ADIC Sales Down Despite EMC

Quarterly results for tape library supplier Advanced Digital Information Corp. (Nasdaq: ADIC) were a mixed bag, falling below analyst expectations for revenue, despite a reseller deal with EMC Corp. (NYSE: EMC).

Although ADIC completed its first full quarter since EMC agreed to resell its tape libraries, ADICs revenue slipped to $115.4 million for the quarter that ended in October from $118 million a year ago. Net earnings were $4.9 million, or $0.07 earnings per share -- higher than expected, thanks to a tax benefit worth $2.3 million ($0.04 per share), but still below the same quarter last year (see EMC to Resell ADIC Tape).

Thomson First Call estimates were for revenue of $121 million and EPS of $0.02.

CEO Peter Van Oppen put on a happy face. “We are pleased about this quarter,” he told analysts on a conference call, pointing to revenues increasing about 5 percent sequentially and a 14 percent rise in branded sales to $65 million. Branded sales, or sales that do not go through OEMs, bring a higher profit margin, and tape libraries sold through EMC and ADIC’s new disk-backup product fall into that category.

But Van Oppen admitted their might not be much revenue growth for 2005. He gave a forecast of around $460 million to $500 million for the year, with the low end of guidance basically flat from $455 million this year. Van Oppen also wouldn’t give specifics on how much revenue EMC is driving.“We consider EMC an important partner, but I can’t comment on size, scale, or anything else,” Van Oppen said.

ADIC is counting on product diversification for long-term growth. Like other tape suppliers, ADIC is turning to disk backup (in the form of its PathLight VX) to offset the industrywide reduction in tape sales. The company is also pushing storage management software (see ADIC Upgrades Disk Backup and ADIC Updates Amass). Unfortunately for ADIC, none of those new product lines are far enough along to show significant results.

Van Oppen acknowledged the market vagaries. “We have executed a strategy to transform ADIC from a company primarily focused on tape libraries to one with a broad stable of technologies,” he said. ”We are slowly but surely seeing significant signs of the success of this strategy, but uncertainties dictate caution in any forward looking guidance.”

— Dave Raffo, Senior Editor, Byte and Switch