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Quantum: DLT meets estimates, Hard Disk Drive Group exceeds in 2Q

Quantum's DLT & Storage Systems Group (NYSE: DSS) earned what analysts predicted in the second quarter, while the company's Hard Disk Drive Group (NYSE: HDD) lost a penny less than expected.

After market close Thursday, the DLT unit, which makes tape drives and network storage systems, reported net income of $58 million, or 34 cents per share, not including write-offs of acquired in-process R&D. First Call's survey of a dozen analysts predicted a profit of 34 cents per share.

Thursday's DLT news should come as little surprise to observers, since the unit last week preannounced results.

DLT revenue rose 23 percent year-over-year, to $357 million. Gross margin in the second quarter increased to 48 percent because of increased royalties from DLTtape partners, Quantum said. Storage systems generated $82 million in revenue.

Including charges related to the acquisition of Meridian Data, Quantum DLT earned $21 million, or 12 cents per share.

Hard disks were bloody, but a little less so than analysts estimated. The Hard Disk Drive Group reported a net loss of $49 million, or 59 cents per share. First Call's survey of 11 analysts predicted a loss of 60 cents per share.

Quantum's Hard Disk Drive Group's second quarter revenue of $768.2 million represents a 12 percent decline year-over-year, even though unit shipments were up 20 percent over the same period, to 7.4 million, on abnormally strong demand, the company said. The hard disk drive industry has suffered from severe price pressures for the last few quarters, as the PC industry continues to wage its own price wars. Declines in disk drive prices eased slightly in the second quarter, but they're still falling faster than the historical norm, said John Gannon, president of Quantum's Hard Disk Drive Group.

The net loss for Quantum Corporation, combining DLT & Storage and the Hard Disk Drive Group, was $63 million, including special charges of $59 million in the company's Hard Disk Drive Group and $37 million related to the write-off of in-process research and development from the company's DLT & Storage Systems Group's acquisition of Meridian Data. Consolidated net income for the quarter, excluding these charges, was $9 million.

Also Thursday, Quantum announced it would expand its share buyback program to $600 million. The company in May had announced plans to repurchase up to $200 million in stock. Most shares to be purchased will be for the DLT group. "Given the strong cash generation capability of DSSG, we have generated sufficient cash from operations to recover the costs of our two recent strategic acquisitions, which have been instrumental in accelerating DSSG's storage systems strategy," said Richard Clemmer, CFO for Quantum.>