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Dot Hill Reports Q1

CARLSBAD, Calif. -- Dot Hill Systems Corp. (NASDAQ:HILL) today announced financial results for the first quarter ended March 31, 2008. For the first quarter of 2008, net revenue was $52.8 million, which includes a reduction in revenue of $2.3 million associated with the warrant issued to Hewlett-Packard, and compares to $53.4 million for the first quarter of 2007 and $51.8 million for the fourth quarter of 2007.

Excluding the $2.3 million reduction in revenue mentioned above, net revenue for the first quarter of 2008 was $55.1 million on a non-GAAP basis, and exceeded the guidance range of $48 to $52 million that the company provided on March 13, 2008.

Net loss was $6.1 million for the first quarter of 2008, or $0.13 per fully diluted share. This compares to a net loss of $6.0 million for the first quarter of 2007, or $0.13 per fully diluted share, and a net loss of $46.4 million for the fourth quarter of 2007, or $1.01 per fully diluted share, which included a non-cash goodwill impairment charge of $40.7 million. Included in the first quarter 2008 net loss was the warrant issued to Hewlett-Packard of $2.3 million, a $3.8 million legal settlement, a $0.3 million currency gain, $0.7 million in share-based compensation expense and $0.3 million in severance costs largely associated with the closure of the company's office in the Netherlands.

On a non-GAAP basis after adjusting for the impacts from the issuance of a warrant to Hewlett-Packard, the legal settlement benefit, share-based compensation expense, foreign currency translation gains and severance costs, net loss for the first quarter of 2008 was $7.0 million, or $0.15 per share on a fully diluted basis, and was within the $0.15 to $0.19 net loss per share range issued by the company on March 13, 2008.

Gross margin for the first quarter of 2008 was 7.9 percent as compared to first quarter 2007 gross margin of 12.5 percent and fourth quarter 2007 gross margin of 12.2 percent. The decrease in gross margin percentage on a year-over-year and sequential basis was due primarily to the reduction in revenue associated with the warrant issued to Hewlett-Packard and secondarily to a change in the company's product sales mix. Adjusting first quarter 2008 results for the reduction in revenue, share-based compensation expense and severance costs, non-GAAP gross margin percentage was 12.0 percent.

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