Exhibit 99.1
 
     
   
     
 
      Contact:   For Release:
  Brad Cohen   May 17, 2011
  Public Relations   1:05 p.m. PDT
  Quantum Corp.    
  (408) 944-4044    
  brad.cohen@quantum.com    
       
  Christi Lee    
  Investor Relations    
  Quantum Corp.    
  (408) 944-4450    
  ir@quantum.com    

QUANTUM CORPORATION DELIVERS BRANDED REVENUE GROWTH FOR FISCAL 2011 AND FOURTH QUARTER
 
Earnings Highlights:
 
SAN JOSE, Calif., May 17, 2011 – Quantum Corp. (NYSE:QTM), the leading global specialist in backup, recovery and archive, today reported results for fiscal 2011 (FY11) and the fourth quarter (FQ4’11), ended March 31, 2011. Revenue for the year totaled $672 million, down about one percent from fiscal 2010 (FY10), primarily due to expected reductions in OEM revenue. For FQ4’11, Quantum reported $165 million in revenue, slightly higher than the same period last year (FQ4’10). Branded revenue, which represented 79 percent of total non-royalty revenue for the year, grew 5 percent for the year and 9 percent for FQ4’11 over the comparable FY10 periods. Branded disk systems and software sales, including related service revenue, were a key contributor to this year-over-year growth, increasing 38 percent for FY11 and 31 percent for the fourth quarter.
 
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For the fiscal year, Quantum’s GAAP and non-GAAP gross margin rates were 42.1 percent and 44.6 percent, respectively. These rates were the highest in 10 years, up from 41.1 percent in FY10 on a GAAP basis and from 44.5 percent on a non-GAAP basis. The company’s GAAP gross margin rate for FQ4’11 was 41.5 percent, up from 40.8 percent a year earlier, while the non-GAAP gross margin rate decreased to 43.7 percent from 44.4 percent.
 
GAAP net income for FY11 was $5 million, or 2 cents per basic share, compared to net income of $17 million, or 8 cents per share, in the prior year. Non-GAAP net income for the year was $49 million, or 22 cents per basic share, down from $55 million, or 26 cents per share, in FY10. For FQ4’11, Quantum reported a GAAP net loss of $2 million, or one cent per basic share, an improvement over the net loss of $4 million, or 2 cents per share, in FQ4’10. Non-GAAP net income for the quarter was $10 million, or 4 cents per basic share, compared to $7 million, or 4 cents per share, in the same quarter of FY10.
 
“In fiscal 2011, we delivered growth in a number of key areas,” said Jon Gacek, CEO of Quantum. “Branded sales increased 5 percent over the prior year, and we had record revenue for both branded disk systems and branded software, which were up 43 percent and 28 percent, respectively. In addition, midrange DXi® product revenue nearly tripled over the prior year. We also added approximately 550 new midrange and enterprise tape automation customers and grew our entry-level tape automation revenue 30 percent year-over-year.
 
“We plan to build on this momentum in fiscal 2012, with new products and enhanced features across our portfolio, as well as deeper engagement with channel partners,” Gacek added. “We have also realigned our sales resources so that we can more comprehensively meet the evolving needs of our installed customer base while growing this base through new partnerships and solutions that enable us to broaden our market reach.”
 
Quantum ended FQ4’11 with $78 million in total cash and cash equivalents and $239 million in total debt. For the full year, the company generated $52 million in cash from operations, reduced total debt by $91 million and refinanced its subordinated term debt with subordinated convertible debt at a significantly lower interest rate. The refinancing saved Quantum nearly $4 million in interest expense for FY11 and is expected to save approximately $10 million annually going forward. Reflecting the continued improvement in the company’s business model and balance sheet, both Moody’s Investor Service and Standard and Poor’s upgraded Quantum’s credit rating during the March quarter.
 
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Outlook
For the full 2012 fiscal year, Quantum expects:
 
For the first quarter of fiscal 2012, the company expects:
 
Business Highlights
Key business highlights for the March quarter include the following:
 
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Conference Call and Audio Webcast Notification
Quantum will hold a conference call today, May 17, 2011, at 2:00 p.m. PDT, to discuss its fiscal fourth quarter and full year results. Press and industry analysts are invited to attend in listen-only mode. Dial-in number: (480) 629-9692 (U.S. & International). Quantum will provide a live audio webcast of the conference call beginning today, May 17, 2011, at 2:00 p.m. PDT. Site for the webcast and related information: http://www.quantum.com/investors.
 
