STORAGE TECHNOLOGY AIMS TO SHOOT BACK THROUGH THE BILLION MARK IN 1989

Storage Technology Corp, which, as reported briefly Friday, won its discharge from Chapter XI bankruptcy protection late Thursday our time, returns to fiscal probity bubbling with enthusiasm for the battles ahead. The company reckons that it will do $29.3m net on sales of $806.3m – disconcertingly precise only halfway through the year – compared with net of $36.2m on sales of $696m – but its eyes are on 1989, when it looks for $128m profit on sales that take it back through the billion mark to $1,050m, reports the New York Times. Its best ever year for sales was 1982, when it did $1,080m. The company has come through the traumas remarkably unscathed – it went into bankruptcy with 6,200 customers worldwide, and claims that it still has 6,000. Employment is another matter however: from 16,200 worldwide in 1982, the company shrank to 8,100 in 1985, and has now crept back up to 8,500. Chief executive Ryal Poppa says that a key strategy switch will be to retain the lease contracts the company signs rather than sell them on to third parties, declaring that while this will put a crimp on growth in the short term, it will underpin the company’s balance sheet and improve the quality of its earnings in the medium term. But Storage Technology Monitor editor Jerry Lazar hears that the company is still selling some leases on to third parties – to the tune of perhaps $50m. One of the key assets is $120m in tax credits, which make a highly profitable acquisition particularly attractive in the short term. Accordingly, Poppa has his eye on a data storage software company to acquire. Under its reorganisation plan, Storage Technology will pay all creditors in full with a mix of cash, equity and notes. The sum involved is about $800m, to be met with $132.5m in cash, $285m in 10-year 13.5% notes, and the balance with about 192m new shares, diluting the stake of existing holders to about 15%. The only immediate cloud on the horizon is the still outstanding suit from limited partners in the research and development tax shelter formed to develop optical disk drives. The effort was wound up because the technology developed proved inadequate – but StorageTek says that it does reckon that it will need to be in optical storage. The shares put on 25 cents to $4.375 on the news.