Exhibit 99.1
 
     
   
     
 
      Contact:   For Release:
  Brad Cohen   Jan. 26, 2011
  Public Relations   1:05 p.m. PST
  Quantum Corp.    
  (408) 944-4044    
  brad.cohen@quantum.com    
       
  Christi Lee    
  Investor Relations    
  Quantum Corp.    
  (408) 944-4450    
  ir@quantum.com    

QUANTUM CORPORATION REPORTS FISCAL THIRD QUARTER RESULTS
 
Highlights:
 
SAN JOSE, Calif., Jan. 26, 2011 – Quantum Corp. (NYSE:QTM), the leading global specialist in backup, recovery and archive, today reported results for the third quarter of fiscal 2011 (FQ3’11), ended Dec. 31, 2010. Revenue for the quarter totaled $176 million which, primarily due to expected reductions in OEM revenue, was down from $182 million for the same period last year (FQ3’10). However, total revenue was up $9 million sequentially. In addition, branded revenue, which represented 78 percent of total non-royalty revenue for the quarter, grew 2 percent year-over-year and 5 percent sequentially. Branded disk systems and software revenue also continued to grow, increasing 26 percent from FQ3’10 and 2 percent over the prior quarter.
 
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Quantum’s GAAP gross margin rate was 42.9 percent for FQ3’11, up from 41.1 percent a year earlier, while the non-GAAP gross margin rate increased to 44.6 percent from 44.4 percent. GAAP operating income was $11 million, the same level as in FQ3’10, and non-GAAP operating income decreased to $20 million from $23 million the previous year.
 
For FQ3’11, GAAP net income was $6 million, or 3 cents per diluted share, compared to GAAP net income of $5 million, or 2 cents per diluted share, in FQ3’10. Non-GAAP net income for the quarter was $16 million, or 7 cents per diluted share, the same as in the comparable quarter last year.
 
“Although we were driving to a higher overall revenue target for the quarter, we made progress on a number of initiatives designed to increase channel traction and grow our branded business that demonstrate we are on the right track,” said Rick Belluzzo, chairman and CEO of Quantum. “We grew branded revenue year-over-year for the fifth consecutive quarter. We had record branded disk systems and software sales, with our midrange DXi® product revenue nearly tripling year-over-year and more than doubling sequentially. We generated our highest level of StorNext® quarterly revenue to date, with a record 22 percent of sales from new customers. And we further extended our tape leadership, adding 170 new enterprise and midrange automation customers.
 
“When you combine this momentum with the enhancements we continue to make across our product portfolio, most notably the new DXi 2.0 software platform we are also announcing today, we are well-positioned to deliver revenue growth and increased profits as the storage market continues to evolve,” Belluzzo added.
 
Quantum ended FQ3’11 with $93 million in total cash and cash equivalents and $280 million in total debt. The company generated $18 million in cash from operations and refinanced its subordinated term debt with subordinated convertible debt at a significantly lower interest rate expected to save Quantum approximately $10 million annually in interest expense. In addition, Moody’s Investor Service recently upgraded Quantum’s credit rating.
 
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Outlook
For the fourth quarter of fiscal 2011, Quantum said it expects:
 
Business Highlights
Key business highlights for the December quarter include the following:
 
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Conference Call and Audio Webcast Notification
Quantum will hold a conference call today, Jan. 26, 2011, at 2:00 p.m. PST, to discuss its fiscal third quarter results. Press and industry analysts are invited to attend in listen-only mode. Dial-in number: (480) 629-9678 (U.S. & International). Quantum will provide a live audio webcast of the conference call beginning today, Jan. 26, 2011, at 2:00 p.m. PST. Site for the webcast and related information: http://www.quantum.com/investors.
 
About Quantum    
Quantum Corp. (NYSE:QTM) is the leading global specialist in backup, recovery, and archive. From small businesses to multinational enterprises, more than 50,000 customers trust Quantum to solve their data protection, retention and management challenges. Quantum’s best-of-breed, open systems solutions provide significant storage efficiencies and cost savings while minimizing risk and protecting prior investments. They include three market-leading, highly scalable platforms: DXi®-Series disk-based deduplication and replication systems for fast backup and restore, Scalar® tape automation products for disaster recovery and long-term data retention, and StorNext® data management software for high-performance file sharing and archiving. Quantum Corp., 1650 Technology Drive, Suite 800, San Jose, CA 95110, (408) 944-4000, www.quantum.com.
 
###
 
Quantum, the Quantum logo, DXi, Scalar and StorNext are registered trademarks of Quantum Corporation and its affiliates in the United States and/or other countries. All other trademarks are the property of their respective owners.
 