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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, StorNext and StorNext Storage Manager are either registered trademarks or 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 statements “We plan to build on this momentum in fiscal 2012, with new products and enhanced features across our portfolio, as well as deeper engagement with channel partners” and that we “realigned our sales resources so that we can more comprehensively meet the evolving needs of our installed customer base while growing this base through new partnerships and solutions that enable us to broaden our market reach,” as well as 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 February 8, 2011. Quantum expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.
 
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.
 
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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   Twelve Months Ended
        March 31, 2011       March 31, 2010       March 31, 2011       March 31, 2010
 Revenue:                                
        Product   $         112,902     $         107,970     $         456,903     $         456,101  
        Service     37,365       38,827       151,095       156,477  
        Royalty     14,830       17,654       64,272       68,849  
               Total revenue     165,097       164,451       672,270       681,427  
 Cost of revenue:                                
        Product     73,217       72,896       294,375       300,568  
        Service     22,716       24,506       94,311       100,822  
        Restructuring charges related to cost of revenue     602             602        
               Total cost of revenue     96,535       97,402       389,288       401,390  
                      Gross margin     68,562       67,049       282,982       280,037  
                                 
 Operating expenses:                                
        Research and development     18,518       18,355       73,008       69,949  
        Sales and marketing     31,795       30,410       122,768       114,612  
        General and administrative     14,860       15,360       59,460       61,372  
        Restructuring charges     3,031       11       3,042       4,795  
      68,204       64,136       258,278       250,728  
                      Income from operations     358       2,913       24,704       29,309  
                                 
 Interest income and other, net     1,175       (540 )     1,199       1,255  
 Interest expense     (3,286 )     (6,116 )     (20,163 )     (25,515 )
 Gain (loss) on debt extinguishment, net of costs                 (1,186 )     12,859  
                      Income (loss) before income taxes     (1,753 )     (3,743 )     4,554       17,908  
 Income tax provision (benefit)     (101 )     622       13       1,274  
                      Net income (loss)   $ (1,652 )   $ (4,365 )   $ 4,541     $ 16,634  
 
 Net income (loss) per share:                                
                           Basic   $ (0.01 )   $ (0.02 )   $ 0.02     $ 0.08  
                           Diluted     (0.01 )     (0.02 )     0.02       0.02  
 Income (loss) for purposes of computing net income (loss) per share:                          
                           Basic   $ (1,652 )   $ (4,365 )   $ 4,541     $ 16,634  
                           Diluted     (1,652 )     (4,365 )     4,541       5,024  
 Weighted average shares:                                
                           Basic     226,496       214,442       220,888       212,672  
                           Diluted     226,496       214,442       229,738       223,761  
 Included in the above Statements of Operations:                                
        Amortization of intangibles:                                
               Cost of revenue   $ 2,575     $ 5,547     $ 14,662     $ 22,069  
               Research and development           100       200       400  
               Sales and marketing     3,331       3,394       13,419       13,575  
               General and administrative     25       25       100       100  
      5,931       9,066       28,381       36,144  
        Share-based compensation:                                
               Cost of revenue     405       414       1,768       1,366  
               Research and development     553       640       2,486       2,373  
               Sales and marketing     730       744       3,121       2,581  
               General and administrative     683       836       3,046       3,469  
      2,371       2,634       10,421       9,789  
        Senior debt amendment fees                 861        

