Quantum's CEO Discusses Q1 2012 Results - Earnings Call Transcript

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Quantum (QTM)

Q1 2012 Earnings Call

July 27, 2011 5:00 pm ET

Executives

Jon Gacek - Chief Executive Officer, President and Chief Operating Officer

Linda Breard - Chief Financial Officer, Chief Accounting Officer, Senior Vice President of Finance, IT and Facilities

Shawn Hall - Senior Vice President, General Counsel and Secretary

Analysts

Brian Marshall - Gleacher & Company, Inc.

Shebly Seyrafi - FBN Securities, Inc.

Brian Freed - Wunderlich Securities Inc.

Alex Kurtz - Sterne Agee & Leach Inc.

Glenn Hanus - Needham & Company, LLC

Chad Bennett - Northland Securities Inc.

Eric Martinuzzi - Craig-Hallum Capital Group LLC

Presentation

Question-and-Answer Session

Jon Gacek

Yes, let me give you -- tell you a little bit of the problem that you're articulating, and then I'll tell you what we're doing. I mean, those channel partners that you're talking to generally are very technically and business tied into the product and to Quantum. So they're probably a NetApp primary disc reseller. Then maybe they used to sell data domain, and now they don't. They understand deduplication. They can deal with complex products. And we have, say, 50 of those kind of partners around the world. Well, we sell a lot of products through partners that are less -- that have less technical capability and are less business-aligned. And our midrange product, for example, was having 2 different platforms and having different configurations, and having to understand all that, it just makes it harder. And I think one of the things that's going to help with the channel will be this new product. We've been out talking to partners. There's going to be a -- there's hopefully still a lot of press coverage today. There's a lot of industry briefings over the last couple of weeks, and we've gotten, very, very good responses. So one of the biggest things is product. The second thing is this just-ongoing training around messaging and how to sell it, how to size it, what to do. We're putting on -- we have a bunch of online training and sizing tools that are coming up, and I believe here shortly is an hour or yet for some people. And then it's our team working tightly with those partners. So I can't tell you the exact progress. I know more are trained. I've been out talking to channel partners, as has Ted. I think we're on the right track. Our think our message is right. I think people like this product. We're going to just keep working at things that are working at other places.

Chad Bennett - Northland Securities Inc.

Okay. I mean, is it safe to say -- because you obviously made some changes when you took over in terms of kind of the structure of sales, and now you've added Ted. I mean, are we making any more dramatic changes in kind of composition of sales or structure, organizational structure in support of sales? Any of that going to happen? And if it's not, do you think the changes that you implemented -- it's just we're still early to see, kind of reap those benefits?

Jon Gacek

I think there's a whole bunch of answers. I mean, I think one of the things that was a positive about Ted is, Ted understands the uniqueness and complexity of the products and the solution set and the customers and the channels that we're selling into. So, I mean, he's very thoughtful about how we go to market, what it takes to be successful. And a lot of the changes we made, he and I were talking about during the recruiting process, if you will. Do I think Ted will -- I already know Ted has implemented some new things around inspection and sales force, and he's making or he's further putting focus on changes that we've made. So I think the biggest thing he's bringing is new perspective as well as focus. I expect him to have ideas of things he wants to do differently. And I also expect him to know that we needed -- we can't have a big disruption, either. And I will expect we'll do some things still. But I don't -- I think the overall changes we made are good, and I think we are seeing the impact of them. We just didn't seize the impact to the tune of $6.5 million, if you want to get really there. I kind of measure it that we expect it to. But we think we will.

Chad Bennett - Northland Securities Inc.

Okay. Last one for me, on the NetApp partnership OEM agreement on StorNext. Can you give us any -- you alluded to within the call, but any better idea of where you are there in terms of training your sales people jointly doing pitches and so forth and any type of quantification of progress?

Jon Gacek

Yes. Just a reminder: It's is not an OEM. It's a brand resell, which is important for us. Because when the customer is buying a tightly integrated solution, but it's their disk and our software. We have lots of activity. We have lots of field events. I believe that they've announced their first product. They have a series of products planned. I don't believe they're shipping any, have shipped the product yet, and I think that has to do with what disc platform they're ran on, but I don't know for sure. I think that's a question for them. I expect there will be revenue from them this quarter, though. And I think it's been really well received in the field. And then one of the nice things you mentioned is, because it's a branded play and it's branded for them, too, both our field reps are going to get paid. And that always helps drive alignment in the field.

Operator

Our next question comes from the line of Brian Freed with Wunderlich Securities.

Brian Freed - Wunderlich Securities Inc.

A couple of quick questions. I guess the first is, when you look at the federal exposure you guys have in the September quarter, you have heard a number of folks in the IT ecosystem talk about softness in federal. Can you discuss kind of your outlook for federal on 2 fronts? One overall, and second, specifically with respect to StorNext, given that has a pretty big exposure there?

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