Storage Vendors Optimistic About 4Q 2002 Financials

Executives at EMC, Storage Technology, McData and Dot Hill Systems this week said earnings for the last quarter should be higher than expected.

On Monday, Hopkinton, Mass.-based EMC surprised Wall Street by reporting stronger-than-expected preliminary results for the fourth quarter of 2002.

The company expects to report revenue for the quarter exceeding $1.47 billion, with earnings in the range of 1 cent to 2 cents per share, excluding a previously announced restructuring charge. With the charge, expected to be about $160 million on a pre-tax basis, the company expects a loss in the quarter of 2 cents to 4 cents per share.

Analysts had been expecting EMC to break even for the quarter, according to First Call.

EMC President and CEO Joe Tucci said in a statement that customer spending was better than expected, and that demand for the company's new CX family of Clariion arrays was strong.

Also on Monday, Fibre Channel switch vendor McData revised its fourth-quarter preliminary revenue and earnings guidance. Company executives said they expect revenue to be between $104 million and $106 million for the quarter, higher than previous guidance of $84 to $86 million. Revenue for the same period last year was $93.5 million.

The company also now expects pro forma earnings per share for the quarter in the range of 6 cents to 8 cents. This figure excludes non-cash deferred compensation and amortization charges. Previous guidance called for break-even to 1 cent per share.

McData's income was 3 cents per share for the same period last year. Analysts had been expecting 2 cents per share, according to First Call.

On a GAAP basis, McData expects income of 5 cents to 7 cents per share, compared with a loss last year of 5 cents per share.

On Tuesday, StorageTek executives said the company expects product revenue for its fourth fiscal quarter to exceed that of its third quarter by about 25 percent, with services revenue hitting about $200 million.

As a result, StorageTek's pro forma earnings for the fourth quarter are expected to be over 45 cents per share, compared with First Call's estimates of 36 cents per share, the executives said. Income for the same period last year was 36 cents per share.

Also on Tuesday, executives at Dot Hill Systems, Carlsbad, Calif., said the company expects revenue for the fourth quarter of fiscal 2002 to be between $15.5 million and $16.5 million, compared with $10.5 million for the same period last year.

Dot Hill CEO James Lambert said he expects 2003 to be an exciting year for the company, which late last year signed an agreement to supply storage arrays to Sun Microsystems.

Total revenue for this year is expected to reach $153 million, compared with between $46 million and $47 million for all of 2002, Lambert said. Dot Hill should have a yearly income of 17 cents per share in 2003, he added.

In related news, Intransa executives said on Wednesday the privately-held IP storage startup closed a new round of venture financing with an extra $6 million in the bank, giving it a grand total of $33 million in funding to date.

The San Jose, Calif.-based company is developing IP-based storage solutions designed to simplify the storage, access, and management of information. Among its strategic investors is 3Com.

However, at least one solution provider said that one successful financial quarter does not make a trend.

Regardless of what the vendors said this week, it is too early to say the worst of the economic doldrums is past, said Geoffrey Lilien, president of Lilien Systems, a Mill Valley, Calif.-based solution provider.

"[In] the past couple of years, we've seen signs of a turnaround, and then signs that there is no turnaround," Lilien said. "It's hard to get excited until we see a couple of good quarters."

Looking forward, Lilien said, business with his clients will pick up, but for now the question is when that will happen. "I believe [end-user] companies are losing their technological edge because they are not investing in IT and other things," he said. "They have been focusing on head count and purchasing expenses more than how they can be more effective. They're trimming fat, but also some essentials."