“Safe Harbor” Statement under the U.S. Private Securities Litigation Reform Act of 1995: This press release contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Specifically, without limitation, the statement “we are well-positioned to deliver revenue growth and increased profits as the storage market continues to evolve” and all of our statements under the “Outlook” section are forward-looking statements within the meaning of the Safe Harbor. All forward-looking statements in this press release are based on information available to Quantum on the date hereof. These statements involve known and unknown risks, uncertainties and other factors that may cause Quantum’s actual results to differ materially from those implied by the forward-looking statement. More detailed information about these risk factors, and additional risk factors, are set forth in Quantum’s periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk Factors,” in Quantum’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 11, 2010 and in Quantum’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 5, 2010. Quantum expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.
 
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Use of Non-GAAP Financial Measures
 
Quantum believes that the non-GAAP financial measures disclosed above provide useful and supplemental information to investors regarding its quarterly financial performance. Quantum management uses these non-GAAP financial measures internally to understand, manage, and evaluate the company’s business results and make operating decisions. For instance, Quantum management often makes decisions regarding staffing, future management priorities and how the company will direct future operating expenses on the basis of non-GAAP financial measures. In addition, compensation of our employees is based in part on the performance of our business based on non-GAAP operating income.
 
The non-GAAP financial measures used in this press release exclude the impact of amortization of intangibles, share-based compensation expense, restructuring charges, senior debt amendment fees and gain (loss) on extinguishment of debt, net, for the following reasons:
 
Amortization of Intangible Assets
This includes acquired intangibles such as purchased technology and customer relationships in connection with prior acquisitions. These expenses are not factored into management’s evaluation of potential acquisitions or Quantum’s performance after completion of the acquisitions because they are not related to Quantum’s core operating performance. In addition, the frequency and amount of such charges can vary significantly based on the size and timing of acquisitions and the maturities of the businesses being acquired. Excluding acquisition-related charges from non-GAAP measures provides investors with a basis to compare Quantum against the performance of other companies without the variability caused by purchase accounting.
 
Share-Based Compensation Expense
Share-based compensation expense relates primarily to equity awards such as stock options and restricted stock units. Share-based compensation is a non-cash expense that varies in amount from period to period and is dependent on market forces that are often beyond Quantum’s control. As a result, management excludes this item from Quantum’s internal operating forecasts and models. Management believes that non-GAAP measures adjusted for share-based compensation provide investors with a basis to measure Quantum’s core performance against the performance of other companies without the variability created by share-based compensation as a result of the variety of equity awards used by other companies and the varying methodologies and assumptions used.
 
Restructuring Charges
Restructuring charges primarily relate to expenses associated with changes to Quantum’s operating structure. Restructuring charges are excluded from non-GAAP financial measures because they are not considered core operating activities. Although Quantum has engaged in various restructuring activities in the past, each has been a discrete event based on a unique set of business objectives. Management believes that it is appropriate to exclude restructuring charges from Quantum’s non-GAAP financial measures, as it enhances the ability of investors to compare Quantum’s period-over-period operating results from continuing operations.
 
Senior Debt Amendment Fees
The senior debt amendment fees relate to a specific amendment fee and are not part of Quantum’s future core operations.
 
Gain (Loss) on Extinguishment of Debt, Net
The gain (loss) on extinguishment of debt, net relates to specific debt refinancing actions and is not part of Quantum’s future core operations.
 
Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. They are limited in value because they exclude charges that have a material impact on the company’s reported financial results and, therefore, should not be relied upon as the sole financial measures to evaluate the company. The non-GAAP financial measures are meant to supplement, and be viewed in conjunction with, GAAP financial measures. Investors are encouraged to review the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the tables accompanying this press release.
 
