News Stay informed about the latest enterprise technology news and product updates.

Procom's Q4 results: Slide or strategy?

Amid rumors of instability and technological issues, storage appliance maker Procom Technology, Inc., released what appears to be less than promising fourth quarter and year-end financial results. However, the company maintains that it's all part of its move toward a focus on the network attached storage (NAS) market.

The Irvine, Calif.-network NAS developer reported that revenues for the three months ending July 31, were $14. 2 million, compared to third quarter revenues of $13.8 million, and revenues of $24.2 million in the prior year's fourth quarter.

Some industry analysts say that Procom's penetration into the high-end NAS market is less than full. "The numbers are horrible, by any definition," said Steve Duplessie, senior analyst for the Enterprise Storage Group. "We are not bullish on Procom."

Though the numbers may raise questions as to what's happening at Procom, President and CEO Alex Razmjoo says that this is an expected side effect of its restructuring plan. "We've realigned our resources. That's why you see a drop in our revenues. [The numbers are] not a good indication of what's going on with Procom."

Razmjoo says that his company is in the process of shaking off the products of the past and moving toward a focus on the high-end NAS market. "We've been in a different business until recently, CD servers and upgrade storage. We are walking away from our legacy business to strictly focus on NAS."

As to the lack of faith by some industry analysts in the company, Razmjoo was genuinely taken aback by the negative comments. "We are surprised to hear that. We've been seeing sequential growth of our NAS revenue. We show 40% growth in that market this quarter."

A big factor in Procom's operation is its OEM agreement with Hewlett-Packard under which HP adds software on top of Procom's NetForce NAS device and packages it under the HP brand. Another industry analyst has said that there is talk that HP is going to introduce its own NAS box, a possibility that Razmjoo finds unimpressive. "HP has confirmed to us that they are committed to our OEM agreement."

Net loss for Procom in the fourth quarter totaled $1.2 million, or $0.11 per share, compared to a net loss of $2.5 million, or $0.22 per share for the quarter ended April 30, 2000, and a net loss of $1.3 million or $0.12 per share for the fourth quarter of fiscal 1999. While revenue for the year ended July 31, 2000, was $63.2 million, compared to revenue of $101.3 million for fiscal year 1999. Net loss for the year totaled $8.0 million, or $0.70 per share, compared to fiscal 1999's loss of $2.9 million, or $0.26 per share.

In keeping with Razmjoo's projections of sequential increases in NAS sales, Procom saw an increase of 43% quarter-over-quarter, from $4.8 million in the quarter ended April 30, to $6.9 million this quarter, and 162% over NAS sales of $2.6 million in the fourth quarter of fiscal 1999.

The movement from a legacy product line to a NAS focus may be causing some bumps in the financial road, but Razmjoo remains confident. "We executed well in all key areas. Network attached storage sales grew, gross margins expanded, losses narrowed, and we further reduced reliance on non-strategic product lines. All key parameters were in line with our expectations, and we are happy with the progress we have made."

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

Dig Deeper on Storage vendors

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.