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Xyratex Management Discusses Q2 2012 Results - Earnings Call Transcript

I'd now like to turn the call over to Richard to review the financial details of the quarter

Richard Pearce

Thank you, Brad, and good afternoon, everyone. I'd like to thank you for joining us today. Our press release is available both on PR Newswire and our website.

I'd now like to provide you with some commentary about our results for the second quarter. Please note that all numbers are in accordance with GAAP, unless stated otherwise. Total revenue was $322.1 million, down 4.9% as compared to the second quarter of last year and up 8.9% from our prior fiscal quarter.

Sales of our Enterprise Data Storage Solutions products was $278.5 million or 86.4% of total revenue. This is a decrease of 7.5% compared to the second quarter of last year and an increase of 2.3% compared to our prior fiscal quarter. Sales of our capital equipment products were $43.7 million or 13.6% of total revenue, up 16.8% compared to the second quarter of last year and up 85% compared to our prior fiscal quarter.

Gross margin was 16.7% for the quarter compared to 12.9% in the same period a year ago and 17.9% in our prior fiscal quarter. The gross margin for our Enterprise Data Storage Solutions products was 16.3% compared to 14.9% last year and 17.3% last quarter.

In addition to product mix, the increase from the prior year was impacted by the sale of specific products without disk drives. The gross margin for our capital equipment products was 19% compared to negative 2.7% last year and 24.7% last quarter. The prior year margin was impacted by a higher fixed cost base, product mix and inventory provisions. This quarter's gross margin was in line with our expectations relative to product mix.

Non-GAAP operating expenses in the quarter were $42.4 million compared to $46.3 million in 2Q of last year and $39.6 million last quarter. The reduction from prior year reflects the restructuring actions we implemented towards the end of last year. The increase in the current period is primarily related to the deferral of some specific product development expense from the first quarter to later in the year and increasing R&D investments in the High Performance Computing area.

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