Quantum Corp. has a market cap of $670.7 million; its shares were traded at around $2.76 with a P/E ratio of 26.1 and P/S ratio of 1.
Highlight of Business Operations:Revenue decreased $2.7 million, or 2%, in the third quarter of fiscal 2012 compared to the third quarter of fiscal 2011 primarily due to expected reductions in OEM and royalty revenue. Product revenue from OEM customers decreased 12% while revenue from branded products increased 5% from the third quarter of fiscal 2011 due to continued improvement in sales volumes through our partners. The royalty revenue decrease was primarily from maturing DLT media. Our efforts to increase revenue from branded disk systems and software solutions resulted in an 18% increase from the third quarter of fiscal 2011, primarily due to the addition of revenue from the recently introduced family of StorNext appliances, such as the StorNext Archive Enabled Library products, and midrange disk system revenue increases. In addition, branded tape automation revenue increased 1% in a declining market, an indicator of growing our market share. Service revenue decreased primarily due to a decline in OEM repair activity and lower hardware service contract revenues from end of service life on higher revenue service contracts for certain legacy branded tape automation products. Our focus on growing the branded business in recent years is reflected in the greater proportion of non-royalty revenue from our branded business, at 81% in the third quarter of fiscal 2012 compared to 78% in the third quarter of fiscal 2011.
Operating expenses increased 4% to $66.7 million for the third quarter of fiscal 2012 primarily due to increased salaries and benefits from investing in our sales and marketing and general and administrative teams. Income from operations was $7.0 million for a 4.0% operating margin in the third quarter of fiscal 2012 compared to a 6.5% operating margin in the third quarter of fiscal 2011. The largest contributor to the decline in operating margin was decreased revenue, specifically lower service revenue and royalty revenue, followed by incremental operating expenses in the third quarter of fiscal 2012.
Tape automation systems revenue decreased 3% and 1% from the third quarter and first nine months of fiscal 2011, respectively, primarily due to expected decreases in sales to OEM customers. For the third quarter of fiscal 2012, OEM tape automation systems revenues from enterprise, midrange and entry-level products each decreased by a similar amount. For the first nine months of fiscal 2012, midrange and entry level tape automation systems revenue from OEM customers decreased as anticipated compared to the prior year period, while OEM enterprise tape automation product sales increased compared to the prior year. Largely offsetting these decreases, we had branded tape automation systems revenue increases of 1% and 4% in the third quarter and first nine months of fiscal 2012, respectively, primarily due to increased enterprise sales and to a lesser extent from midrange sales.
The $30.8 million difference between reported net income and cash provided by operating activities during the nine months ended December 31, 2011 was primarily due to $43.6 million in non-cash items, the largest of which were amortization, depreciation, share-based compensation and service parts lower of cost or market adjustment. In addition, we had a $7.1 million increase in accounts payable primarily due to the timing of payments and increased purchases. These were partially offset by a $17.5 million increase in manufacturing inventories primarily due to purchasing materials to meet projected third quarter fiscal 2012 product sales and from securing a sufficient supply of hard disk drives for forecast needs into early fiscal 2013 due to supply constraints from flooding in Thailand.
The $22.7 million difference between reported net income and cash provided by operating activities during the nine months ended December 31, 2010 was primarily due to $52.3 million in non-cash expenses, the largest of which were amortization, depreciation, service parts lower of cost or market adjustment and share-based compensation. This was partially offset by a $15.4 million increase in accounts receivable and a $9.3 million decrease in deferred revenue. Accounts receivable increased primarily due to an increase in revenue in the third quarter of fiscal 2011 compared to the fiscal quarter ended March 31, 2010. The decrease in deferred revenue was primarily due to the final utilization of an OEM deduplication software prepayment during the first nine months of fiscal 2011.
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