Dot Hill's sales of data storage equipment fell in the March 2009 quarter more than expected. But sales did not fall off a cliff. I am still sticking with the theory that the one technology product that enterprise-sized corporations must buy this year is more storage capacity. It is the law.
Dot Hill's products are very well positioned to take advantage of enterprises needing more storage but wanting to cut back on capital expenditures. While serving only a tiny sliver of the market so far, it is clear tht Dot Hill has gained considerable market share during this last year. In the past three years it has transitioned from being highly dependent on sales to a single OEM, Sun, to having three solid large clients, Sun, HP, and NetApp, plus a host of smaller OEMs and channel distributors.
Preliminary estimates for Q1 were released on April 14, 2009 [See also Dot Hill Preliminary Q1 press release]. Revenue probably came in just below $54 million. Non-GAAP net loss should be $0.05 to $0.07. At the Dot Hill Q4 analyst conference on February 26, 2009 guidance was for Q1 2009, with admitted low visibility, was $56 to $63 million in revenue with non-GAAP EPS negative $0.06 to $0.11. So despite being somewhat below the bottom of guidance on revenue, they did well on EPS.
Management has done a great job reducing costs. Any sort of firming of the global economy should result in a revenue ramp-up that puts Dot Hill back in the black. They have a good cash reserve, about $54 million at the end of the quarter.
Market capitalization has shot up since the announcement, but it is still just $38 million as I write. If they can do a profitable quarter by the end of the year, with over $200 million a year in revenues, you can bet this stock will shoot up. I have; I own the stock (so weigh that against my obvious enthusiasm).
Aside from the possibility that this recession will last into 2010, the main potential risks for Dot Hill are price competition from competitors and the danger of being dependent on Sun, HP, and NetApp for most of their sales.
My Dot Hill main page