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StorageTek Announces First Quarter Revenue And EPS Growth

StorageTek (Storage Technology Corp) has announced first quarter 2003 net income of $16.5 million, or $0.15 diluted earnings per share. These amounts compare to net income of $6.0 million, or $0.06 diluted earnings per share, for the first quarter of 2002. Revenue for the first quarter of 2003 was $480.0 million compared to $455.9 million for the first quarter of 2002.

"Given the difficult external environment, we are very pleased to show revenue growth and eleven consecutive quarters of year-over-year earnings improvement," said Patrick J. Martin, StorageTek chairman, president and chief executive officer. "The strategy we have embarked upon is clearly taking hold. Our Information Lifecycle Management offerings enable customers to view storage solutions on a holistic, enterprise-wide basis, reflecting StorageTek's aim to satisfy specific end-to-end storage solution needs."

First quarter 2003 revenue for storage services grew 14% over the same period last year. "Our performance in our Service business continues to be one of our highlights," continued Martin. "We are uniquely positioned to offer customers the hardware, software and very importantly, the services necessary to assist customers to successfully manage their storage environment."

Financial highlights for the first quarter include an increased cash balance to $719 million and cash flow from operations of $63 million. "The disciplines we have embedded in our business model should enable future growth in revenue and earnings throughout the year," said Robert Kocol, StorageTek's chief financial officer. "We are very much on track to delivering the financial results we anticipated as we entered 2003."

CA Revenue Grows As Competitors Wane, Says Gartner

Computer Associates International Inc (CA) was listed as the only independent storage management software provider to achieve revenue growth in the global $4.7 billion dollar storage management market in 2002, according to a recently issued report by Gartner Dataquest, a leading market research firm. The report, 2002 Storage Management Software Market Share, states that CA grew its storage management license revenue by 16% from 2001 to 2002.

The report also states that CA is the only one of the top five storage management providers to recognize revenue growth in 2002.

"Our ability to achieve these results during a tumultuous period in the IT industry speaks volumes about CA's business model and our delivery of world-class storage management solutions customers want and need," said Nigel Turner, CA's senior vice president of BrightStor solutions. "It is evident that customers are embracing our innovative backup and recovery, storage resource management and SAN management solutions as well as our unique ability to deliver greater enterprise storage efficiencies."

According to the report, CA secured revenue growth across all six of the eight storage management software sub-segments that CA participates in.

"We expect our growth to continue in 2003 as we continue to break new ground in delivering greater business value to our customers. Our commitment to improving risk mitigation and storage efficiencies across the enterprise truly resonates with customers seeking a better approach to storage management," said Turner.

Through its BrightStor family of products, CA offers solutions for managing the entire storage lifecycle, from design and deployment through capacity monitoring and performance tuning.

Imation Q1 2003 EPS Rises 31% to $0.59

Imation Corp, a leading supplier of removable data storage media, reported net income of $21.5 million, or diluted earnings per share of $0.59, on $273.3 million in revenue. This compares with income from continuing operations of $15.7 million, or diluted earnings per share of $0.45, on total company revenues of $270.6 million for the first quarter of 2002.

"Imation's core data storage business produced record revenue and operating income, even in a difficult economy," said Imation Chairman and CEO Bill Monahan. "Profit margins continued to improve as a result of Imation's efficient business model coupled with a solid performance in our international operations which enables us to generate solid earnings growth through leveraging a weaker dollar. We saw continued strong results in the businessto -business sector worldwide, while the U.S. was relatively soft, particularly in the personal storage media sector."

"We also continue to make progress on our strategic initiatives to build on the core data storage business. We recently announced the launch of Global Data Media, a joint venture with Moser Baer India, which positions us to meet the growth in demand for optical products. In addition, we recently began marketing LTO Ultrium 2 tape cartridges."

"While mindful of the economic uncertainty, we remain confident in our stated goal of five to ten percent revenue growth in data storage for the year. Based on the results in the first quarter, we are increasing our full year operating income outlook to ten to fifteen percent year-on-year growth, excluding litigation and restructuring benefits in 2002," Monahan added.

