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July 16, 1998

QUANTUM Q1 EARNINGS SUFFER DESKTOP DRIVE DOLDRUMS

By CBR Staff Writer

Quantum Corp, the world’s biggest tape drive maker, and the second biggest maker of high end disk drives in the world, has seen the ongoing price war in the desktop hard drive market all but destroy its first quarter profits. Net income for the three months through June fell 97% to just $3m on revenues down 24% to $1.1bn. But unlike some of its competitors, Quantum at least has substantial other business segments to help it through some of the hardest business conditions the desk top drive industry has ever seen. Quantum rates itself as number one worldwide in the desktop segment, shipping 5.3 million drives this quarter, generating 65% of its total revenues. The desktop hard drive business remains very competitive, particularly in the distribution channel, where we have seen a continued oversupply of hard disk drives and aggressive pricing for the third consecutive quarter, said Richard Clemmer, Quantum’s chief financial officer. Quantum’s profit margins collapsed in the last period of 1997 and have still to recover. Added to which, Quantum said it deliberately shipped less inventory into the distribution channel in attempts to alleviate the over supply problems. OEM PC makers also reduced orders in the quarter, culminating in a steep revenue decline. But if normal seasonal trends kick in later this year in the PC industry, said a Quantum spokesperson, conditions may start to improve by September or October. Clemmer said he was pleased with performance in both the high end disk drive and DLTtape businesses but that these factors had been overshadowed by the company’s other problems.

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