Wells Fargo Comments on Xyratex on In-Line Demand with Storage Subsystem Expectations

In a report published Friday, Wells Fargo Securities analyst Maynard Um commented on recent developments related to

. In the report, Wells Fargo Securities noted, “Xyratex sees demand in line with expectations in its storage subsystem business. XRTX's August quarter revenues from its enterprise data storage solutions (EDSS) business, which provides storage subsystems to OEM customers (NetApp, Dell, HP, IBM and others), were at the mid-point of its guided range (-4.9% sequentially). XRTX noted that forecasts from its customers have not changed meaningfully, but there is some uncertainty as to how specific products may perform in the market. Revenues from NTAP to XRTX declined 19.5% sequentially in the August quarter and are expected to further decline given the current contract between the two companies will wrap-up in XRTX's current fiscal quarter. As such, we note that the read through to NTAP isn't as strong as it once was (NTAP accounts for 22% of XRTX's storage solutions revenues, down from 48% in May 2012). Among the other major OEMs, revenue from IBM was up about 11% sequentially likely due to ramp of new products while Dell was up 2.4% qtr/qtr.” Xyratex closed on Thursday at $12.00.