Poor Execution Hurts Quantum

CEO says Quantum itself is to blame for the vendor's Q3 disappointment

January 25, 2008

3 Min Read
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Poor execution in the U.S. has hurt backup specialist Quantum, which released its third-quarter results last night, dipping below both its own and analysts' revenue estimates.

The vendor posted third-quarter revenues of $253 million, down from $302 million in the same period last year and below analyst estimates of $267.02 million. Quantum itself had estimated a quarterly revenue figure between $265 million and $275 million.

On the upside, the vendor's losses narrowed. On a GAAP basis, Quantum reported a net loss of $2 million, or 1 cent per share, compared to a loss of $10 million and 5 cents per share in the year-ago quarter. Excluding stock-based compensation charges and amortization of intangibles, Quantum's earnings would have been 7 cents per share, in line with analyst estimates.

Quantum also doubled its GAAP operating income to $9 million during the quarter, its highest level in three years, and the vendor paid down $20 million of its debt related to the 2006 ADIC acquisition.

The company has now reduced its debt by 27 percent since the acquisition and had a balance of $360 million at the end of the quarter, according to execs on last night's call.But the revenue dip was a major focus of the report. "Much of the shortfall was in our branded business in North America," explained Quantum CEO Rick Belluzzo, on a conference call last night, adding that the vendor's disk and tape businesses, in particular, felt the pinch.

Despite growing talk of recession and an IT spending slowdown, the exec refused to blame macroeconomic conditions for Quantum's performance.

"We felt that it was pretty focused on our execution, and pretty central to North America. We havent seen business dry up or see deals come off the table... There are many actions underway to address this revenue challenge," the CEO said, highlighting Quantum's decision to focus attention on its sales teams and pre-sales engineers.

The last few quarters have challenged Belluzzo, who has had to deal with fallout from the firm's $770 million ADIC acquisition while at the same time pushing for higher-margin sales.

Key to this new business model is Quantum's upcoming high-end disk system, the DXi 7500, which the vendor is touting as a way to get its revenues back on track."We continue to feel very good about the DXi 7500," said Belluzzo, in response to a question from an analyst. "We have already received more than 200 requests about the DXi 7500 from customers."

The exec also explained why the DXi 7500 has not yet seen the light of day. "We were planning to start shipping that by the end of the [last] quarter," he said, adding that the launch date was postponed because of the complex nature of the system.

"It was taking us longer than expected to test some of the functionality," said the CEO, who confirmed that the launch was also delayed to "meet the requirements" of an unnamed OEM partner.

The launch will now take place sometime within the next few months, according to Belluzzo. "We now plan to begin branded DXi 7500 shipments on a limited availability basis toward the end of this quarter, with general availability next quarter."

The Quantum CEO and his team made no mention of the vendor's patent dispute with Riverbed during the conference call.Have a comment on this story? Please click "Discuss" below. If you'd like to contact Byte and Switch's editors directly, send us a message.

  • Advanced Digital Information Corp. (Nasdaq: ADIC)

  • Quantum Corp. (NYSE: QTM)

  • Riverbed Technology Inc.

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