intended to enable the company to achieve non-GAAP EBITDA break-even by the fourth quarter of 2010.

Guidance for Second Quarter 2010
Following a comprehensive financial review and with its restructuring plan now underway, the Company anticipates second quarter 2010 net revenue to be in the range of $62 to $65 million and a non-GAAP net loss per share in the range of $0.07 to $0.10. Management expects cash and cash equivalents on June 30, 2010 to be between $40 and $43 million.

Restructuring Details
The Company additionally announced the implementation of a restructuring and cost reduction plan, referred to as the 2010 Plan, that will include severance and related costs for an approximate 10% reduction in its global workforce and the acceleration of the closure of the Company’s Carlsbad, California facility. The Company expects to record severance costs in the range of $300,000 to $500,000 and facility reduction costs in the range of $200,000 to $350,000 in connection with the 2010 Plan. In addition, the Company announced a 10% reduction in the annual base salaries of its vice-president and executive management teams, including the Company’s President and Chief Executive Officer and Chief Financial Officer, and a 5% reduction in the annual base salaries of certain of its employees below the vice-president level.

"We expect to realize the majority of the benefits associated with these actions starting July 1," said Dana Kammersgard, President and Chief Executive Officer. "The aggregate benefit is a significant reduction in break-even levels and our projections indicate that we should break-even on a non-GAAP EBITDA basis by the fourth quarter of 2010. In our last earnings call, I indicated our intent to break-even at between $60 million to $65 million in quarterly revenues, depending on product and customer mix. I believe these actions should enable consistent financial improvements throughout the remainder of this year and achievement of this objective."

Comments

Dot Hill is trying to change its business model in two new directions to come back to profitability:

  • pushing the channel rather than volatile OEMs with low margin sales like Oracle/ Sun, and
  • entering into RAID software following the acquisition of Cloverleaf Communications last January for $12 million, after being concentrated on hardware only (125,000 RAID systems based on its R/Evolution architecture shipped since 2005).
But it takes time. The company continues to register heavy and increasing non-GAAP net losses: $4.8 million, or $0.09 per share for the last quarter ended March 31, 2010, compared to $2.7 million, or $0.06 per share for the previous three-month period and $2.0 million, or $0.04 per share one year ago.

The situation is not catastrophic for the company as revenues are not drastically going down: $60.0 million, $62.6 million and $53.9 million respectively for the same periods. And for next quarter Dot Hill expects revenues in the $62-$65 million range but significant non-GAAP net loss per share, between $0.07 and $0.10.

It's not an easy decision for the management to decrease its own salaries and to cut workforce but it's generally an efficient way for any company to increase productivity and lower losses.

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