MILPITAS, Calif.--(BUSINESS WIRE)--June 5, 1997--Storage Dimensions, Inc.
(NASDAQ:STDM), the leading independent vendor of high-availability RAID storage
systems for the PC-LAN market, today announced that it anticipates second quarter
results will fall below the Company's expectations. The Company believes this shortfall
is due primarily to a near-term softness in the PC-LAN market, price erosion on disk
drive components, below-plan staffing of the Company's end-user sales force, and
expenses related to the RAIDPro product introduction.
The RAIDPro product launch, which occurred during May, is on target. RAIDPro is a
compact, easy-to-use, external storage system for entry-level PC servers running
Windows NT and NetWare. With the introduction of RAIDPro, Storage Dimensions
has expanded its breadth of product offerings to reach a large new market segment.
Initial customer reaction has been favorable toward RAIDPro, reinforcing
management's view that it will open the entry-level PC server market for the Company
and will expand distribution through the channel. Business Outlook
The following statements are based on current expectations. These statements are
forward looking and actual results may differ materially.
-- The Company expects revenue for the second quarter to be down 10% to 15%
from first quarter revenue of $20.9 million. A significant factor in this expectation is a
near-term softness in the Intel-based networking market as indicated by lower second
quarter revenues projected or reported by Intel, Novell, Seagate, and Cabletron.
Other contributing factors include turnover in the sales force, and the subsequent time
and cost required to recruit and train qualified replacement personnel.
-- Gross margin percentage in the second quarter of 1997 is expected to be between
34% and 35%, which is down from the first quarter margin of 36.4%. This
unexpected, short-term drop in gross margin is due to recent, significant price
reductions in disk drive components. The price reductions are anticipated to result in
abnormally high, non-recurring, inventory re-valuation charges for the quarter.
-- Operating expenses are expected to exceed the target of $6.6 million by 5% to 8%
due to higher R&D and marketing expenses for the RAIDPro launch, and higher G&A
expenses associated with accelerated recruiting efforts.
-- The Company is projecting a second quarter loss due to the cumulative effect of the
above mentioned factors.
"While we are very disappointed with our current second quarter outlook, we remain
confident that the PC-LAN market will experience above average growth over the
long haul," said David Eeg, president and CEO of Storage Dimensions. "Despite the
short-term setback, we believe our long-term business fundamentals and relative
competitive position remain intact and will allow us to take advantage of the
opportunities this market is projected to provide."
Mr. Eeg continued, "We are taking swift action to mitigate the factors that are
negatively impacting the Company this quarter. We are working with our disk drive
component suppliers to minimize the future impact of further price erosion. We are
moving aggressively to address the sales force staffing issues by recently hiring several
new sales people. In addition, our business plan includes opening an additional seven
sales offices during the third quarter of 1997. Finally, we are reviewing all areas of
expense to ensure they are prudent given current business conditions, without
jeopardizing the company's strategic growth opportunities.
"With the timely introduction of RAIDPro during the second quarter of 1997, we have
an attractive offering for the entry-level PC-LAN server market. This should allow us
to expand our business by leveraging our channel network, thus affording growth
opportunities independent of Storage Dimensions' end-user sales force." Company
Profile
Founded in 1985, Storage Dimensions designs, manufactures, markets, and supports
high-performance data storage systems for open systems network applications. The
Company focuses on the PC-LAN market by developing and marketing a broad
family of disk and tape storage systems designed to satisfy the high-performance,
fault-tolerance, and high-availability requirements of its customers, while at the same
time reducing the life-cycle cost of ownership. In line with its open systems strategy,
the Company also develops and supports selected products for the Unix market.
Storage Dimensions' products are sold through its own field sales force in combination
with multi-tiered distribution channels. For more information, contact Storage
Dimensions at 1656 McCarthy Boulevard, Milpitas, California 95035, 408/954-0710,
or visit the Company's World Wide Web site at storagedimensions.com . |