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QUANTUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
        March 31, 2011       March 31, 2010*
Assets                
Current assets:                
       Cash and cash equivalents   $              76,010     $              114,947  
       Restricted cash     1,863       1,896  
       Accounts receivable, net     114,969       103,397  
       Manufacturing inventories, net     48,131       54,080  
       Service parts inventories, net     45,036       53,217  
       Deferred income taxes     6,271       7,907  
       Other current assets     11,274       14,500  
              Total current assets     303,554       349,944  
Long-term assets:                
       Property and equipment, net     24,980       24,528  
       Intangible assets, net     44,711       73,092  
       Goodwill     46,770       46,770  
       Other long-term assets     10,950       9,809  
              Total long-term assets     127,411       154,199  
    $ 430,965     $ 504,143  
Liabilities and Stockholders’ Deficit                
Current liabilities:                
       Accounts payable   $ 52,203     $ 56,688  
       Accrued warranty     7,034       5,884  
       Deferred revenue, current     87,488       94,921  
       Current portion of long-term debt     1,067       1,884  
       Current portion of convertible subordinated debt           22,099  
       Accrued restructuring charges     4,028       3,795  
       Accrued compensation     31,249       31,237  
       Income taxes payable     1,172       2,594  
       Other accrued liabilities     21,418       23,555  
              Total current liabilities     205,659       242,657  
Long-term liabilities:                
       Deferred revenue, long-term     34,281       30,724  
       Deferred income taxes     6,820       8,676  
       Long-term debt     103,267       305,899  
       Convertible subordinated debt     135,000        
       Other long-term liabilities     7,049       7,444  
              Total long-term liabilities     286,417       352,743  
Stockholders’ deficit     (61,111 )     (91,257 )
    $ 430,965     $ 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)
 
  Twelve Months Ended
  March 31, 2011       March 31, 2010
Cash flows from operating activities:              
       Net income $ 4,541     $ 16,634  
       Adjustments to reconcile net income to net cash provided by operating activities:              
              Depreciation   11,657       12,098  
              Amortization   30,304       38,461  
              Service parts lower of cost or market adjustment   13,796       11,424  
              (Gain) loss on debt extinguishment   1,186       (15,613 )
              Deferred income taxes   (184 )     (466 )
              Share-based compensation   10,421       9,789  
              Other non-cash writeoffs   302        
              Changes in assets and liabilities:              
                     Accounts receivable   (14,935 )     4,454  
                     Manufacturing inventories   (1,460 )     2,328  
                     Service parts inventories   1,955       3,217  
                     Accounts payable   (1,466 )     11,495  
                     Accrued warranty   1,150       (5,268 )
                     Deferred revenue   (3,876 )     9,484  
                     Accrued restructuring charges   227       (917 )
                     Accrued compensation   (302 )     3,824  
                     Income taxes payable   (1,454 )     (2,239 )
                     Other assets and liabilities   465       1,459  
Net cash provided by operating activities   52,327       100,164  
Cash flows from investing activities:              
       Purchases of property and equipment   (12,339 )     (8,595 )
       (Increase) decrease in restricted cash   32       (112 )
       Return of principal from other investments   2,204       166  
Net cash used in investing activities   (10,103 )     (8,541 )
Cash flows from financing activities:              
       Borrowings of long-term debt, net         120,042  
       Repayments of long-term debt             (203,449 )     (61,934 )
       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   (2,307 )     (1,069 )
       Proceeds from issuance of common stock   16,547       2,851  
Net cash used in financing activities   (81,286 )     (62,398 )
Effect of exchange rate changes on cash and cash equivalents   125       190  
Net increase (decrease) in cash and cash equivalents   (38,937 )     29,415  
Cash and cash equivalents at beginning of period   114,947       85,532  
Cash and cash equivalents at end of period $ 76,010     $ 114,947  
               
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QUANTUM CORPORATION
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share amounts)
(Unaudited)
 
    Three Months Ended March 31, 2011
       Gross
Margin
     Gross
Margin
Rate
     Net Income
(Loss)
     Per Share
Net Income
(Loss),
Basic
     Per Share
Net Income
(Loss),
Diluted
GAAP   $ 68,562   41.5 %   $ (1,652 )   $ (0.01 )   $ (0.01 )
Non-GAAP Reconciling Items:                                    
       Amortization of Intangibles     2,575           5,931                  
       Share-based Compensation     405           2,371                  
       Restructuring Charges     602           3,633                  
Non-GAAP   $ 72,144   43.7 %   $ 10,283     $ 0.04     $ 0.04  
                                     
            Computation of basic and diluted net income (loss) per share:     GAAP     Non-GAAP  
                   Net income (loss)     $ (1,652 )   $ 10,283  
                          Interest on dilutive convertible notes             1,166  
                   Income (loss) for purposes of computing income (loss) per diluted share     $ (1,652 )   $ 11,449  
            Weighted average shares:                  
                   Basic       226,496       226,496  
                          Dilutive shares from stock plans             9,469  
                          Dilutive shares from convertible notes             31,158  
                   Diluted       226,496       267,123  
     
