Dot Hill


conference date: May 9, 2006
for quarter ending: March 31, 2006 (1st quarter)

Overview: Dot Hill continues to lose money as it attempts to transition to new products and clients. Crossroads patent lawsuit will be resolved this quarter.

Basic data:

Revenues of $58.7 million were up 4% sequentially but only 1% over year-earlier results. Net loss of $5 million or .11 per share is worse than comparable prior quarter and year-earlier.

Gross profit margins shrank to 19%, attributed to product changes and shipping of prototypes of new products. R&D expense was up substantially to $9.7 million again due to new product development.

Cash ended at $114.8 million, down $7.4 million, partly attributed to delays in invoicing customers.


Expects revenues of $63 to 66 million in the 2nd quarter, and net loss per share of .08 to .10.

Conference Highlights:

Revenue mix: FibreChannel 44.2%; SCSI 31.8%; SATA 11.3%; blade, 7.3%.

New ERP, new headquarters, and exits of CEO & CFO did cause some disruption in quarter.

Shipped significant quantities of new product prototypes (50 to 75 units). Customers increased requests for prototypes. Fruits (product announcements by OEM customers) will be seen soon.

Sun Microsystems relationship. Sun Storage product line continues to use 5 Dot Hill products that continue to sell well.

Anticipates new customer announcements soon.

Actively studying stock buyback plan, but will not happen until Crossroads lawsuit resolved.

No longer predicting $500 million annual revenue run rate in 2007, but believes it is possible.

New CFO decision should be made in near future.


160 line is declining in shipped units; 320 is increasing, but does not have a good of a profit margin yet.

Chaparel controller? Sun is not committed to it at this time.

Gross margins? Expects to get back to historic gross margin levels by the end of the year.

Sun is consolidating; they have been supporting numerous code bases. Hence loss of a potential new product sale to them. Sun was 87.7 % of revenue in the quarter. Backlogs in quarter increased from 1.9 to $3.6 million, with most of the pick up being non-Sun.

Crossroads lawsuit should be resolved this quarter, which will result in an uptick in legal fees, but "then we should be done." [Excepting a large payment if they lose]

Anticipates R&D costs will be similar in this quarter, but drop to $6 to $7 million next quarter as they finish up on the current set of new products.


OpenIcon Analyst Conference Summaries Main Page

Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. Before making or terminating an investment you should always verify any factual basis of your decision from multiple independent sources.

Copyright 2006 William P. Meyers