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FalconStor Software Reports Second Quarter Financial Results

FalconStor Software, Inc. (NASDAQ: FALC), the provider of disk-based data protection solutions, today announced financial results for its second quarter ended June 30, 2012.

Total revenues for the second quarter of 2012 were $16.5 million, compared with $19.6 million for the same period a year ago.

As a result of the Company’s increased dependence on revenues outside North America, with overseas business now accounting for over fifty percent of the Company’s total revenues, the recent slowness in Asian and European markets negatively impacted the Company’s second quarter results. As a result of the slower than anticipated recovery around the world, the Company must realign its existing cost structure based on the declines in revenues it has experienced. Accordingly, commencing in the third quarter, the Company engaged in a cost-reduction initiative that is expected to result in approximately $10.0 million in gross annualized savings. This action includes approximately a 7 percent reduction in existing workforce, the elimination of select positions, and other cost savings initiatives. The cost reductions impact all levels and regions of the Company and are designed to help streamline our operations and focus our efforts and resources more efficiently in the current environment. The estimated cost of this action, which is expected to be completed by the end of the third quarter, is approximately $0.65 million to $0.85 million.

Also during the quarter, the Company announced the successful resolution of the investigations by the United States Attorney’s Office for the Eastern District of New York and by the Securities and Exchange Commission. Total payments by the Company to settle the investigations will equal $5.8 million.

“FalconStor is committed to innovation and the delivery of novel and disruptive data protection solutions,” said Jim McNiel, president and CEO. “Our expense reductions address changing global market conditions and deliver a sustainable business model while preserving our ability to deliver new products to a demanding market.”

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