The maker of removable cartridge hard drives reported a net loss of $33.7 million, or $1.31 per share, for the second fiscal quarter ending March 31, compared with a net loss of $51.1 million or $4.40 a share for the same period a year earlier.
Despite the reduction in net loss, revenue for the quarter plummeted to $16.8 million, a 65 percent drop from revenue of $47.4 million last year.
"This was not a normal quarter; this was the transition quarter," said company chairman Edward Marinaro. "When you are trying to fix a business like SyQuest, you need the resources to work with."
The company also announced $24.5 million from NEA, a venture capital firm and one of the original founders of SyQuest, Marinaro added. This latest infusion brings the total equity for the past year to about $112 million. The money is being used to streamline the operation, and SyQuest will increase merchandising expenditures as well as exploit its competitor's troubles.
Last month, Iomega (IOM) recalled approximately 75,000 recently manufactured Jaz disks. Iomega said it will recall some 20,000 disks in the United States and approximately 55,000 disks in foreign markets. The defective disks could lose information stored on them and may not perform properly, according to the company.
Marinaro said Syquest is hoping to pick up additional customers and cash in on those deterred by Iomega's defective disks. "We have ignited a lot of studies about how we run the business and how to improve the business. We are getting rid of subsidiaries and have been doing a fair amount of outsourcing, That has helped us to reduce some of our expenses."
The company attributes the reduced revenue to limited shipments of EZFlyer 230 in anticipation of product price reductions and new product releases, decline in sales of older products, and lower-than-planned shipments of the new SyJet 1.5GB removable cartridge hard drive. Initial component shortages and other shortfalls limited SyJet production on the accelerated basis the company expected to achieve.
But even as revenue dwindled, the company said EZFlyer channel sell-through remained at the same level as the previous quarter and that channel inventories were reduced substantially. In addition, the SyJet product channel sell-through continues to grow with strong reorders and low returns.
After the close of the second quarter, Fletcher Asset Management invested $5 million in the company; SyQuest also announced that four major suppliers converted $14.2 million of debt into SyQuest common stock.
But after receiving that investment, one analyst was not swayed that it would make a difference.
"$5 million is a pittance" compared to the losses that SyQuest has suffered, Howard Rosencrans, an analyst with HD Brous & Company, told CNET's NEWS.COM previously. Rosencrans added that SyQuest "will burn this money in an hour" on operating expenses alone.
In active trading today, the company's stock was at 2-1/2, up from yesterday's close of 2-5/16.