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QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
    Three Months Ended   Nine Months Ended
        December 31, 2010       December 31, 2009       December 31, 2010       December 31, 2009
Revenue:                                
     Product   $ 123,218     $ 124,580     $ 344,001     $ 348,131  
     Service     37,365       38,991       113,730       117,650  
     Royalty     15,643       18,139       49,442       51,195  
          Total revenue     176,226       181,710       507,173       516,976  
Cost of revenue:                                
     Product     77,456       82,509       221,158       227,672  
     Service     23,200       24,485       71,595       76,316  
          Total cost of revenue     100,656       106,994       292,753       303,988  
               Gross margin     75,570       74,716       214,420       212,988  
Operating expenses:                                
     Research and development     18,240       18,155       54,490       51,594  
     Sales and marketing     31,776       29,029       90,973       84,202  
     General and administrative     14,176       16,289       44,600       46,012  
     Restructuring charges (benefits)     —       (22 )     11       4,784  
      64,192       63,451       190,074       186,592  
               Income from operations     11,378       11,265       24,346       26,396  
Interest income and other, net     (250 )     526       24       1,795  
Interest expense     (4,761 )     (6,813 )     (16,877 )     (19,399 )
Gain (loss) on debt extinguishment, net of costs     (1,186 )     —       (1,186 )     12,859  
               Income before income taxes     5,181       4,978       6,307       21,651  
Income tax provision (benefit)     (683 )     342       114       652  
               Net income   $ 5,864     $ 4,636     $ 6,193     $ 20,999  
Net income per share:                                
                    Basic   $ 0.03     $ 0.02     $ 0.03     $ 0.10  
                    Diluted     0.03       0.02       0.03       0.04  
Income for purposes of computing net income per share:                                
                    Basic   $             5,864     $             4,636     $             6,193     $             20,999  
                    Diluted     5,864       4,636       6,193       9,389  
Weighted average common and common equivalent shares:                                
                    Basic     222,801       213,525       219,052       212,092  
                    Diluted     235,099       220,710       228,154       223,143  
Included in the above Statements of Operations:                                
     Amortization of intangibles:                                
          Cost of revenue   $ 2,574     $ 5,548     $ 12,087     $ 16,522  
          Research and development     —       100       200       300  
          Sales and marketing     3,332       3,393       10,088       10,181  
          General and administrative     25       25       75       75  
      5,931       9,066       22,450       27,078  
     Share-based compensation:                                
          Cost of revenue     459       333       1,363       952  
          Research and development     603       513       1,933       1,733  
          Sales and marketing     786       619       2,391       1,837  
          General and administrative     686       877       2,363       2,633  
      2,534       2,342       8,050       7,155  
     Senior debt amendment fees     861       —       861       —  

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QUANTUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
        December 31, 2010       March 31, 2010*
Current assets:                
     Cash and cash equivalents   $ 91,198     $ 114,947  
     Restricted cash     1,667       1,896  
     Accounts receivable, net     118,747       103,397  
     Manufacturing inventories, net     54,086       54,080  
     Service parts inventories, net     46,591       53,217  
     Deferred income taxes     8,079       7,907  
     Other current assets     10,667       14,500  
          Total current assets     331,035       349,944  
Long-term assets:                
     Property and equipment, net     24,994       24,528  
     Intangible assets, net     50,642       73,092  
     Goodwill     46,770       46,770  
     Other long-term assets     12,909       9,809  
          Total long-term assets     135,315       154,199  
    $ 466,350     $ 504,143  
Liabilities and Stockholders’ Deficit                
Current liabilities:                
     Accounts payable   $ 58,708     $ 56,688  
     Accrued warranty     6,511       5,884  
     Deferred revenue, current     83,539       94,921  
     Current portion of long-term debt     1,477       1,884  
     Current portion of convertible subordinated debt     —       22,099  
     Accrued restructuring charges     944       3,795  
     Accrued compensation     30,259       31,237  
     Income taxes payable     1,408       2,594  
     Other accrued liabilities     22,527       23,555  
          Total current liabilities     205,373       242,657  
Long-term liabilities:                
     Deferred revenue, long-term     32,793       30,724  
     Deferred income taxes     8,398       8,676  
     Long-term debt     143,227       305,899  
     Convertible subordinated debt     135,000       —  
     Other long-term liabilities     6,749       7,444  
          Total long-term liabilities     326,167       352,743  
Stockholders’ deficit     (65,190 )     (91,257 )
    $                   466,350     $                 504,143  
____________________                 
*     Derived from the March 31, 2010 audited Consolidated Financial Statements.
 
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QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
    Nine Months Ended
        December 31, 2010       December 31, 2009
Cash flows from operating activities:                
     Net income   $ 6,193     $ 20,999  
     Adjustments to reconcile net income to net cash provided by operating activities:                
          Depreciation     8,780       9,111  
          Amortization
     23,728       28,987  
          Service parts lower of cost or market adjustment     10,957       8,092  
          (Gain) loss on debt extinguishment     1,186       (15,613 )
          Deferred income taxes     (417 )     (387 )
          Share-based compensation
     8,050       7,155  
          Changes in assets and liabilities:
                
