Storage Technology Corp, the number-one manufacturer of computer tape storage equipment, warned yesterday that it expects third- quarter profits and revenues to fall well below expectations. The firm hinted at falling sales to IBM Corp, its long-time strategic partner, and said also that it has been hit by slackening demand as corporate users suspend purchases to contend with the millennium date change. The warning sent shares in the Louisville, Colorado-based firm, known to the industry as StorageTek, tumbling 24.12% in trading yesterday to close at $14.75.
The firm said net profits, excluding one-time charges from a patent settlement, would fall under 10 cents-a-share compared with the 30-33 cents-a-share range predicted by analysts polled by First Call. The firm said it expects revenue for the three- month period to September 24 to correspond with figures one year ago when it reported revenue of $571m. It singled out declining orders for its storage disk and tape back-up products. Storage management software and services plus other tape products showed buoyant demand, the firm said.
StorageTek chairman and CEO, David Weiss added: Revenue growth, excluding sales to IBM, is anticipated to be in the mid-teens for the third quarter. He offered no further elaboration. During the quarter IBM unveiled a new range of storage products to cut its dependency on StorageTek. Big Blue had bought storage drives from StorageTek and re-badged them to sell as its own while new products were under development. Meantime StorageTek recently struck a deal with IBM-rival, Sun Microsystems Inc, to develop storage devices targeted at the nascent internet market. Weiss also cited customers delaying testing and purchasing decisions in anticipation of Y2K, as a factor in depressing demand for new products, in particular.
Separately, earlier this week StorageTek agreed to pay $100m to communications equipment maker, Odetics Inc, under a deal to resolve all patent disputes between the two firms.
