Quantum to Thin Ranks Again

Quantum Corp. (NYSE: DSS) has indicated that it will cut staff over the next few quarters, to the tune of several million dollars in severance pay and other associated charges.

The company also offered additional guidance on its fiscal second quarter (ending September 30), alluding to "$4 million to $5 million in restructuring charges" but making no mention of future layoffs. A reorganization in November 2003, in which 110 staffers were let go, resulted in $10 million to $15 million in charges (see Quantum Reorg Carves Off 110).

The projected layoffs follow a downward trend among suppliers that specialize in tape libraries, most notably rival Storage Technology Corp. (StorageTek) (NYSE: STK), which blamed a slowdown in IT spending for its latest disappointing figures (see StorageTek Decries IT Spending).

Overall, Quantum lowered its headcount by 11 percent during its 2004 fiscal year ended in March and currently has 1,800 employees. In a round of layoffs during the previous fiscal year, roughly 900 jobs were eliminated (see Quantum Splices Tape Unit).

A spokesman at Quantum would not elaborate on the layoffs, saying that the restructuring will be further discussed when the company reports its second-quarter earnings in early October.However, the Form 8-K that Quantum just filed with the Securities and Exchange Commission (SEC) indicates plans to "terminate certain employees to reduce operating expenses and improve the company's cost structure." The filing further states that the preliminary estimate of costs related to severance will be approximately $4 million to $5 million.

With these charges determined, Quantum was able to fill in some second-quarter numbers not addressed in guidance from July. Specifically, Quantum is now projecting GAAP figures for operating expenses at $59 million to $62 million, gross margins at 31 percent to 32 percent, and earnings at $0.02 to $0.06 per share.

Non-GAAP guidance remains unchanged, with sequential revenue remaining flat at around $195 million and earnings coming in at breakeven to a loss of $0.04 per share.

Quantum reported $206 million in revenue for its fiscal fourth quarter in May, which represented a GAAP net loss of $9.1 million or $0.05 per share.

Brett Mendel, Senior Analyst, Byte and Switch Insider0