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StorageTek reports loss

StorageTek loses money in the second quarter, more evidence of depressed earnings in the storage industry.

StorageTek reported a net loss in the second quarter, more evidence of depressed earnings in the storage industry.

StorageTek, a provider of network storage products, said today that it earned $27.2 million excluding one-time charges, compared to $54.4 million a year ago. Diluted earnings per share excluding the one-time charges were 27 cents per share compared to last year's 50 cents.

Including one-time pretax charges of $102.6 million, the company reported a net loss for the quarter of $38.5 million, or 38 cents per share. The charges resulted from "pending patent litigation and an employee voluntary separation and restructuring program," the company said.

Revenues were $654.4 million, a 21 percent increase from $542.3 million a year ago and a 26 percent increase over the first quarter of 1999. U.S. and Canadian revenue grew 42 percent compared to the second quarter last year, excluding sales to IBM. Europe grew 29 percent, and Asia Pacific grew 41 percent, with Latin America flat, the company said.

"Going forward, we anticipate that revenue growth will be accompanied by continued improvements in our costs associated with the restructuring program we initiated earlier this year," said chief executive David E. Weiss in a statement.

Disk revenue was down 10 percent from last year but tape revenue, driven by sales of the 9840 tape drive and automated libraries for the client-server market, grew 28 percent over the second quarter of 1998, the company said. Revenues from networking and other products were flat compared with the second quarter last year.

StorageTek is also a player in the market for storage area networks, high-speed networks dedicated to information storage management. EMC is the most successful company in this space and recently, IBM entered the market and is making an aggressive push for market share.

IBM's contribution to total corporate revenue decreased, Weiss said. StorageTek works with IBM in areas such as virtual disk arrays.

"We are off to a strong start with our Shared Virtual Array product. Over 40 percent of our total disk product revenue in the second quarter was generated by our direct sales force and partners, excluding IBM. IBM's contribution to total corporate revenue decreased to 11 percent," Weiss said.

Storage services revenue grew 21 percent over the second quarter of 1998 to $185 million. Consulting and integration services were the primary drivers of growth in service revenue.