               Accounts receivable     (15,350 )     (8,702 )
               Manufacturing inventories     (5,861 )     8,387  
               Service parts inventories     1,524       3,270  
               Accounts payable     2,000       11,354  
               Accrued warranty     626       (4,724 )
               Deferred revenue     (9,312 )     13,864  
               Accrued restructuring charges     (2,856 )     (190 )
               Accrued compensation     (1,068 )     1,312  
               Income taxes payable     (1,159 )     (2,268 )
               Other assets and liabilities     1,900       954  
Net cash provided by operating activities     28,921       81,601  
                 
Cash flows from investing activities:                
     Purchases of property and equipment     (9,348 )     (5,728 )
     (Increase) decrease in restricted cash     222       (120 )
     Return of principal from other investments     95       166  
Net cash used in investing activities     (9,031 )     (5,682 )
                 
Cash flows from financing activities:                
     Borrowings of long-term debt, net     —       120,042  
     Repayments of long-term debt     (163,079 )     (61,463 )
     Borrowings of convertible subordinated debt, net     130,022       —  
     Repayments of convertible subordinated debt     (22,099 )     (122,288 )
     Payment of taxes due upon vesting of restricted stock     (2,165 )     (960 )
     Proceeds from issuance of common stock     13,635       1,761  
Net cash used in financing activities     (43,686 )     (62,908 )
                 
Effect of exchange rate changes on cash and cash equivalents     47       248  
                 
Net increase (decrease) in cash and cash equivalents     (23,749 )     13,259  
Cash and cash equivalents at beginning of period     114,947       85,532  
Cash and cash equivalents at end of period   $             91,198     $             98,791  
 
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QUANTUM CORPORATION
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share amounts)
(Unaudited)
 
        Three Months Ended December 31, 2010
    Gross
Margin		       Gross
Margin
Rate		       Income
From
Operations		       Operating
Margin		       Net
Income		       Per Share
Net Income,
Basic*		       Per Share
Net Income,
Diluted*
GAAP   $ 75,570   42.9 %   $ 11,378   6.5 %   $ 5,864   $ 0.03   $ 0.03
Non-GAAP Reconciling Items:                                          
     Amortization of Intangibles     2,574           5,931           5,931            
     Share-based Compensation     459           2,534           2,534            
     Loss on Debt Extinguishment                             1,186            
     Senior Debt Amendment Fees                             861            
Non-GAAP   $ 78,603   44.6 %   $ 19,843   11.3 %   $ 16,376   $ 0.08   $ 0.07

* Weighted average common and common equivalent shares:
 
            GAAP          Non-GAAP
     Basic:   222,801   222,801
     Diluted:   235,099   250,678

        Three Months Ended December 31, 2009
    Gross
Margin		       Gross
Margin
Rate		       Income
From
Operations		       Operating
Margin		       Net
Income		       Per Share
Net Income,
Basic*		       Per Share
Net Income,
Diluted*
GAAP   $ 74,716   41.1 %   $ 11,265     6.2 %   $ 4,636     $ 0.02   $ 0.02
Non-GAAP Reconciling Items:                                              
     Amortization of Intangibles     5,548           9,066             9,066              
     Share-based Compensation     333           2,342             2,342              
     Restructuring Benefits                 (22 )           (22 )            
Non-GAAP   $ 80,597   44.4 %   $      22,651     12.5 %   $ 16,022     $ 0.07   $ 0.07

* Weighted average common and common equivalent shares:
 
            GAAP          Non-GAAP
     Basic:   213,525   213,525
     Diluted:   220,710   220,710

The non-GAAP information set forth in this table is not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial information used by other companies.
 
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QUANTUM CORPORATION
FOURTH QUARTER FISCAL 2011 FORECAST
GAAP TO NON-GAAP RECONCILIATION
(In millions, except per share amounts)
 
    Dollar range
Forecast Revenue       $ 165.0       -       $ 175.0      
               
    Dollar range
Forecast operating expense on a GAAP basis   $ 64.5   -   $ 66.5  
Forecast amortization of intangibles         3.4        
Forecast share-based compensation         2.1        
Forecast operating expense on a non-GAAP basis   $ 59.0   -   $ 61.0  
               
    Dollar range
Forecast diluted earnings per share on a GAAP basis   $ 0.01   -   $ 0.02  
Forecast amortization of intangibles         0.02        
Forecast share-based compensation               0.01        
Forecast diluted earnings per share on a non-GAAP basis   $        0.04   -   $        0.05  
                   
Estimates based on current (January 26, 2011) projections.
 
The projected GAAP and non-GAAP financial information set forth in this table represent forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For risk factors that could impact these projections, see our Annual Report on Form 10-K as filed with the SEC on June 11, 2010. We disclaim any obligation to update information in any forward-looking statement.
 
The non-GAAP financial information set forth in this table is not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial information used by other companies.
 
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