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Company Establishing Strong Position in High Growth Data De-Duplication Market with DXi-Series Disk Backup and Remote Replication Appliances


SAN JOSE, Calif., May 23, 2007 - Quantum Corp. (NYSE:QTM), the leading global specialist in backup, recovery and archive, today announced that revenue for its fiscal fourth quarter (FQ4’07), ended March 31, 2007, was $277 million and that revenue for the full fiscal year 2007 (FY07) was slightly more than $1 billion. Reflecting Quantum’s acquisition of Advanced Digital Information Corp. (ADIC) last August, these revenue totals represented a 35 percent increase over the fourth fiscal quarter last year (FQ4’06) and a 22 percent increase over fiscal year 2006 (FY06), respectively.


The company reported a GAAP net loss of $20 million for FQ4’07, or 10 cents per share, a
2-cent improvement over the same quarter last year. This $20 million net loss included a number of major expense items totaling $22 million: $13 million in amortization of intangibles,
$7 million in restructuring and other transition expenses related to the ADIC acquisition, and
$2 million in stock-based compensation charges. The net impact of these items reduced earnings per share on a diluted basis by approximately 11 cents.


Quantum highlighted several significant financial accomplishments in FQ4’07, including generating $72 million in cash from operations, paying down $120 million of its revolving line of credit and $6.2 million of its long-term debt, and achieving the goal of approximately
$20 million in quarterly synergy savings two quarters earlier than it had expected.


“The March quarter was the second full quarter of Quantum and ADIC operating as a combined company, and we feel good about the progress we’ve made toward our objective of building a more valuable storage company,” said Rick Belluzzo, chairman and CEO of Quantum. “Although the fourth quarter was not as strong as expected, our operating income as a percentage of revenue in the last two quarters was the best we’ve achieved in more than five years, when amortization, stock-based compensation and acquisition-related expenses are excluded.”


Quantum’s GAAP gross margin rate for FQ4’07 was 29.5 percent, a solid increase over the
28.3 percent rate in the same quarter last year. Operating expenses were $88 million, up from
$63 million in FQ4’06 primarily as a result of the ADIC acquisition.


For the full fiscal year 2007, the GAAP gross margin rate was 28.9 percent, up from 27.8 percent in FY06. Operating expenses in FY07 totaled $321 million, an increase of $68 million over the prior year, again largely due to the ADIC acquisition. Quantum had a GAAP net loss of
$64 million, or 33 cents per share, in FY07. This compared to a net loss of $41 million, or 23 cents per share, in FY06, with the difference being largely due to increased operating and interest expenses resulting from the ADIC acquisition. The $64 million net loss in FY07 included a number of major expense items totaling $84 million: $42 million in amortization of intangibles; $33 million in restructuring, in-process R&D and other transition expenses related to the ADIC acquisition; and $9 million in stock-based compensation charges. The net impact of these items reduced FY07 earnings per share on a diluted basis by approximately 43 cents.


Quantum’s product revenue, which includes sales of the company’s hardware and software products and services, totaled $248 million in the March quarter. This represented a net increase of $75 million over FQ4’06, with greater contributions from tape automation, disk and software, and service revenues offsetting a decline in royalties and device and non-royalty media revenue. Quantum continued to increase the percentage of its product revenue coming from branded sales, which rose to 57% in FQ4’07.


The components of product revenue were as follows:

·       Tape automation systems revenue totaled $119 million in the March quarter, an increase of $79 million from FQ4’06.

·       Disk and software revenue, which includes Quantum’s disk systems and appliances as well as StorNext software and related disk revenue, was $9 million, up $7 million from FQ4’06.

·       Revenue from devices and non-royalty media sales totaled $82 million in FQ4’07, down
$28 million from FQ4’06.

·       Revenue in the “services and other” category - which includes hardware service contracts as well as repair, installation and professional services - was $38 million in the March quarter, an increase of $17 million over FQ4’06.


Quantum had $29.5 million in royalty revenue for FQ4’07, down approximately $3 million from the same quarter last year. The $29.5 million in FQ4’07 revenue included a $3.3 million royalty that Data Domain paid in common stock to Quantum as part of a patent cross-license agreement between the two companies covering data de-duplication and other non-tape, data storage technologies.


Along with the Data Domain agreement, Quantum pointed to the significant interest in its new DXi-Series disk backup and remote replication appliances with de-duplication technology as evidence of the strong position it is establishing in one of the highest growth segments in storage. The company began shipping the DXi-Series in the March quarter, and early customer wins included a multi-unit deal with a major foreign government social service agency, a large capacity sale to a name-brand fashion retailer as a first step toward additional deployments across twenty global offices, and a combined DXi-Series/Scalar i500 tape library purchase by a leading data supplier to financial services firms.


