Dot Hill Systems Corp. (HILL) has provided an update on its fourth-quarter and fiscal 2014 guidance. The company now expects non-GAAP revenues for the fourth quarter to come within the $67 million and $69 million range, up from the previous expectation of $62 million to $68 million set forth during the third-quarter conference call.
The company has also upgraded its non-GAAP earnings per share (EPS) guidance for the fourth quarter. It now estimates earnings in the range of 11 cents–13 cents per share, up from the previous estimate of 7 cents–12 cents announced in Nov 2014. The Zacks Consensus Estimate is pegged at 6 cents.
The company increased its quarterly non-GAAP revenues and earnings per share outlook, primarily due to greater traction in vertical markets coupled with product launches and better capacity utilization.
For fiscal 2014, the company estimates non-GAAP revenues in the range of $216.3 million to $218.3 million and non GAAP earnings per share in the range of 17 cents to 19 cents.
While the quarterly revenue guidance reflects a 31% sequential increase at the mid-point, the fiscal revenue outlook reflects a 14% year-over-year increase.
In the third quarter of fiscal 2014, Dot Hill reported non-GAAP revenues of $52 million, down 1.7% year over year primarily due to a delay in order bookings, which resulted in orders that remained unshipped.
The company reported adjusted earnings (excluding all one-time items but including stock-based compensation) of 1 cent per share in the last reported quarter, which not only missed the Zacks Consensus Estimate by a couple of cents but also decreased from 5 cents reported in the year-ago quarter.
Our Take
Although, Dot Hill reported tepid third-quarter fiscal 2014 results, the company’s new guidance is encouraging. We believe that the company’s product launches and expected growth in the deal pipeline will boost its revenues, going forward.
Dot Hill serves vertical markets such as media & entertainment, telecommunications, big data/data analytics, oil & gas, and digital image capture. The company believes that the telecommunications and media & entertainment markets continue to leverage from increasing data generated by smartphone users and film studios.
Also, the company remains encouraged by the traction in vertical markets and expects to generate strong revenues from this market in the near future.
However, a volatile spending atmosphere and competition from EMC Corporation (EMC) and NetApp, Inc. (NTAP) remain concerns.
Currently, Dot Hill shares have a Zacks Rank #3 (Hold).
A better-ranked stock worth considering in the technology sector is F5 Networks, Inc. (FFIV), carrying a Zacks Rank #2 (Buy).
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