NEW YORK -- Crossroads Systems Inc. (CRDS) Chairman and Chief Executive Brian R. Smith said he's comfortable with analysts' estimates that the company's revenue will rise 20%, quarter to quarter, in fiscal 2000.
The Austin, Texas, maker of equipment for computer data-storage networks also expects to meet analysts' projections that it will achieve profitability in the first half of fiscal 2001, Chief Financial Officer Reagan Sakai told Dow Jones Newswires.
Crossroads sells routers to original-equipment manufacturers who make an emerging class of computer systems known as storage area networks, or SANs. The networks, which consist of multiple servers and storage devices, are designed to be faster and more expansive than traditional computer storage systems.
With a dozen of the largest computer-hardware makers as its customers, Crossroads has a market share of about 85% to 90% in the storage-router sector, Smith said in an interview. Top customers include Compaq Computer Corp. (CPQ) and Storage Technology Corp. (STK). Investors in Crossroads include Dell Computer Corp. (DELL), Intel Corp. (INTC) and Hewlett-Packard Co. (HWP).
Crossroads plans to continue to build revenue and market share through internal growth, signing up new OEM partners and making acquisitions and investments, Smith said. Potential targets for new customers include Sun Microsystems Inc. (SUNW) and EMC Corp. (EMC).
"The world of storage is moving more towards a networking flavor," he said. "Our key goal is to enable quick information access for our customers."
Crossroads recently closed the acquisition of Polaris Communications, Portland, Ore., for about $54 million in stock. The purchase will allow Crossroads to sell routers that link SANs with older-style computer mainframe systems in large companies, Smith said.
While Crossroads generates most of its sales through deals with OEMs, it also sells its own branded routers directly to customers. This makes up about 10% of overall sales, but Smith thinks Crossroads' branded-routers sales could rise to 20% of sales by the end of the year.
Despite Crossroads' large market share, its revenue is still fairly modest, tallying $8.8 million in the first quarter that ended Jan. 31. That's because SANs are still relatively new, with most customers initially testing smaller versions of the networks before buying the real thing, Smith said.
Still, Crossroads has posted strong sales growth, and analysts expect the growth to continue. Sales were $18.9 million in the year ended Oct. 31, 1999. Needham & Co. analyst Glenn Hanus expects sales to rise 145% to $46.3 million for fiscal 2000, followed by a 93% increase to $89.3 million in 2001.
In the first quarter ended Jan. 31, Crossroads lost 4 cents a share. Excluding stock-based employee compensation, the company lost 1 cent a share. Morgan Keegan & Co. analyst Robert Montague sees Crossroads narrowing its losses throughout the year, then earning 1 cent a share in the fourth quarter, excluding stock-based compensation.
A First Call/Thomson Financial survey of four analysts predicted the company would earn 1 cent a share in the fourth quarter ended Oct. 31. Sakai, the chief financial officer, said this figure excludes stock-based compensation. The company should surpass the breakeven point - including stock-based compensation - sometime in the subsequent two quarters, he said.
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