Price wars in the disk drive industry could drive Quantum Corp. (Nasdaq: QNTM) to first quarter earnings less than one-sixth of what analysts were expecting.
After market close Thursday, the Milpitas, Calif.-based maker of hard disk drives and tape storage products said it expects fiscal first quarter earnings to range between 5 cents and 15 cents a share. First Call's survey of 12 analysts had predicted first quarter net income of 31 cents.
Price pressure in the hard disk drive market is hurting Quantum's revenue, said Michael Brown, Quantum's Chairman and CEO. "As we entered this quarter, we expected desktop units to be relatively flat, with revenue down sequentially due to continued pricing pressures," Brown said. "However, pricing pressures have been more severe than expected, with the sequential rate of price decline roughly double that of the prior two quarters."
Hard disk drive companies have been hurt badly by falling prices over the last few months. Shares of Quantum fell 9/16 to 19 9/16 in Thursday's trading prior to the earnings warning. Of 14 analysts surveyed by Zack's Investment Research, five rate Quantum a "strong buy", five maintain the equivalent of "hold" ratings on the stock, and four recommend it as a "moderate buy".>