Storage Earnings: Seven Players Report This Week, Most Down


Financial news on the storage front leans toward the negative as at least seven storage vendors reported earnings this week.

On Thursday, StorageNetworks, a Waltham, Mass.-based developer of software for managed storage services, reported a loss of $18.5 million, or 19 cents per share, for its fourth fiscal quarter of 2001, which ended on Dec. 31. This compared with a loss of $33 million, or 36 cents a share, for the same quarter last year, and soundly beat analysts' expectations of a loss of 25 cents per share, according to First Call.

As a result, Wall Street gave StorageNetworks a thunderous applause, sending shares of the company, which reported before the opening of the market, up 26 percent to close at $5.14 per share.

Excluding certain charges, the company had a pro forma loss of $1.2 million for the quarter, compared with a loss of $25.6 million last year.

Both the pro forma and the net pro forma losses excluded a charge of $114.4 million the company recorded during the quarter, related to scaling back from hosting storage services for clients in third-party data centers in order to focus on selling the technology, which allows the managing of storage as a service. Including that charge, the company actually posted a loss of $132.9 million, or $1.36 per share, for the quarter.

For the quarter, StorageNetworks also reported revenue of $31.6 million, up 49 percent over the $21.2 million reported last year. This brought revenue for all of 2001 to $123.6 million, up 156 percent from the $48.2 million reported for 2000.

Also reporting on Thursday was OTG Software, a Rockville, Md.-based developer of data management software.

OTG executives said the company reported a loss of $3.7 million, or 11 cents a share, for its fourth fiscal quarter of 2001, which ended Dec. 31. This compared with a profit of $800,000, or 3 cents a share, for the same period a year ago.

Adjusted for certain merger-related expenses and the amortization of certain acquired assets, OTG had a pro forma loss of $152,000, which was about break-even, compared with a profit of $611,000, or 2 cents a share, last year.

OTG came in under analysts' expectations of a profit of 1 cent per share, according to First Call.

For the year, the company had a GAAP loss of $7.6 million, or 24 cents per share, compared with a profit of $3.2 million, or 10 cents per share, in 2000. On a pro forma basis, OTG posted a yearly loss of $1.4 million, or 4 cents per share, compared with a profit of $4.4 million, or 14 cents per share, last year.

Revenue for the company in the fourth quarter hit $18.5 million, up 22 percent from the $15.2 million reported last year. That brought fiscal 2001 revenue to $64.9 million, up 24 percent from the $52.5 million reported last year.

Veritas Software on Tuesday reported a loss of $204 million, or 51 cents a share, for its fourth quarter, which ended Dec. 31. That compares with a loss of $125 million, or 31 cents per share, for the same period one year ago. That figure includes adjustments for acquisitions and for a one-time stock-based compensation package.

However, without those adjustments, the company had pro forma income of $64 million, or 15 cents a share, compared with $84 million, or 19 cents a share last year.

Analysts were expecting earnings of 13 cents per share, according to First Call.

Revenue was up slightly for the quarter, reaching $374 million, compared with the $370 million reported for the same quarter last year.

For all of fiscal 2001, the company reported a loss of $651 million, or $1.63 a share, compared to $620 million, or $1.55 per share, for fiscal 2000. Revenue for 2001 was $1.5 billion, up about 24 percent increase over $1.2 billion reported last year.

For rival Legato Systems, which also reported on Tuesday, both earnings and revenue were down compared to last year.

Legato executives said the Mountain View, Calif.-based company lost $47.9 million, or 54 cents per share, compared with a loss of $13 million, or 15 cents per share, for the same period last year. Excluding special items, pro forma losses were $4 million, or 4 cents per share, compared with a loss of $3.9 million, or 4 cents a share, last year.

According to First Call, analysts had been expecting the company to lose 5 cents per share for the quarter, which ended Dec. 31.

Revenue for the quarter was $62 million, compared with $58.4 million for the same quarter last year.

For the year, Legato lost $81.5 million, or 92 cents per share, compared with a loss of $35.2 million, or 41 cents per share, in 2000. Revenue in 2001 was $246.6 million, compared with $231.4 million in 2000.

Legato bucked one trend in 2001. The company's head count grew to 1,338 people, compared with 1,274 in 2000.

Company executives said Legato is depending more on the channel than in the past, with about 55 percent of its revenue coming from non-OEM indirect sales channels this past quarter compared with 44 percent for the third quarter of 2001.

Looking forward, Legato expects a top-line growth in overall revenue of between 13 percent and 18 percent, with an ever-increasing part of that revenue coming from indirect channels. The company expect to reach the break-even point in the second half of 2002, Legato officials said.

Maxtor, based in Milpitas, Calif., found the acquisition of the hard-drive business of Quantum this year to be a big boost in revenue and a big drag on earnings.

On Tuesday, the company reported a loss for its fourth quarter of 2001, which ended Dec. 29, of $162.2 million, or 69 cents per share. This compared with a profit of $5 million, or 4 cents per share, for the same period one year ago. Pro forma loss, which excludes expenses related to the Quantum acquisition and the acquisition of hard-drive component manufacturer MMC Technology, was $44.6 million, or 19 cents per share. Analysts were calling for a loss of 21 cents per share, according to First Call.

Revenue for the quarter was $1.1 billion, compared with $727.2 million for the same quarter a year ago.

For the whole of fiscal year 2001, Maxtor reported a loss of $646.4 million, or $3.12 per share, way down from the income reported last year of $31.8 million, or 28 cents a share. Revenue for the year was $3.8 billion, up from the $2.7 billion reported last year.

In a statement, Mike Cannon, president and CEO, said the company shipped 13.7 million desktop and SCSI drives during the quarter, up 1.1 million drives from the previous quarter. The desktop drive business was profitable, but those profits were offset by weaker-than-expected results for the server drive line due to delayed customer qualifications.

Also reporting Tuesday was FalconStor Software, a Melville, N.Y.-based developer of software for IP storage networks, which in August became a publicly listed company via a merger with Network Peripherals.

For the fourth quarter of fiscal 2001, which ended Dec. 31, FalconStor reported a loss of $1.25 million, or 3 cents per share, down slightly from the loss of $1.4 million the company experienced in the same quarter last year.

Revenue for the quarter was $3 million, compared with $75,000 last year.

For the fiscal year, FalconStor lost $10.1 million, or 40 cents per share, compared with a loss of $2.1 million in 2000. Revenue for the year was $5.6 million, compared with $140,000 in 2000.

On Monday, Gadzoox Networks executives reported a loss of $11.2 million, or 21 cents per share, for its third quarter of fiscal 2002, which ended Dec. 31. That figure did not include a $3 million restructuring charge, which, when figured in, brought the loss to 28 cents per share. This compared with a loss of $11.5 million, or 41 cents a share, for the same quarter last year.

Analysts were expecting a loss of 21 cents per share, according to First Call.

Revenue for the quarter was $5.1 million, flat with the revenue reported for the same quarter last year.