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Xyratex: Not Sorry Now

Xyratex Ltd. (Nasdaq: XRTX) may have been the reason some startups didn't file for IPO last year, but the newly public company showed no regrets when it posted year-end earnings today (see Xyratex Reports Earnings, We Pick Our Privates, and Xyratex Has No IPO Regrets).

Xyratex posted $116.7 million in fourth-quarter revenue, up 1.6 percent sequentially and 17.4 percent year-over-year. GAAP net income was $8.2 million for the quarter, or $0.29 per diluted share. Revenue for fiscal year 2004 was $459 million, up 37.5 percent year-over-year.

Revenue for the company's storage and network systems business, which accounted for 69 percent of yearly revenue, was $84.4 million for the quarter, up 25 percent year-on-year and 3 percent sequentially. This segment provides OEMs such as Network Appliance Inc. (Nasdaq: NTAP) with NAS, SAN, and nearline storage gear.

Though Xyratex owed over 50 percent of its sales to NetApp last year, CFO Richard Pearce sees "strong growth" in the storage market overall. He and CEO Steve Barber predict revenue from their OEM systems business to grow 1 to 5 percent next year.

Storage infrastructure gear, which includes equipment to help disk-drive manufacturers build and test their drives, will grow more, however, between 15 and 20 percent, according to Pearce and Barber. One reason for this is the growing popularity of "high capacity, low cost" storage, they say, in both the SATA and Fibre Channel spaces.

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