    Twelve Months Ended March 31, 2011
    Gross
Margin
  Gross
Margin
Rate
  Net Income   Per Share
Net Income,
Basic
  Per Share
Net Income,
Diluted
GAAP   $ 282,982   42.1 %   $ 4,541     $ 0.02     $ 0.02  
Non-GAAP Reconciling Items:                                    
       Amortization of Intangibles     14,662          
28,381
                 
       Share-based Compensation     1,768           10,421                  
       Restructuring Charges     602           3,644                  
       Loss on Debt Extinguishment                 1,186                  
       Senior Debt Amendment Fees                 861                  
Non-GAAP   $ 300,014   44.6 %   $ 49,034     $ 0.22     $ 0.21  
                                     
            Computation of basic and diluted net income per share:     GAAP     Non-GAAP  
                   Net income     $ 4,541     $ 49,034  
                          Interest on dilutive convertible notes             1,761  
                   Income for purposes of computing income per diluted share     $ 4,541     $ 50,795  
            Weighted average shares:                  
                   Basic       220,888       220,888  
                          Dilutive shares from stock plans       8,850       8,850  
                          Dilutive shares from convertible notes             11,610  
                   Diluted       229,738       241,348  
                         
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
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share amounts)
(Unaudited)
 
    Three Months Ended March 31, 2010
       Gross
Margin
     Gross
Margin
Rate
     Net Income
(Loss)
     Per Share
Net Income
(Loss),
Basic
     Per Share
Net Income
(Loss),
Diluted
GAAP   $ 67,049   40.8 %   $ (4,365 )   $ (0.02 )   $ (0.02 )
Non-GAAP Reconciling Items:                                    
       Amortization of Intangibles    
5,547
          9,066                  
       Share-based Compensation     414           2,634                  
       Restructuring Charges                 11                  
Non-GAAP   $ 73,010   44.4 %   $ 7,346     $ 0.04     $ 0.03  
                                     
            Computation of basic and diluted net income (loss) per share:     GAAP     Non-GAAP
                   Net income (loss)     $ (4,365 )   $ 7,346  
                          Interest on dilutive convertible notes              
                   Income (loss) for purposes of computing income (loss) per diluted share     $ (4,365 )   $ 7,346  
            Weighted average shares:                  
                   Basic       214,442       214,442  
                          Dilutive shares from stock plans             10,956  
                          Dilutive shares from convertible notes              
                   Diluted       214,442       225,398  
     
    Twelve Months Ended March 31, 2010
    Gross
Margin
  Gross
Margin
Rate
  Net Income   Per Share
Net Income,
Basic
  Per Share
Net Income,
Diluted
GAAP   $ 280,037   41.1 %   $ 16,634     $ 0.08     $ 0.02  
Non-GAAP Reconciling Items:                                    
       Amortization of Intangibles     22,069          
36,144
                 
       Share-based Compensation     1,366           9,789                  
       Restructuring Charges                 4,795                  
      Gain on Debt Extinguishment, Net of Costs                 (12,859 )                
Non-GAAP   $ 303,472   44.5 %   $ 54,503     $ 0.26     $ 0.25  
                                     
            Computation of basic and diluted net income per share:     GAAP     Non-GAAP  
                   Net income     $ 16,634     $ 54,503  
                          Interest on dilutive convertible notes       1,249        
                            Gain on debt extinguishment, net of costs       (12,859 )      
                   Income for purposes of computing income per diluted share     $ 5,024     $ 54,503  
            Weighted average shares:                  
                   Basic       212,672       212,672  
                          Dilutive shares from stock plans       4,527       4,527  
                          Dilutive shares from convertible notes
      6,562        
                   Diluted       223,761       217,199  
                         
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
FORECAST FIRST QUARTER FISCAL 2012 FORECAST
GAAP TO NON-GAAP RECONCILIATION
(In millions)
 
  Percentage range
Forecast gross margin rates on a GAAP basis   41.1 %       -           42.1 %
Forecast amortization of intangibles         1.6 %        
Forecast share-based compensation         0.3 %        
Forecast gross margin rates on a non-GAAP basis   43.0 %   -       44.0 %
 
  Dollar range
Forecast operating expense on a GAAP basis $    63.7     -     $    65.7  
Forecast amortization of intangibles         3.3          
Forecast share-based compensation         2.4          
Forecast operating expense on a non-GAAP basis $ 58.0     -     $ 60.0  
                     

Estimates based on current (May 17, 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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