EMC Invests In Storage VAR MTI

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EMC has taken a financial stake in one of its solution providers, Tustin, Calif.-based MTI Technology.

During a conference call Tuesday to discuss MTI's fiscal 2004 results, MTI President and CEO Tom Raimondi said EMC took part in a $15 million investment in his firm. The investment, led by Advent International, will be used to help MTI expand its business, with a focus on its relationship with EMC. Of the $15 million investment, $4 million came from EMC, said MTI CFO Todd Schaefer.

MTI and EMC have a long history together. MTI originally was a developer and manufacturer of proprietary storage products and sold intellectual property related to RAID technology to EMC in 1996. About a year ago, MTI exited the manufacturing space to focus on sales and related services of EMC hardware and software.

EMC's investment in MTI arose from the companies' unique relationship, according to Raimondi. "EMC is investing in us so we can expand our business," he said. "[It] benefits both companies."

One reason for EMC to invest in MTI is their mutual focus on information life-cycle management, Schaefer said. "EMC's ILM strategy"we fold right into that," he said. "We have technology and sales resources that have grown up around ILM. We can take this complex ILM message to the masses."

The move from manufacturer to solution provider has proved to be good for MTI. For its fiscal 2004 fourth quarter ended April 3, the company reported revenue of $23.6 million, a 6 percent year-over-year gain. MTI lost $700,000, or 2 cents per share, in the quarter, compared with earnings of $600,000, or 2 cents per share, a year earlier.

For the full year, MTI's revenue was $83.2 million, up from $82.4 million in 2003. The company lost $3.9 million, or 12 cents per share, in 2004, compared with a loss of $11.2 million, or 34 cents per share, in 2003.

Margins for MTI's fiscal fourth quarter rose to 22.3 percent, up from 19.4 percent in the previous quarter. Order backlogs rose $1.3 million to $3.7 million in the last quarter, Raimondi said. "This is a great indicator to us about how our business is going," he said.

During the fiscal year, MTI managed to open 245 new named accounts, which accounted for 43 percent of product revenue, Raimondi said. "This creates a whole new base for us to be able to sell into next year and the year after, as most customers keep products they purchase for a three- to five-year life cycle," he said.

Part of EMC's investment will be used to expand MTI's sales capabilities, Raimondi said. At the end of its fiscal fourth quarter, MTI had 22 quota-carrying salespeople and five sales managers in the United States, but the storage vendor aims to hire 20 more sales staff this quarter and another 20 by year-end, as well as a few new sales managers, he said.

The impact of the new sales staff could be significant. This year, MTI added a senior sales executive with 20 years of storage experience plus five new salespeople with an average of 19 years of experience each, and they accounted for $5.2 million in revenue, or 23 percent of MTI's U.S. product revenue for the fiscal year, Schaefer said.

MTI also plans to bolster its professional services offerings, including new design and implementation strategies for data backup, specifically using disk-to-tape devices, Raimondi said. A big push in server consolidation in Microsoft Exchange environments is planned as well, he said.

"We really believe that in the storage marketplace today, there's a huge requirement for professional services, not just on the front-end design of the systems, but also on a subscription basis as customers constantly change their environments from quarter to quarter as they add new services and take services off," Raimondi said.

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