ADIC Posts Two Cent Per Share Loss on 10% Sales Growth To $111 Million in Second Quarter
Thursday May 13, 4:05 pm ET
biz.yahoo.com
New Enterprise Product Acceptance Accelerates; Sales and Marketing Costs Up; Share Buyback Expanded
REDMOND, Wash.--(BUSINESS WIRE)--May 13, 2004-- Advanced Digital Information Corporation (Nasdaq:ADIC) today announced a second quarter loss of $1.3 million, or two cents per share, on sales of $111.1 million for the period ended April 30, 2004, versus a profit of $2.4 million, or four cents per share, on sales of $100.6 million during the same period last year. Sales grew more than 10 percent from the same period last year and declined just over six percent from the record first quarter ended Jan. 31.
"We are disappointed at the end of our six quarters of sequential sales growth and the resulting small operating loss this period," said Chairman and CEO, Peter van Oppen. "But we remain convinced that our continued investment in new products and channels is the right strategy. ADIC® ramped up expenses during the second quarter, especially in sales and marketing, in anticipation of even more rapid sales growth which did not materialize," he said. "We did, however, continue to make measurable progress in the acceptance of our newest products as well as development of sales channels during the quarter and we do not expect to significantly alter our existing levels of spending."
Yesterday, the Company announced a worldwide reseller agreement with HP covering ADIC's StorNext(TM) data management software. The first joint customer is identified as NOB Cross-Media Facilities, a supplier of digital archiving services for multiple public broadcasters in the Netherlands. In mid-April, ADIC announced StorNext(TM) interoperability with Apple Computer's new Xsan(TM) file system. This exclusive compatibility allows end users to add Mac-based server and storage resources to the list of platforms that can transparently share data over a SAN.
Also during the quarter, both the i2000 Intelligent Library(TM) and Pathlight VX(TM) disk-to-tape backup appliance grew at sequential rates that would represent triple-digit growth on an annualized basis. Pathlight VX(TM) users are able to achieve disk performance and RAID reliability using serial ATA disk for primary backup and restore while maintaining an integrated path to tape for extended data retention and disaster recovery. The Company believes ADIC's own proven tape emulation, disk file system, policy based data management tools and tape library technology provide Pathlight VX(TM) unique performance and scalability advantages for customers.
"ADIC is in the process of transforming our business from one that has historically been heavily dependent on mid-range tape storage to one that is becoming a leading player in creating innovative, enterprise-class hardware and data management software products incorporating both disk and tape," van Oppen said. "Our customers are drowning in data and ADIC's products are a big part of the solution. These new products, combined with additional enterprise sales channels, are expected to help gradually improve overall sales growth and result in improved financial results," he said.
During the second quarter, gross profit as a percentage of sales dropped to 28.2 percent compared with 32.7 percent in the second quarter last year and 29.0 percent in the immediately preceding quarter. This decline is primarily a result of lower-than-anticipated sales volumes and significant increases in service infrastructure which offset increases in the proportion of higher margin Intelligent Storage Solutions(TM) (ISS) sales and branded versus OEM business.
Sales of ISS products, which include elements of ADIC connectivity and software technology and are sold through both branded and OEM sales channels, represented approximately 38 percent of sales in the second quarter, unchanged from a year ago and up from 35 percent in the immediately preceding period. The Company believes that, at constant sales levels, an increasing proportion of ISS sales, whether sold on a branded or OEM basis, will typically increase gross margins as a percentage of sales. A sequential decline in overall sales volume this period obscured the positive margin effects of a sequential improvement in the proportion of ISS sales, according to ADIC. ISS sales were 17, 30 and 37 percent of total sales in fiscal years 2001, 2002 and 2003, respectively.
OEM sales to partners, including Dell, Fujitsu-Siemens, HP, IBM and Sun, were approximately 47 percent of total sales versus 45 percent in the second quarter of fiscal 2003 and 50 percent in the first quarter of fiscal 2004. A lower proportion of OEM sales generally results in increasing gross margin as a percentage of sales but the sequential decline this quarter was also obscured by the effect of lower overall sales volumes during the period, according to the Company.
Operating expenses rose 6.8 percent from the same quarter last year and 10.4 percent sequentially. All of this expense growth is attributable to increases in sales and marketing expenses, including the addition of more than 50 sales and marketing Team Members over the past six months. Other income was a net expense for the quarter as interest income of $519,000 was more than offset by foreign currency losses of $961,000. Total cash and marketable securities, net of all debt, rose to approximately $224.3 million.
Separately, ADIC announced that Chuck Stonecipher will become Executive Vice President for Product Development and Strategy, relinquishing other responsibilities to spend full time on the management of products, technology plans and competitive strategy for which he has long had responsibility. Chief Financial Officer Jon Gacek also becomes an Executive Vice President.
Share Repurchase Expanded
The Company also announced that its Board of Directors has authorized the repurchase of up to five million total additional shares under its previously announced stock repurchase program. Approximately 1.4 million shares have been repurchased under the existing program approved in May 2002. ADIC believes any such purchases, which may be made from time to time, represent good value for the Company and its shareholders. |
