Exabyte spins off CreekPath, reports preliminary Q4 earnings

Exabyte Corp. admitted that its fourth quarter earnings were less than stellar but assured investors that the company was working on plans that would put the company back on track, including the spin-off of its subsidiary CreekPath Systems, Inc.

In a teleconference for media and investors yesterday Bill Marriner, chairman, president and chief executive officer for Exabyte announced the company's preliminary fourth quarter earnings for 2000, calling the overall year "flat" and giving predictions as to how he plans to put the Colorado-based tape drive and library maker back on the road to profitability. Marriner also announced the spin-off of CreekPath a year-old startup in the storage outsourcing arena that recently nabbed $23 million in venture capital.

"We made modest revenue progress again in the fourth quarter and recorded our best revenue quarter in the past seven," said Marriner. "Clearly we are making progress, but not yet at the rate that I would like to see."

Revenue for the fourth quarter of 2000 totaled approximately $61 million compared to revenue for the third quarter of 2000 of $60 million and revenue of $58,617,000 for the fourth quarter of 1999. Revenue for the full year of 2000 totaled approximately $222 million compared to $222,827,000 for 1999.

Exabyte's biggest gain was made in the automated tape library market, posting sales of $25 million, up from $21 million in the preceding quarter and $14.5 million in the fourth quarter of 1999. The company has plans to introduce its second LTO Ultrium library, another AIT, and several DLT models in the first two quarters of 2001.

High operating costs due to the delayed closing of CreekPath's funding round and problems with tape media suppliers combined as a one-two punch, hitting Exabyte in the pocketbook. "That hurt," said Marriner. "We've had very low inventories of media on the shelves of our distributors due to quality issues with two out of three of our media suppliers causing us to reject media shipments." The shortage of tape media caused a backlog of $3.5 million. Marriner forecasts a 50-100% increase in media shipments in the early months of the year will eliminate the backlog.

For the fourth quarter of 2000, Exabyte expects a pretax loss of approximately $8.7 to $9.5 million, or $0.38 to $0.42 per share, compared to a pretax operating loss of $0.50 per share, for the third quarter of 2000 and a pretax loss of $0.53 per share, for the fourth quarter of 1999. The pretax loss for the full year of 2000 was approximately $44.0 million or $1.94 per share.

Marriner said that putting Exabyte back in the black will involve further outsourced offshore manufacturing; a continued shift in the product mix to the higher margin library and media products; further product quality and cost improvements; and expense reductions. "We are also evaluating various funding alternatives to support our operations," said Marriner.

Exabyte now holds a 34% stake in CreekPath. The financial results of CreekPath will no longer be consolidated in the Exabyte financials. In commenting on the dilution of Exabyte's ownership of CreekPath Marriner said "We'd rather have a partial stake in something successful than a major stake in something unstable."

Steve Duplessie, analyst for the Milford, Mass-based Enterprise Storage Group said that CreekPath needed to be spun off as a separate entity, or they never would be able to gain critical mass and focus in the competitive SSP market. "Loosening the ties to Exabyte will only help them move forward," added Duplessie.

Exabyte engineers, manufactures and markets 8mm and MammothTape technology tape drives, premier storage media and libraries for MammothTape, DLTtape and LTO Ultrium tape technologies.

One investor, disappointed with Exabyte's recent performance, asked Marriner why the company shouldn't be sold immediately to which he responded that they would not want to sell in the current market environment. "We will look at opportunities to sell. First we need to get our cost structures up to make us more attractive," said Marriner.

Let us know what you think about the story, e-mail Kevin Komiega, assistant news editor

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