Data General Reports Financial Results for Third Quarter of Fiscal 1999 - Company Financial Information

Edge: Work-Group Computing Report, August 2, 1999

Data General Corporation has reported a net loss of $3.1 million, or $.06 per share, on revenues of $355.9 million, for its third quarter of fiscal 1999, which ended June 26. The results include a gain of approximately $.06 per share, resulting from the sale of investments.

The company reported a net loss of $155.1 million, or $3.15 per share, on revenues of $351.3 million, for the third quarter of fiscal 1998. The 1998 results included a charge of $135 million, or $2.74 per share, resulting from a corporate restructuring.

Commenting on the third quarter results, Data General President and Chief Executive Officer Ronald L. Skates said, "We continue to see growth from each of our two major businesses, our AViiON server and CLARiiON storage lines. However, as we had planned, our expenses have increased, primarily because of our efforts to create a large direct sales force for our CLARiiON organization. As anticipated, this has had a negative impact on profitability."

Data General announced in May that it would hire more than 450 people over the next 18 months for its CLARiiON organization, the majority of whom will be end user sales people. The company said that the additional expense of this hiring and related marketing efforts during the year and a half period would be more than $100 million.

"As the recognized leader in Fibre Channel storage technology, Data General has a tremendous opportunity in a market that is expected to grow 65 percent annually for the next few years," said Mr. Skates. "By accelerating the expansion of our end-user sales force, we have the opportunity to be a major player in this growing multi-billion dollar market."

Commenting on the CLARiiON business, Mr. Skates said, "Our CLARiiON full Fibre Channel storage products continued to show revenue growth during the quarter and now represent more than 60 percent of our storage business. Overall CLARiiON revenues were up 10 percent year over year. Excluding revenues from Hewlett-Packard, which continued to decline, CLARiiON revenues grew nearly 50 percent. Revenues from direct end-user sales also continued to ramp up."

"Our goal longer-term is to become the premier supplier of storage area networking solutions," said Mr. Skates. "The advent of SANs is changing today's computing model and helping to establish a storage market apart from servers. Fibre Channel is the enabling technology for SANs and with CLARiiON, Data General is the only major storage vendor shipping full end-to-end Fibre Channel storage solutions."

At a major press conference in May, the company unveiled its strategy to provide the industry's first family of full Fibre Channel-based SAN solutions. Its first SAN product, CLARiiON SANbackup, allows organizations to move their mission-critical data from disk to tape without impacting the performance of the enterprise network. Over the course of this calendar year, Data General will deliver a series of SAN solutions, including CLARiiON shared storage, which will allow organizations to share storage on CLARiiON arrays in multi-vendor platform environments including Windows NT and UNIX.

In addition to announcing its plans to build a direct sales force, the company further strengthened its CLARiiON OEM channel with the announcement earlier this month that Unisys will expand its enterprise storage product line by incorporating CLARiiON full Fibre Channel technology. The CLARiiON products will initially be available with the Unisys Aquanta Series of Windows NT servers. Subsequent releases of the CLARiiON product line will be expanded to other Unisys platforms.

Commenting on the AViiON business, Mr. Skates said, "AViiON revenues were again up year over year as we continue to see solid demand from our customers for our high-end Windows NT and NUMA technology based servers."

Noting the IBM - Sequent merger that was announced last week, Mr. Skates stated, "We agree with IBM's statement that 'NUMA will be a defining technology for early 21st century UNIX and NT servers.' We believe our NUMA technology and its price/performance leadership provides excellent opportunities for Data General."

The AViiON NT server line was enhanced with the introduction of the high-end enterprise server, the eight-processor AV 8900, in June. The company also expanded its server line with the introduction of the AV 2300 entry-level server. In addition, the company also unveiled DG/ManageSuite, a comprehensive package of open enterprise management solutions for its AViiON server and CLARiiON storage lines.

During the quarter, Data General announced that, according to International Data Corporation (IDC), the company's AViiON family of servers is the worldwide market share leader in both the Intel-based NT and UNIX categories. Based on 1998 revenues, Data General is the leader in NT servers selling from $25,000 to $250,000 and $100,000 to $250,000, and is also ranked number one in UNIX systems selling between $100,000 and $250,000.