Dot Hill meets revised estimates

Dot Hill Systems Corp., announced its first quarter financial results have met revised expectations. The company lowered its forecast last month.

The bright spot in Dot Hill's quarter was a 125% increase in sales of its SANnet storage systems.

Dot Hill, Carlsbad, Calif., said net revenue for the first quarter was approximately $18.6 million, compared to fourth quarter 2000 net revenue of $30.7 million and net revenue a year ago of $30.9 million. For the first quarter 2001, Dot Hill experienced a net loss of $28.7 million, or $1.17 per share. Last quarter, Dot Hill reported a net loss of $1.1 million, or $0.04 per share, and a year ago reported net income of $1.0 million, or $0.04 per diluted share.

Last month, Dot Hill lowered its earnings forecast and cut its workforce by 30% bringing its total number of employees down from more than 400 to about 300. The cutbacks, according to Dot Hill, were a cost-saving measure to reduce its break-even point.

"We believe that by taking these measures and continuing to focus on providing customers with industry leading technologies, we are positioning Dot Hill for future success when the economy and industry rebounds," stated Romm.

Sales of Dot Hill's SANnet systems have been steadily on the rise. SANnet sales accounted for 51% of revenue, compared to 38% of revenue for the fourth quarter and 14% of revenue a year ago. Tape backup accounted for 10% of revenue and service for 10%; legacy and other products accounted for the remaining 29% of sales.

Sales to the telecommunications and service provider industry, Dot Hill's biggest market, made up 35% of the company's revenue. According to Dot Hill, the decrease in revenue was due to a reduction in demand from telecom and other commercial sectors and the planned shift away from legacy products.

During the first quarter, Dot Hill said it took a number of actions to stave off the effects of the economic downturn. Two one-time charges were taken, the first of which was the recording of a $16 million charge in connection with a valuation allowance provided for deferred income tax assets. The second was a restructuring charge of $2.9 million related to severance payments for the previously announced workforce reduction and for the consolidation of excess facilities and related fixed assets. The company also recorded an additional $2 million inventory reserve for the quarter.

Since last quarter, Dot Hill has announced OEM agreements with Motorola, IPeria, and Comverse, as well as partnerships with Cisco Systems and FalconStor.

Preston Romm, Dot Hill's chief financial officer, stated, "Although we executed well with respect to many of our goals during the first quarter, Dot Hill has suffered from the current economic downturn. Like many other technology companies, we saw a number of our customers delay purchasing decisions, suffer disruptive personnel cuts and experience budget freezes. Deals weren't lost as much as they simply didn't close, and we continue to see this trend entering the second quarter."

Dot Hill said due to its lack of visibility in the marketplace and the economic downturn the company is not able to give accurate financial guidance at this time.

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

For more information:

Dot Hill drops earnings outlook, cuts workforce by 30%

Executive vision: Dot Hill targets storage's sweet spot

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