Dot Hill's Banking On HP

RAID array maker Dot Hill has expanded an OEM agreement with Hewlett-Packard, in a move that signals the potential for more SMB products from HP while holding out fresh hope for Dot Hill's flagging fortunes.

Dot Hill has been OEMing RAID arrays to HP for use in the HP Storageworks 9000 VTLs announced last fall, a system that also is based on software from Sepaton. Now, HP and Dot Hill have expanded their agreement from one year to five and opened it up to include other divisions in HP besides the one that made the 9000.

On the down side, Dot Hill's HP deal does not have any minimum spending requirement, which means HP might not live up to Dot Hill's expectations.

Those expectations are substantial: Dot Hill has boldly taken steps that indicate it's counting on this agreement. The company has:

• Raised guidance for its year-end quarter. Dot Hill now says it expects to show $50 million to $52 million in revenues for the last quarter of 2007, instead of the $44 million to $48 million previously given. Loss per share, though, should stay in the range of 10 cents to 15 cents, management says. For the third quarter of 2007, which ended September 30, 2007, Dot Hill posted revenue of $45.7 million and a loss per share of 9 cents.
• Cranked up infrastructure to support HP development. Dot Hill plans to use $10 million to $20 million in cash just to make parts for HP and to "make modest but incremental investments in organizational capabilities and test infrastructure."