ADIC

After recently issuing a "reduced sales expectations" warning, storage equipment and software provider Advanced Digital Information Corp. (Nasdaq: ADIC) suffered the predictable fate: analyst downgrades and a stock-price decline.

But even after losing nearly 20 percent of its valuation in the last week, it may not be too long before the storage-systems and software vendor becomes a bargain again. According to analysts who cover the company, ADIC has plenty of cash, good OEM relationships, and is pointed in the right technical directions, albeit at a slower pace and lower valuation – than before.

ADIC – primarily a supplier of automated tape libraries – needs to reap more rewards from its recent moves to add more storage-network capabilities to its product line, if it wants to keep from falling further into disfavor on Wall Street.

"I'm just not comfortable with the [previous] valuation," says Brion Tanous, senior research analyst with Wells Fargo Van Kasper, explaining why he downgraded his recommendations on ADIC after the company issued a warning on July 19 that it would not meet previous growth expectations for its third and fourth fiscal quarters.

But Tanous and others don't expect ADIC to fade away, since the company is still profitable, with more than $350 million in revenues expected this year. With about $150 million in cash on hand, ADIC also has enough resources to last out the current network equipment-purchasing slowdown, which may make the company an attractive purchase for new investors."The previous valuation was a little expensive," says Tanous, who expects ADIC to someday reach $1 billion in yearly sales. "It's getting closer to a reasonable price. And at eight to ten dollars [per share], it's a stock you've got to own."

ADIC sells SAN routers and gateways, as well as several flavors of storage-network management and administration software. But the lion's share of ADIC's business is OEM sales of its tape libraries, with IBM Corp. (NYSE: IBM) and Dell Computer Corp.