As part of its effort to capitalize on the increased market opportunities in disk and software, Quantum has tripled the size of its engineering team in this area over the last year. This included the March quarter hiring of Jeff Tofano as chief architect. Tofano has more than twenty years of systems architecture, design and management experience on multiple operating systems and hardware platforms, most recently as technical director at Network Appliance where he was responsible for all aspects of the company’s secondary storage NAS and SAN encryption/compression appliances.


As Quantum begins fiscal year 2008 (FY08), the company said it will pursue a more aggressive strategy to grow branded revenue by shifting R&D spending from devices to disk and software and expanding its customer-facing sales resources. To support this branded growth strategy, Quantum also expects to make changes in its operations infrastructure.


Conference Call and Audio Webcast Notification

Quantum will held a conference call on, May 23, 2007, at 2:00 p.m. PDT, to discuss its fiscal fourth quarter results. Press and industry analysts are invited to attend in listen-only mode. Dial-in number: (303) 262-2138 (U.S. & International). Quantum will provide a live audio webcast of the conference call beginning today, May 23, 2007, at 2 p.m. PDT. Site for the webcast and related information: http://www.quantum.com/investors.


About Quantum

Quantum Corp. (NYSE:QTM) is the leading global storage company specializing in backup, recovery and archive. Combining focused expertise, customer-driven innovation, and platform independence, Quantum provides a comprehensive, integrated range of disk, tape, and software solutions supported by a world-class sales and service organization. As a long-standing and trusted partner, the company works closely with a broad network of resellers, OEMs and other suppliers to meet customers’ evolving data protection needs. Quantum Corp., 1650 Technology

Drive, Suite 700, San Jose, CA 95110, (408) 944-4000, www.quantum.com.


Quantum, the Quantum logo, DLT and DLTtape are trademarks of Quantum Corporation registered in the United States and other countries. DXi and Scalar are trademarks of Quantum Corporation. All other trademarks are the property of their respective owners. 


"Safe Harbor" Statement under the U.S. Private Securities Litigation Reform Act of 1995: This press release contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Specifically, without limitation, statements relating to: (1) our substantial opportunity in high growth storage segments; (2) our plan to shift more investment toward growth opportunities in disk and software; and (3) our expectations regarding changes to our operations infrastructure, are forward-looking statements within the meaning of the Safe Harbor. These statements are based on management's current expectations and are subject to certain risks and uncertainties. As a result, actual results may differ materially from the forward-looking statements contained herein. Factors that could cause actual results to differ materially from those described herein include, but are not limited to: (a) the failure to compete successfully in the highly competitive and rapidly changing marketplace for backup, recovery, archive and other storage products and services; (b) difficulties in retaining key employees; (c) our ability to successfully execute to our product roadmaps and timely ship our products; (d) the risk that lower volumes and continuing price and cost pressures could lead to lower gross margin rate; (e) media royalties from media manufacturers coming in at lower levels than expected; (f) operational risks associated with the changes being made to our manufacturing infrastructure; (g) acceptance of, or demand for, our products being lower than anticipated; and (h) challenges in successfully integrating ADIC, its products and its employees into Quantum. More detailed information about these risk factors, and additional risk factors, are set forth in Quantum's periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Factors," on pages 39 to 50 in Quantum's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on February 8, 2007 and pages 14 to 25 in Quantum's Annual Report on Form 10-K for fiscal year 2006, filed with the Securities and Exchange Commission on June 12, 2006. In particular, you should review the risk factors on pages 39 through 42 of our Form 10-Q under the headings “A large percentage of our sales come from a few customers, and these customers have no minimum or long-term purchase commitments. The loss of, or a significant reduction in demand from, one or more key customers could materially and adversely affect our business, financial condition, and operating results”, " From time to time we make acquisitions, such as the recent acquisition of ADIC. The failure to successfully integrate recent or future acquisitions could harm our business, financial condition, and operating results ", “In connection with the acquisition of ADIC, we drew on our $500 million credit facility with Key Bank, substantially increasing our debt service obligations and constraining our ability to operate our business. If we are unable to generate sufficient cash flow from operations to meet these debt obligations, our business financial condition and operating results will be materially and adversely affected”, “Our credit agreement contains various covenants that limit our discretion in the operation of our business, which could have an adverse effect on our business, financial condition, and results of operations”, “We derive almost all of our revenue from products incorporating tape technology. If competition from alternative storage technologies continues or increases, our business, financial condition, and operating results would be materially and adversely harmed” and “Competition has increased, and may increasingly intensify, in the tape drive and tape automation markets as a result of competitors introducing products based on new technology standards, which could materially and adversely affect our business, financial condition, and results of operations.” Quantum expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.



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Cynthia Carta Adv.
Advertising Communication
Via Novara, 216 20153 Milano
Ph. ++39(0)2 40918411
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