Storage Tek seems pretty confident about growth of enterprise. I'm wondering if most of their drives come from IBM? I suppose they split their tape purchases between IBM and QNTM?
I didn't include all the financials as they really mess up the format. Here's the link if you want to see them. biz.yahoo.com
One note from financials should you check, inventories decreased from 288,615 to 276,007, but I now fear increasing inventories and look for any drops.
Regards,
StorageTek Announces Record Third-Quarter Results, Plans $800 Million Share Repurchase Program
LOUISVILLE, Colo.--(BUSINESS WIRE)--Oct. 23, 1997--Storage Technology Corp. (NYSE:STK) today reported record third-quarter revenue, net income and earnings per share, driven by continued dramatic growth in its new business initiatives and by higher growth in its core tape storage business.
For the third quarter ended September 26, StorageTek said it earned $54.5 million, or $.87 per common share, an increase of 38 percent over the $39.5 million, or $.65 per share, reported a year ago. Revenues for the quarter increased to $525.2 million from $486.1 million in the 1996 quarter.
StorageTek also said that its board of directors has authorized the repurchase of up to $800 million of its common stock. Based on Wednesday's closing price of StorageTek shares, the repurchase program would reduce the number of shares outstanding by over 20 percent.
''StorageTek today has two key priorities: to fully exploit the major growth opportunities that lie before us, and to provide ongoing value for our shareholders,'' said David E. Weiss, StorageTek chairman, president and chief executive officer. ''Over the last several months, we have reviewed the full range of strategic alternatives available to us. Our growth initiatives are exceeding our expectations. Our core business continues to generate substantial free cash flow. The capital needs of our businesses are well in hand. We have determined that our shareholders will be best served by returning a substantial amount of capital to them through this share repurchase program. We are also quite confident that we retain the flexibility to invest in growth opportunities going forward.
''I am delighted with the overall progress of our key new growth initiatives in client-server storage and new applications,'' said Weiss. ''Together, they have grown from $100 million last year to an expected $300 million this year, with dramatic growth potential in 1998.
''Our applications business is hitting on all cylinders, with significant contributions from each of the key vertical segments: document management, scientific applications, check image archive, broadcast automation and medical imaging. These applications drove record quarterly sales of our ultra-high capacity RedWood tape drive,'' said Weiss.
''Our TimberWolf small library business is accelerating,'' Weiss continued. ''Most of these sales have come through a strong network of VARs (value-added resellers) and VADs (value-added distributors) as well as our direct sales channel. We expect to bolster these channels with additional OEM (original equipment manufacturer) partnerships in the current quarter and near future. More partnerships will extend our leadership position in this product category.
''We have made positive strides on the marketing front in open disk,'' said the StorageTek chairman. ''Increased marketing resources should lead to faster growth going forward. We are also substantially increasing our internal research and development investment in this product area which, at least in the short term, will result in higher R&D expense as a percentage of revenue. Longer term, increased StorageTek software content in an open-systems disk product should help us achieve greater market penetration in this fast growing market.
''Our enterprise storage business is performing well. The growth rate in our enterprise Nearline business has improved dramatically. This has been driven by strong PowderHorn library sales,'' said Weiss. ''Our terabyte shipments in enterprise DASD grew dramatically year over year and we had yet another record quarter for shipments of SnapShot software. Continuing technological innovations in both these areas bode well for our ability to sustain a leading competitive position.''
The Virtual Storage Manager (VSM) system was announced on October 13 during FORUM97, the StorageTek users conference attended by over 950 people. The VSM system is based on the renowned Iceberg technology combined with the proven architecture of the highly successful Nearline family of products. VSM is the first product to provide customers with greatly simplified storage management, improved applications performance, and efficient cartridge utilization while adding value to their investment in Nearline automation. The ability to use existing media and drives to create an almost limitless back-end storage capacity will allow storage managers to deploy new storage-intensive applications, such as server consolidation, year 2000 testing and document management. The introduction of VSM is a significant step in StorageTek's continued drive to provide enterprise storage management.
''During the quarter we delivered, ahead of schedule, the latest version of our virtual DASD technology which IBM markets as the Ramac Virtual Array Turbo eight path,'' said Weiss. ''The RVA Turbo eight path doubles the performance over the non-turbo product. In addition, we introduced a new Ramac Scalable Array (RSA-3) with enhancements that make it the fastest subsystem in the world. This quarter we achieved record shipments of RVA and SnapShot software.''
David E. Lacey, StorageTek executive vice president and chief financial officer, noted, ''Gross margins achieved a new high and revenue performance was solid despite the negative effect of currency translation. Overall revenue grew 11 percent on a constant currency basis. Tape sales revenue grew approximately 30 percent in constant currency. I am particularly pleased by the increasing contribution of our new business areas. All the more so because we have at the same time seen improvement in our traditional businesses.''
The company said its share repurchase program would be effected through open market purchases and privately negotiated transactions. The first phase is planned to begin shortly. The company said it would fund the share repurchase through existing cash reserves, future cash flows and a new, unsecured $350 million revolving credit agreement. The company expects to complete the repurchase program in 1998.
''In initiating this share repurchase program, we never lost sight of our overriding objective -- to achieve a profitable, higher-growth trajectory for our company. We are confident that our growth strategy is working and that even with this aggressive share investment we will have the financial resources to fuel that growth,'' said Lacey.
During the quarter, the company acquired 300,000 shares at a cost of $14.6 million under its ongoing share repurchase plan. Weighted average shares outstanding for the quarter were 62.6 million.
Except for the historical information and discussions contained herein, statements contained in this release may constitute ''forward looking statements'' within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks and uncertainties that could cause actual results to differ materially, as discussed in the company's reports on Forms 10-K, 10-Q and 8-K that are filed with the Securities and Exchange Commission (SEC).
Discussions with the Department of Justice and IBM Corp. regarding the department's investigation and a possible resolution, as described in the reports filed with the SEC, are continuing.
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