Havant, UK, January 12, 2010 — Xyratex Ltd (Nasdaq: XRTX), a leading provider of enterprise class data storage subsystems and storage process technology, today announced results for the fourth quarter and fiscal year ended November 30, 2009.  Revenues for the fourth quarter were $243.0 million, a decrease of 14.9% compared to revenues of $285.4 million for the same period last year.

For the fourth quarter, GAAP net income was $1.6 million, or $0.05 per diluted share compared to a GAAP net loss of $55.7 million in the same period last year. Non-GAAP net income increased to $7.9 million, or a diluted earnings per share of $0.26, compared to non-GAAP net income of $0.4 million, or $0.02 per diluted share, in the same quarter a year ago(1).

Click here to view the financial tables (19KB PDF file).

Gross profit margin in the fourth quarter was 15.6%, compared to 12.5% in the same period last year and 16.7% in the prior quarter.

Revenues from sales of our Networked Storage Solutions (NSS) products were $203.4 million in the fourth quarter as compared to $222.3 million in the same quarter a year ago, a decrease of 8.5%. Gross profit margin in the Networked Storage Solutions business was 13.2% as compared to 8.4% a year ago. Revenues from sales of our Storage Infrastructure (SI) products were $39.5 million as compared to $63.1 million in the same quarter a year ago, a decrease of 37.4%. Gross profit margin in the Storage Infrastructure business was 28.7% as compared to 27.3% a year ago.

Revenues for fiscal year 2009 were $867.9 million, a decrease of 17.3%, compared to revenues of $1,049.7 million for fiscal year 2008. Revenues from sales of our NSS products were $762.0 million for the year as compared to $855.8 in 2008, a decrease of 11.0%. Revenues from sales of our SI products were $105.9 million as compared to $193.9 million in 2008, a decrease of 45.4%.

GAAP net loss for fiscal year 2009 was $16.4 million or $0.56 per diluted share compared to a GAAP net loss of $47.9 million for fiscal year 2008. Non-GAAP net income for fiscal year 2009 decreased to $1.5 million, or a diluted earnings per share of $0.05, compared to non-GAAP net income of $16.2 million, or $0.54 per diluted share, for fiscal year 2008.

When comparing with the prior year it should be noted that the 2008 fourth quarter and full year results included some significant non-recurring charges related to the deterioration in the macroeconomic climate in that quarter. GAAP net loss and non-GAAP net income included additional inventory and vendor claim provisions totaling approximately $7 million. These charges reduced the NSS gross profit margin in the fourth quarter of fiscal 2008 by 3.2%. GAAP net loss also included non-cash charges totaling approximately $54 million, being an impairment of goodwill and a valuation allowance against the deferred tax asset.         

“Although our Fiscal Year 2009 proved to be very challenging, I believe we delivered a good overall performance through reducing our cost base and supporting our customers' changing needs. The results of the fourth quarter reflect the component supply issues primarily related to semi conductors that we have been working to address, which have constrained our NSS shipment capability through the second half of the year. I continue to be encouraged with the demand environment we are seeing for 2010 and believe that component supply will improve from the actions we are taking,” said Steve Barber, CEO of Xyratex. “We are confident that the fundamentals within the markets we serve are improving and that our technology and strong execution will benefit us over the longer term.” 

Business Outlook

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. They reflect a significant improvement in the outlook for the SI business including customer forecasts of approximately $140 million for delivery in the first half of 2010.

• Revenue in the first quarter of 2010 is projected to be in the range $245 to $285 million.
• Fully diluted earnings per share is anticipated to be between $0.24 and $0.52 on a GAAP basis in the first quarter. On a non-GAAP basis fully diluted earnings per share is anticipated to be between $0.32 and $0.60. Non-GAAP earnings per share excludes  amortization of intangible assets, equity compensation expense, specified non-recurring items and related taxation expense.

Conference Call/Webcast Information

The company will host a conference call to discuss its results at 1:30 p.m. PT/4:30 p.m. ET on Tuesday, January 12, 2010.
 
The conference call can be accessed online via the company's website www.xyratex.com/investors, or by telephone as follows:

(1) Non-GAAP net income (loss) and diluted earnings (loss) per share excludes (a) amortization of intangible assets, (b) equity compensation expense, (c) specified non-recurring items, such as restructuring costs, the impairment of goodwill and valuation allowance against a deferred tax asset, (d) the related tax effects and (e) the effect of changes in exchange rates on the income tax expense. Reconciliation of non-GAAP net income (loss) and diluted earnings (loss) per share to GAAP net income (loss) and GAAP diluted earnings (loss) per share is included in a table immediately following the condensed consolidated statements of cash flow below.

The intention in providing these non-GAAP measures is to provide supplemental information regarding the Company’s operational performance while recognizing that they have material limitations and that they should only be referred to with reference to the corresponding GAAP measure.

The Company believes that the provision of these non-GAAP financial measures is useful to investors and investment analysts because it enables comparison to the Company’s historical operating results, those of competitors and other industry participants and also provides transparency to the measures used by management in operational and financial decision making. In relation to the specific items excluded: (a) intangible assets represent costs incurred by the acquired business prior to acquisition, are not cash costs and will not be replaced when the assets are fully amortized and therefore the exclusion of these costs provides management and investors with better visibility of the costs required to generate revenue over time; (b) equity compensation expense is non-cash in nature and is outside the control of management during the period in which the expense is incurred; (c) restructuring costs are not comparable across periods or with other companies and the impairment of goodwill and the valuation allowance against the deferred tax asset are non-recurring,  non-cash and are not comparable across periods or with other companies; (d) the exclusion of the related tax effects of excluding items (a) to (c) is necessary to show the effect on net income of the change in tax expense that would have been recorded if these items had not been incurred; (e) the effect of changes in exchange rates on deferred tax balances is non-cash and is not comparable across periods or with other companies.
 
Safe Harbor Statement
 
This press release contains forward–looking statements. These statements relate to future events or our future financial performance, including our projected revenue and fully diluted earnings per share data (on a GAAP and non-GAAP basis) for the first quarter. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Factors that might cause such a difference include our inability to compete successfully in the competitive and rapidly changing marketplace in which we operate, failure to retain key employees, changes in our customers volume requirements, cancellation or delay of projects and adverse general economic conditions in the United States and internationally. These risks and other factors include those listed under "Risk Factors" and elsewhere in our Annual Report on Form 20-F as filed with the Securities and Exchange Commission (File No. 000-50799). In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

About Xyratex

Xyratex is a leading provider of enterprise-class data storage subsystems and storage process technology. The company designs and manufactures enabling technology that provides OEM and disk drive manufacturer customers with data storage products to support high-performance storage and data communication networks. Xyratex has over 25 years of experience in research and development relating to disk drives, storage systems and high-speed communication protocols.

Founded in 1994 in a management buy-out from IBM, and with headquarters in the UK, Xyratex has an established global base with R&D and operational facilities in Europe, the United States, and Southeast Asia.

Xyratex Investor Relations:

Brad Driver
Tel:  +1 (510) 687-5260
Email: mailto:bdriver@us.xyratex.com