Indeed, what's helping Dot Hill is that the entire storage sector has been on the upswing. Others posting upbeat results for the second quarter include EMC Corp. (NYSE: EMC), QLogic Corp. (Nasdaq: QLGC), Storage Technology Corp. (StorageTek) (NYSE: STK), and Veritas Software Corp. (Nasdaq: VRTS) (see Veritas Vrooms, StorageTek Keeps on Growth Curve, QLogic Gets High on FC, and EMC Sinks Despite Hiking Profits).
The much brighter outlook for Dot Hill has pushed its stock price up in the past six months, from hovering around $4 in January to $15.95 in morning trading today. "Although HIL has had a big move, we believe the stock can continue to appreciate modestly as HIL's fundamentals continue to improve and it gains credibility and exposure with investors," writes Needham & Co. analyst Glenn Hanus, who maintains a Buy rating on the stock.
In light of its relatively strong quarterly results, Dot Hill raised its guidance for the full year 2003, projecting revenue of $180 million and net income of $0.25 per share, compared with its previous guidance of $171.5 million in revenue and net income of $0.21 per share.
Gross margins remain well below industry average, at 20.7 percent for the quarter. But that's a vast improvement over Dot Hill's previous margins, which were 18.1 percent for the first quarter of 2003 and 2.4 percent for the second quarter of 2002.
Dot Hill says margins have improved because it is now outsourcing nearly all its manufacturing to Solectron Corp. (NYSE: SLR), reducing its manufacturing expenses. The company said it has closed its manufacturing facility in Carlsbad, Calif., but at the same time has hired an additional 19 engineers.
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