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Dot Hill Dots Its I's

Dot Hill Systems Corp. (Nasdaq: HILL) became the latest technology vendor to restate its financials last night, packaging the news with earlier-than-expected earnings figures for the fourth quarter (see Dot Hill Restates 2004).

A series of accounting problems, which execs blamed in part on an outdated ERP (enterprise resource planning) system that couldn't keep up with growth, caused the company to restate the first three quarters of 2004.

"It's an old system," said Dot Hill CFO Preston Romm in an earnings briefing originally scheduled for next week. "I would characterize it as adequate in the pre-Sarbanes-Oxley world, adequate for the size of the company we were a couple years ago, but the transactions have gotten very complicated."

Romm added that the company hopes to fix the situation this year by beefing up IT and other resources, which might include replacing the accounting system altogether.

Among the snafus: understated costs of goods sold in the first quarter, overstated earnings for the first three quarters, and misclassified costs of goods sold as operating expenses for the first three quarters. Dot Hill execs maintain that these errors affect less than 1 percent of revenues, with little or no impact on gross profits and net income.

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