MTI Loses Money, Expands

Although still losing money, systems integrator MTI Technology Corp. (Nasdaq: MTIC) today announced it raised $15 million in private placement equity financing, with which it plans to more than double its sales force and deepen a relationship with EMC Corp. (NYSE: EMC).

Advent International invested $11 million and EMC $4 million in exchange for stock in MTI, which is based in Irvine, Calif. Advent partner Mike Pehl also joins MTIs board, and MTI assigned its intellectual property to EMC in exchange for the funding.

In a call with analysts, MTI CEO Tom Raimondi said the company plans to increase its North American sales force from 22 today to 62 by the end of the year while expanding in Europe from 18 to 40.

In its earnings report today, MTI reported net losses of $3.9 million, or $0.12 per share, for its fiscal year 2004; and $700,000, or $0.02 per share, for the fourth quarter. MTI lost $11.2 million, or $0.34 per share, in fiscal year 2003; and reported net income of $600,000, or $0.02 per share, for its fourth quarter a year ago.

However, MTI’s revenues of $83.2 million for the year and $23.6 million for the quarter were up year-over-year and sequentially. The company’s revenues for the previous year were $82.4 million, and it had $22.4 million in revenue in the fourth quarter a year ago.Raimondi attributes the increased revenue to the company’s decision in April 2003 to quit selling its branded SAN and NAS products and start reselling EMC products instead (see MTI Halts Its Hardware). MTI adds professional services such as installation and support around those products. In the quarter before making the deal with EMC, MTI lost $1.4 million on revenue of $19.6 million (see MTI Turns Cash-Flow Positive).

For EMC, the partnership helps it sell hardware and also push its software products into deals. For instance, MTI quit selling Veritas Software Corp. (Nasdaq: VRTS) in January and now only sells EMC’s Legato storage software. So by helping MTI find salepeople, EMC furthers its own competitive cause.

“Our expansion plans are focused around EMC,” Raimondi said. “EMC has also been extremely helpful in helping us attract talent.”

Raimondi said MTI gained 245 new customers in the year since it partnered with EMC. He gave guidance for more than $25 million in revenue this quarter.

“We believe in the storage environment today there’s a huge demand for professional services,” Raimondi said. “We believe we can increase our market share by expanding aggressively.”— Dave Raffo, Senior Editor, Byte and Switch