First Quarter 2003 Financial Highlights

Total company revenue grew approximately one percent to $273.3 million with data storage and information management segment revenue of $260.0 million, up 3.1 percent compared to Q1 of 2002. For the comparable period in 2002, total company revenue included $6.4 million in revenue from businesses subsequently exited. In addition, Q1 2002 revenue benefited due to higher than typical backlog as the Company exited 2001. Revenue from outside the U.S. showed solid growth in local currency terms, led by Asia, Latin America and Canada. Currency benefits contributed approximately five percentage points to total company revenue growth in the quarter. U.S. revenue declined due to tight supplies of certain high demand outsourced optical products as well as slowing demand for certain personal storage media products within the consumer retail channels.

Gross margin of 31.9 percent, a 2.9 point improvement over Q1, 2002, was driven by foreign currency exchange rate benefits and a more favorable product mix. Selling, general and administrative expenses were $41.4 million, or 15.2 percent to sales, and research and development spending was $12.9 million, or 4.7 percent to sales.

Total company operating income of $32.8 million, a record for the Company, grew nearly 46 percent over Q1, 2002 operating income of $22.5 million which included a loss of $1.2 million from businesses subsequently exited but not accounted for in discontinued operations.

Earnings per share of $0.59 grew 31 percent over the $0.45 earnings per share from continuing operations recorded for Q1, 2002. The tax rate in the quarter was 36 percent.

Cash increased to $480.1 million. Capital spending in the quarter was $14.1 million. Depreciation and amortization totaled $9.3 million and cash flow from operations totaled $18.8 million in the quarter. Total employee count at the end of the quarter was approximately 2,800.

Business Outlook

The following statements are based on the Company's current outlook for fiscal year 2003, subject to the risks and uncertainties described below:

• Data storage and information management segment revenue is estimated to range between $1,050 million and $1,100 million in 2003 representing approximately between five and ten percent growth with the strongest growth coming primarily in the second half of the year;
• Gross margin is estimated to be in the range of 30 to 32 percent of revenues;
• Research and Development spending is targeted to be in the range of five percent of revenues;
• Selling, General and Administrative spending is targeted to be in the range of 16 to 16.5 percent of revenues;
• Full year 2003 operating income is expected to range between $110 million and $115 million. Operating income of $110.7 million reported in 2002 using Generally Accepted Accounting Principles (GAAP) treatment, included $10.4 million of benefits derived primarily from litigation settlement and restructuring adjustments. Using an adjusted operating income of $100.3 million without the litigation and restructuring benefits, full year 2003 operating income is estimated to grow approximately ten to 15 percent. Previously, earnings growth had been estimated to range between eight and ten percent from a base of $100.3 million;
• Primarily due to the slightly higher tax rate estimated for 2003, earnings per share is estimated to grow somewhat less than the comparable operating income growth achieved for the year;
• Tax rate is estimated to be 36 percent;
• Capital spending is targeted to be as much as $80 million;
• Depreciation and amortization is estimated to be approximately $40 to $45 million.

Maxtor Corp Announces First Quarter 2003 Financial Results

Maxtor Corporation recently announced its financial results for the first quarter ended March 29, 2003. Revenue for the quarter was $938.9 million. The Company reported net income on a GAAP basis of $27.4 million, or $0.11 per share. Included in the GAAP net income was a charge of $20.6 million for the amortization of intangible assets and $0.3 million in stock compensation expense. On a pro forma basis, excluding these charges, Maxtor reported net income of $48.2 million, or $0.20 per share. During the third quarter of 2002, the Company shut down its network attached storage business and, as a result, net income in prior periods has been reclassified to reflect both continuing and discontinued operations. In the first quarter of 2002, Maxtor reported revenue of $1.036 billion from continuing operations, a loss from continuing operations on a GAAP basis of $55.4 million, or $(0.23) per share, and a pro forma loss from continuing operations of $29.9 million, or $(0.12) per share.

"We are very pleased with our first quarter financial results and the progress that the company made during the quarter," said Paul Tufano, president and chief executive officer. "Our pro forma gross profit margin increased over two percentage points to 18.3% compared with 16.2% in the fourth quarter. Our operating expenses on a pro forma basis declined to $118.3 million. Our pro forma net income increased to $48.2 million, and we generated cash from continuing operations of $44.2 million.

"During the course of the quarter, we continued our progress on the ramp of our 80 GB areal density products. Unit shipments of hard drives into consumer electronics applications, primarily PVR, DVR and set-top boxes, grew sequentially. Our new Atlas 10K IV 36 GB per platter server drive was qualified at our major server OEM customers and is shipping in volume. Finally, we broke ground on an 800,000 square foot manufacturing facility in Suzhou, China, which we believe will provide Maxtor with a low-cost option to accommodate the expected growth of our hard drive business over the next decade."

