QNTM forecasts:
Friday June 5, 3:58 am Eastern Time
INTERVIEW-Quantum sees modest growth,hurdles ahead
By Josephine Ng
SINGAPORE, June 5 (Reuters) - The world's second largest disk drive maker, Quantum Corp (QNTM - news), expects
modest profit growth in 1998/99 in the face of several hurdles, chief executive Michael Brown said on Friday.
''We would look for some revenue growth for the year based on underlying market trends,'' Brown told Reuters in an
interview.
He said Quantum's tape drive business could increase its contribution to revenue and ''we're looking for some modest level of
profit growth year on year.''
Brown could not quantify what ''modest'' meant but indicated this would be less than a 25-50 percent kind of growth rate.
For the year ended March 31, 1998, Quantum chalked up a 15 percent rise in net income to US$170.8 million on a nine
percent increase in sales to $5.8 billion.
For its first quarter ending June, Brown said Quantum was likely to turn in flat to slight lower results against its previous quarter.
The company reported a slightly better than break-even level of income at $2.7 million for the quarter ended March 31, 1998.
''There are too many factors in the year yet to go'' he said to explain why it was difficult to make more precise projections.
''What needs to happen to make the disk drive business healthy is working through the inventory that is there and not build it
up again.''
The disk drive industry has been depressed by excess worldwide supply and plummeting prices for the past year.
Brown said he was looking to disk drive inventories being worked off in the last quarter of the year.
Factors that would determine Quantum's performance were overall market growth, the Asian economic crisis, product mix, the
level of pricing, how its tape drives business performed and timing and extend of a recovery in disk drives, he said.
Brown said disk drive prices had fallen 10 to 15 percent in the first quarter this year and no significant improvements were
expected in the second quarter.
Research firm Dataquest forecast the global personal computer (PC) market to growth 15.6 percent in unit shipments this year
but saw only single-digit growth in revenue.
International Data Corp predicted that PC shipments in the Asia-Pacific region, excluding Japan, would rise only five percent in
1998, down from 16.5 percent last year.
In the current year, Brown said Quantum was not counting on growth from Asia, except for China, India, Australia and New
Zealand.
For the year ended March 1998, Quantum saw single-digit unit shipments growth in Asia outside of Japan, David Rawcliffe, its
Asia Pacific marketing director said.
Overall, Asia, which provides 18 to 22 percent of the company's global sales, could see revenue growth in the second half this
year, he said.
Brown said Quantum's tape drive and tape automation business had helped to cushion the company's performance during this
period of oversupply and falling prices in disk drives.
He said its tape drive and tape automation business made up some 21 percent of overall revenue in the last fiscal year and this
could rise to 25-30 percent going forward.
Low-cost PCs in the US$1,000 range were also an area to watch, Brown said.
The popularity of such systems would boost the consumer market, but not the commercial sector, he said.
Quantum had a 30 percent share of the consumer original equipment market market with its bigger form factor Bigfoot disk
drive, he said.
On competition from second-tier players, Brown said Quantum had gained in the desktop segment with its share at 26 percent
in the last six months in 1997 against the same period in 1996. It maintained its share in the high end at around nine percent.
Second tier disk drive makers like Maxtor Corp, a unit of Korea's Hyundai Electronics (00660.KS), Japan's Fugitsu (6755.T)
and IBM (IBM - news) were reported to have eaten into the share of the big players, including Seagate Technology (SEG -
news).
Seagate's high end share had fallen from some 60 percent to closer to 40 percent now, Brown said. |
