Dot Hill Reports Results

CARLSBAD, Calif. -- Dot Hill Systems Corp.(NASDAQ:HILL) today announced financial results for the first quarter ended March 31, 2007. For the first quarter of 2007, net revenue was $53.4 million, compared to $58.7 million for the first quarter of 2006 and $59.4 million for the fourth quarter of 2006.

Net loss for the first quarter of 2007 was $6.0 million, or $0.13 per fully diluted share. This compares to first quarter 2006 net loss of $5.0 million, or $0.11 per fully diluted share, and a fourth quarter 2006 net loss of $9.1 million, or $0.20 per fully diluted share. Included in the first quarter 2006 net loss was a one-time charge of $0.8 million, or $0.02 per fully diluted share impact, associated with a consulting agreement with the company's former chief executive officer.

The figures for first quarter 2007 net revenue and net loss per share exceeded guidance set by the company in February, 2007 as well as analyst consensus.

Gross margin for the first quarter of 2007 was 12.5 percent as compared to first quarter 2006 gross margin of 19.0 percent and fourth quarter 2006 gross margin of 7.9 percent. The sequential improvement in gross margin percentage can be attributed primarily to higher than anticipated revenue and higher margin contribution from the company's largest OEM customer.

"The first quarter of the year was a good start to 2007 for Dot Hill," said Dana Kammersgard, president and chief executive officer of Dot Hill. "We are pleased that we surpassed our internal projections for the quarter on both the top and bottom lines. Last month, we released the 2730 Turbo storage product and we continue to add new OEM customers as a direct result of our R/Evolution product architecture. Additionally, the transition of our manufacturing to our new supply chain partners in China is progressing well and we anticipate that this move will begin to bear fruit in the third quarter of this year."While we still have a lot of work to do, we believe we have made good progress in the last three months on all of our transition fronts. We will continue to remain cautious about the short term until we gain more insight into the purchasing patterns of our new OEM customers and most importantly, begin shipping our 2730 product from MiTAC and SYNNEX."

Dot Hill Systems Corp.