Overland Storage Posts Record Results For Q3 Of Fiscal 2003

Overland Storage Inc has reported fiscal 2003 third quarter and nine-month year-to-date results. For the quarter ended March 31, 2003, Overland reported record revenue of $56.2 million compared to revenue of $42.8 million in the third quarter of the prior fiscal year. Net income for the third quarter of fiscal 2003 reached a record $2.4 million, or $0.20 per diluted share, compared to net income of $2.1 million, or $0.18 per diluted share, in the third quarter of the prior fiscal year.

Revenue for the nine-month period ended March 31, 2003 was $139.4 million compared to revenue of $128.4 million in the corresponding nine-month period of the prior fiscal year. Net income for the nine-month period of fiscal 2003 totaled $3.4 million, or $0.28 per diluted share, compared to net income of $5.1 million, or $0.46 per diluted share, in the nine-month period of fiscal 2002.

Both revenue and earnings for the quarter surpassed the range that the Company provided during its previous quarterly conference call. This growth reflects stronger than expected demand from its OEM customers. Combined sales to OEM customers grew 44 percent compared to the prior year quarter and rose 27 percent on a sequential basis from the second fiscal quarter. The third quarter represents the first full quarter of shipments to the Company's two largest OEM customers. In the case of Overland's largest OEM, supplies of the customer's predecessor product were not fully depleted and replaced by Overland's products until midway through the prior quarter. In the case of the other OEM customer, Overland did not commence shipments until midway through the second quarter. Sales through the Company's branded sales channel rose 7 percent compared to the prior year quarter, and as expected were seasonally slower on a sequential basis.

Gross margin improved to 27.9 percent from 27.1 percent in the preceding quarter despite an increase from 65 percent to 71 percent in the concentration of the Company's OEM business, reflecting the benefit of increased manufacturing volumes and cost reductions. Third quarter operating expenses rose by $1.0 million compared to the preceding quarter, an amount that includes costs associated with the closing of the Company's Longmont, Colo. R&D facility and increased legal fees.

Christopher Calisi, president and CEO of Overland Storage, said: "We are extremely pleased with the level of business we are reporting this quarter. In regards to our largest OEM customer, it is apparent that the transitional issues that characterized the last three quarters are behind us, and we are moving forward at enhanced revenue levels. This is really our first full quarter of shipments to both of our major OEMs. Following the commencement of shipments last November, sales to our newest OEM customer ramped more quickly than expected. Overall, the strong OEM partnerships we have developed are delivering impressive results, and we aim to expand these relationships, as well as develop new ones.

"Revenue in our branded business posted gains over our 2002 third quarter, but continued to reflect the customary cyclicality of a slow third quarter. The Americas region grew substantially from last year, increasing 34 percent. This growth is a result of investments made in sales and marketing over the past several quarters. Our business in Europe and Asia Pacific declined compared to the prior year due to the fact that both of these regions reported large one-time deals in the prior year quarter.

"We were gratified to close 16 software deals this quarter with our Storage Resource Management product, surpassing both our goal for the quarter and the nine orders booked last quarter. Software revenue during the quarter was not material, as we continue to focus on the number of installations to build market acceptance. The market reception to our new version introduced in December, Overland SRM 3, is encouraging. Furthermore, EMC Corporation's recent acquisition of Astrum Software, our key software provider, brings additional resources and credibility to our software initiative. EMC has expressed its desire to forge a cooperative and mutually beneficial marketing effort. We continue to view the nascent SRM market as challenging, but remain committed to building a meaningful midrange storage software business. "Our previously published outlook for our fourth fiscal quarter remains unchanged. Specifically, we anticipate fourth quarter revenue in the $54 to $59 million range and earnings per diluted share of $0.23 to $0.28."

Mr. Calisi concluded, "This has been an excellent quarter, and the discipline of previous quarters is truly paying off. Our OEM relationships are growing, and we believe the level of business we are now seeing is sustainable. We plan to grow our business to new levels -- levels that require forward thinking and innovation. Overland's reputation remains an excellent calling card that we will work diligently to maintain. Our strategic focus on the mid-range storage market has proved insightful, and we expect to maintain that focus. Though the economic and political climate in which we all operate remains difficult, we believe our business will continue to experience steady demand. I look forward to reporting a record year for Overland Storage."

