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conference date: May 3, 2007 at 1:30 PM Pacific Time
for quarter ending: March 31, 2007 (Q1)
Overview: Slump in income and increased net loss, but way above guidance given in February conference.
Basic data:
Revenues were $53.4 million, down 10% sequentially from $59.4 million and down 9% from $58.7 million year-earlier.
Net loss was $6.0 million, improved sequentially from a $9.1 million loss but worse than a year-earlier loss of $5.0 million.
EPS was ($0.13), up sequentially from ($0.20) and down from year earlier ($0.11).
$95.9 million in cash is left, down sequentially from $99.7 million.
Guidance:
Revenues of $56 to $60 million. EPS loss of $0.12 to $0.15. Less visibility than usual.
Conference Highlights:
Better than guidance revenues; feels off to a good start. Sequential decline in revenue was seasonal in nature and included lower revenue from largest customer, partly offset by gains from new customers.
Gross margin was 12.5%. Sold more higher-margin products to largest customer. May be flat or decline slightly in Q2, but expects to start climbing again after that.
2730 Turbo was released in April and new OEM customers are being added for R/Evolution architecture.
Operating expense totalled $13.6 million, down from $20.0 million year-earlier. Expects to manage to this level through 2007.
12.6 terabytes of storage shipped.
SAN2 Fibre channel 43.5% revenue; SAN2 SCSI 27.2%; SAN2 SATA 2.3%? SAN2 Blade 9.6%; 2730 product 13.6% of net revenue.
1040 of 2730 units shipped, down seasonally from 1673 units in Q4.
7628 units shipped to largest customer [Sun]. 76% of revenue compared to 88% a year ago.
Began transition to Asian production of 2730. Expect to see results in Q3. Will have new models to address mid-range markets then too.
$7.1 million backlog at end of quarter, up sequentially from Q4.
Q&A:
Assuming increase of new large OEM customer for Q2? Yes, expects OEMs to increase purchases of 2730. Was not specific about "new large OEM customer."
Will Sun strength continue going forward? Don't have that insight. Product continues to sell well; entrenched for many of their customers.
Pricing environment for enterprise drives? Serial ATA drive costs have been competitive from suppliers, but also to customers, so it normalized out.
New revenue per OEM? Some are small system integrators, others are large, so don't think of it that way. Some order 100 units at a time, others order 10s. Added several customers last quarter. Margins tend to be better in the smaller deals.
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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. Before making or terminating an investment you should always verify any factual basis of your decision.
Copyright 2007 William P. Meyers