ADIC Powers Through Q3

Tape vendor turns in fab quarter with record sales and upbeat outlook, sending stock up 18%

August 16, 2003

3 Min Read
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The crippling power outage in the Northeast U.S. didn't slow down tape library vendor Advanced Digital Information Corp. (Nasdaq: ADIC), which saw its stock climb almost 18 percent in morning trading today after posting its highest-ever quarterly revenues (see ADIC Posts Record Q3 Sales).

ADIC's stock was up this morning 17.9 percent, to $12.07. For the quarter ended July 31, the Redmond, Wash.-based company's top line grew to $108.3 million, up 42 percent compared with the same period last year. Its net income for the quarter was $2.6 million, or 4 cents per share, compared with a loss of $2.1 million in the year-ago period.

The company said it expects revenue for the current quarter to be in the range of $110 million to $120 million, and fiscal year 2004 revenue to be between $475 million and $525 million -- above Wall Street's estimates of $110 million for the fourth quarter and $460 million for 2004.

On a conference call yesterday, ADIC CEO Peter van Oppen said that the company's OEM revenues "exploded" with 79 percent annual and 18 percent quarter-over-quarter growth. Its OEM partners include Dell Computer Corp. (Nasdaq: DELL), Fujitsu Siemens Computers, Hewlett-Packard Co. (NYSE: HPQ), IBM Corp. (NYSE: IBM), and Sun Microsystems Inc. (Nasdaq: SUNW). Sales of ADIC's own branded products, however, dropped 1 percent sequentially.

"Our strategy of continued product innovation and investment in both our OEM and branded channels at the bottom of an economic cycle continues to produce additional market acceptance and share gain," the CEO said.Overall, ADIC's branded sales accounted for 51 percent of total sales during the quarter. In the third quarter of 2002, its split was 61 percent branded and 39 percent OEM.

On the strength of ADIC's results, Bear Stearns & Co. Inc. upgraded the stock from Peer Perform to Outperform. "ADIC has delivered upsides for three quarters in a row," wrote Bear Stearns analyst Andy Neff in a note today. "Its outlook for 4Q03 and FY04 was better than our estimates, and ADIC's growth outlook is improving owing to new products as well as expanding OEM customer engagements."

ADIC said it expects branded sales -- particularly for its recently introduced Scalar i2000 tape library and its forthcoming disk-plus-tape option -- to increase in the fourth quarter (see ADIC Sticks In Some Disk and ADIC Launches i2000 Library). But the company also cautioned that continued strength in OEM sales could keep average gross margins from matching those it experienced in the second quarter of 2003.

Meanwhile, the company's total cash, cash equivalents, and marketable securities increased by about $17 million during the quarter, to $204.6 million.

One of ADIC's competitors, Overland Storage Inc. (Nasdaq: OVRL), also reported upbeat earnings this week, with revenues growing to $56.5 million, up 62 percent over the same quarter last year. However, Overland's stock price was hurt because of investor concern that its OEM sales had remained flat (see Overland Loses on Profits).Todd Spangler, US Editor, Byte and Switch

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