A few CC notes. I won't repeat most of the the raw numbers that were in the press release.
1. SDLT. They say that they have shipped 000s of backward compatible SDLT drives to OEMs who are now qualifying them. Of course they mentioned Overland, and said that everyone else should finish qualifying SDLT this quarter. They claimed that manufacturing SDLT was as smooth as manufacturing the 7000s (I don't know why they didn't say the 8000s, maybe it was a slip). But they still expect the roll out to be slow, and real volume production and acceptance will be slow and drawn out over the next few quarters.
2. They warned of a slow Q4, mainly due to slower IT spending in general, and server growth in particular. They don't believe that it is because of SDLT transition issues or due to competitive pressures from LTO. In fact, they claim that their feedback from customers who are testing both drives is that SDLT actually works faster than LTO in compression mode, and the customers believe that it will be more reliable because of its "heat characteristics" (by which I assume he means it runs cooler). (BTW, M2 was never mentioned in the call by anyone.)
3. Q4 will also be slower because media grew from $84m last Q to $87m this Q, and they expect it to fall slightly next Q. Royalty revenue grew even faster, from $49m to $59. Since they only made $48m profit, one analyst asked if they make anything outside of media. They didn't clarify much with their response, but they basically said that you can't really separate media from drive sales. I say, true enough, you need drive sales to generate media sales. They should find more Benchmarks and Tandbergs out there to make drives, and they can sell more media.
4. Snap grew 40% sequentially, and 500% y-y. They didn't break out absolute numbers separate from their systems storage numbers. They did say that ATL separately was profitable, but that Snap and ATL together weren't, so guess what, Snap isn't profitable. They said that they believed that Snap would be profitable next fiscal year. They still don't have a time when the IPO will take place, and don't want to say much before the road show, whenever that will take place. Snap4000 accounts for over half of Snap's revenue, and they believe that they have an 80% market share for entry level and workgroup NAS appliances.
5. Meanwhile, ATL is working with NTAP, and have added a gigabyte ethernet drive to their FC drive, so they can sell to all of NTAP's configurations. They are also growing their direct sales force, and their service business. The service business accounted for a record 14% of SS's revenue this quarter, and they believe it will grow. SS (Storage Systems) revenue grew to $116m, up 27% y-y.
6. They generated about $69m in cash this quarter, and exited the quarter with $378m in cash, and $107m in inventory. They didn't buy any stock, because their lawyers claimed it might not be right to do so with Snap in registration. They still expect to spend another $130m on stock buybacks in the future.
7. While next quarter will be slower, they believe that they will grow by greater than 30% in FY02. This sounds good. SDLT will be shipping, Snaps losses will be off the books, and ATL's growth will be from a higher base. There will be more systems and drives in place, which will generate more media revenue (they sold 115,000 drives last Q, they said). While the tape market overall is growing only in single digits, they will be addressing a much larger part of that market, from the low end with Benchmark to the higher end with SDLT, and including systems and service revenues, rather than primarily the mid-range with DLT. They are developing other technologies in house which they don't want to talk about, they say.
Those are the highlights of the call, I think.
Sam |