About Overland Storage

Overland Storage Inc is a leading global supplier of innovative hardware and software storage solutions for mid-range computer networks. The company's reputation for delivering high availability products, including its award-winning automated storage libraries and the industry's first family of fully open storage management software solutions, sets the standard for intelligent, automated and scalable storage. Overland sells its products worldwide through leading OEMs, commercial distributors, storage integrators and value-added resellers. For more information, visit Overland's Web site at www.overlandstorage.com.

SanDisk Announces Q1 2003 Earnings: Record Units And MB Sold

SanDisk Corporation, one of the world's largest suppliers of flash memory data storage card products, has announced results for its first quarter ended March 31, 2003. Total first quarter revenues were $174.5 million, up 88% compared to the first quarter of 2002. Product revenues were $155.4 million, up 80% from $86.5 million in the same period of the prior year. First quarter total units sold increased 96%, total megabytes sold increased 205% and the average price per megabyte sold declined 40% compared to the same period of the prior year. Revenues from licenses and royalties were $19.0 million in the first quarter of 2003, up from $6.2 million in the same period of the prior year due primarily to increased royalty-bearing sales by licensees. First quarter net income was $24.9 million, net of unrealized losses of $6.7 million, before tax, resulting from revaluation of our equity investments in Divio and Tower Semiconductor. This compares to a net loss of $3.7 million in the first quarter of 2002. Earnings per share for the first quarter of 2003 were $0.33 per diluted share compared to a net loss of $0.05 per diluted share in the same period in 2002.

Product revenues for the first quarter of 2003 decreased 2% sequentially from the prior quarter. Growth in OEM sales of 30% partially offset a seasonal decline in retail sales of 13% compared to the fourth quarter of 2002. First quarter total units sold increased 10% and total megabytes sold increased 29% compared to the previous quarter, both representing new record levels. First quarter product gross margins were 34%, down from 37% in the prior quarter. Average price per megabyte sold declined by 24% in the first quarter and was offset by comparable product cost reductions achieved during the quarter. First quarter sales of NOR flash inventory that was previously written off contributed 0.7% to product gross margins compared to 2% in the prior quarter. Revenues from licenses and royalties declined 10% from the prior quarter due to lower royalty-bearing sales by our licensees. Income before taxes of $27.6 million in the first quarter compares with $27.5 million in the prior quarter. In the first quarter of 2003, our provision for income taxes declined by $5.1 million due to a lower effective tax rate. This caused our net income to increase to $24.9 million in the first quarter from $19.6 million in the prior quarter.

Net cash provided by operating activities was $34.0 million for the first quarter of 2003 compared to $3.6 million used in operating activities in the same quarter of 2002. Our cash and short-term investment position increased $28.0 million from the prior quarter to $484.5 million.

"The first quarter was another excellent quarter for SanDisk. Results were better than expected considering the normal seasonal decline in first quarter retail sales compared to our traditionally strong fourth quarter. We experienced a significant increase in sales to our OEM customers, which reached the highest sales level in the past eight quarters," said Eli Harari, president and CEO of SanDisk Corporation. "During the quarter we introduced a number of important new products, including the miniSD card, which we believe will become a significant revenue generator for us in new cell phones with built-in digital cameras that are expected to be introduced this year. During the first quarter, we were able to move the retail market average card capacity to 120 megabytes, up from 90 megabytes in the prior quarter, through strategic pricing of higher capacity cards, where we enjoy the low cost benefits of our MLC (Multi Level Cell) NAND flash. Consumers are proving the significant price elasticity inherent to our business. We are currently on schedule to shift the majority of our NAND flash wafer starts at Yokkaichi from .16 micron to .13 micron in the second quarter. This transition should provide us with a lower cost structure for wafers manufactured by our FlashVision joint venture in Yokkaichi, starting in the third quarter of this year and continuing into 2004. With the projected growth in the usage of flash cards in digital cameras, cell phones and USB flash drives, we are optimistic about the prospects for our business in 2003."

Second quarter 2003 business outlook

Retail sales are expected to be back-end loaded in the second quarter, while OEM sales are projected to continue the positive trend started in the first quarter. We currently anticipate second quarter 2003 total revenues to be approximately the same as the first quarter of 2003. Product gross margins are projected to be in the range of 26% to 30% due to the incremental costs that we expect to incur in the second quarter associated with the .13 micron NAND flash technology transition at FlashVision. Second quarter 2003 operating expenses are expected to increase moderately compared to the first quarter and our second quarter effective tax rate is expected to be consistent with the first quarter.