Quantum Takes Q1 Revenue Hit

Vendor's struggles continue, although CEO Belluzzo sees light at the end of the tunnel

July 30, 2008

3 Min Read
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Quantum took a revenue hit in its Q1 results last night, although the vendors losses narrowed in what it described as a “transitional” quarter.

The de-dupe specialist’s revenues were $222 million, 10 percent down on the same period last year, and below analyst estimates of $225.1 million, although CEO Rick Belluzzo put a positive spin on the results.

”It was a transitional quarter in that we launched the [latest] DXi7500 disk device at the end of the quarter -- there is a lot of really good progress in [Quantum] becoming a systems company,” he told Byte & Switch, explaining that tape sales were largely to blame for the revenue shortfall. “We were a bit short in the U.S. for tape automation -- that was a problem that we have had for a few quarters.

On a GAAP basis, Quantum reported a net loss of $14 million, or a loss of 7 cents per share, compared to a net loss of $22.5 million and a loss of 11 cents per share in the first quarter of 2007. Without $11 million in intangibles costs and $3 million in stock-based compensation charges, the vendor would have reported break-even per share, although this would have still been below analysts’ 1 cent EPS estimate.

The Quantum CEO admitted that the vendor is still in the throes of its corporate makeover, shifting its focus from selling components to OEMs to branded systems sold via VARs and the likes of EMC.”We have characterized Quantum’s journey here as a transition to a systems company that delivers disk, tape, and software,” he said. “We’re making progress to reposition our company as a storage systems company.”

The CEO estimates that this overhaul will be complete “over the next couple of quarters,” adding that Quantum’s disk systems such as the DXi7500 will breathe new life into its tape business.

”Our growth will come from disk systems and software,” he explained. “One of the options for the DXi7500 is a direct path to tape option -- almost 50 percent of the DXi shipments were with that option.”

In Q1, Quantum’s disks systems and software revenues were $19 million, double the $9 million generated in the same quarter last year. Revenue from the vendor’s tape automation products, however, was $86 million, a decrease of $22 million on the first quarter of 2008.

The vendor is nonetheless hoping that Quantum’s burgeoning relationship with EMC will provide a much-needed revenue boost.”We announced last quarter that we had signed an agreement for EMC to ship our DXi software on their [3D disk library] product,” he said. ”The EMC relationship will grow and result in more high-margin revenue.”

The last 18 months have certainly not been easy for Quantum, which suffered execution problems earlier this year. The vendor has also had to contend with the fallout from its $770 million ADIC acquisition , not to mention recent weakness in its Asian- and North American-branded businesses.

Quantum is also up against the likes of Diligent, now part of IBM, and Sepaton in the de-dupe space, hence the recent decision to extend its product line.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.

  • Diligent Technologies Corp.

  • EMC Corp. (NYSE: EMC)

  • IBM Corp. (NYSE: IBM)

  • Quantum Corp. (NYSE: QTM)

  • Sepaton Inc.

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