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Fourth Quarter Earnings !!

Looks like a good start, too bad it is not followed more heavily (low volume). Is there a reason NOT to own this stock.

Qualstar Corp. Announces Fourth-Quarter and Year-End Results; Company Reports Record Revenues and Earnings for the Year Ended June 30, 2000

CANOGA PARK, Calif.--(BUSINESS WIRE)--Aug. 16, 2000--Qualstar Corp. (Nasdaq:QBAK), today reported financial results for the fourth quarter and fiscal year ended June 30, 2000.

Revenues for the quarter increased 59.6 percent to $14.5 million, compared with $9.1 million in the fourth quarter of fiscal 1999. Net income for the quarter increased 99.1 percent to $2.3 million, or 23 cents per share on a diluted basis, compared with net income of $1.2 million, or 12 cents per share, in the fourth quarter of fiscal 1999.

Revenues for the year ended June 30, 2000, increased 66.2 percent to $49.4 million from $29.7 million in fiscal 1999. Net income for the year rose to $7.8 million, or 80 cents per share on a diluted basis, compared with net income of $4.0 million, or 42 cents per share on a diluted pro forma basis, for the prior year.

"This record-setting performance is the result of continued strong demand for data storage and backup products that utilize magnetic tape as the recording medium. The recent round of personal computer virus attacks have further emphasized the importance of backing up valuable data on a second medium in addition to the primary disk storage," said William Gervais, Qualstar co-founder and chief executive officer.

"As companies discover just how vulnerable their data has become, it makes sense to invest in a tape library to provide backup protection," he said.

"Qualstar's gross margins continue to be strong at 37.4 percent for the year and 38.0 percent for the quarter ended June 30, 2000. The strength in the gross margins is the result of Qualstar's marketing approach of selling directly to value added resellers and avoiding the double markup of a distribution sales model," Gervais added.

Sales of automated tape libraries and related products, such as tape drives and tape media, represented 85.8 percent of revenues in the year ended June 30, 2000, compared with 76.9 percent of revenues in fiscal 1999. Sales of 9-track tape drives, services and other products accounted for the balance of revenues.

Qualstar's June 30, 2000 balance sheet includes a cash balance of $19.0 million and shareholders' equity of $35.0 million. The increased cash balance reflects net proceeds of $16.3 million raised in Qualstar's recent initial public offering, but does not reflect the additional $2.4 million the company received as a result of its underwriters exercising their over allotment option on July 18, 2000.

Shareholders' equity increased primarily as a result of the initial public offering as well as Qualstar's net income of $7.8 million for the year ended June 30, 2000.

About Qualstar

Founded in 1984, Qualstar is a leading manufacturer of automated cartridge tape libraries as well as 9-track tape drives, with an installed base of more than 35,000 units.

Qualstar's tape libraries span capacities from 200 gigabytes to more than 30 terabytes of native (uncompressed) storage capacity, in several popular tape formats, and are compatible with most network operating systems and storage management software applications.

Qualstar's products are sold worldwide, primarily to value added resellers and original equipment manufacturers.

For further information, contact Matt Natalizio at Qualstar Corp., 6709 Independence Ave., Canoga Park, Calif. 91303; telephone 818/592-0061; and fax 818/592-0116.

More information about Qualstar can be found on its Web site at

Statements in this news release concerning the future business, operating results and financial condition of the company are "forward-looking" statements as defined in the Private Securities Litigation Reform Act of 1995. Such statements are based upon management's current expectations and are subject to a number of risks and uncertainties that could cause actual performance and results to differ materially from the results discussed in the forward-looking statements. Factors that could affect the company's actual results include unexpected shortages of critical components, delays in the availability of LTO Ultrium tape drives and media, unexpected product design problems and adverse changes in market demand for tape libraries or Qualstar's products. Further information on these and other potential factors that could affect the company's financial results are included in Qualstar's Prospectus dated June 23, 2000, filed with the Securities and Exchange Commission.

Qualstar Corp.

Consolidated Statements of Income

Three Months Ended Year Ended

June 30 June 30

2000 1999 2000 1999

Net revenues $14,456,000 $ 9,055,000 $49,352,000 $29,698,000

Cost of goods sold 8,959,000 6,039,000 30,915,000 19,058,000

Gross profit 5,497,000 3,016,000 18,437,000 10,640,000

Research and

development 261,000 258,000 1,027,000 925,000

Sales and marketing 751,000 589,000 2,643,000 1,941,000

General and

administrative 748,000 332,000 2,057,000 1,267,000

Total operating

expenses 1,760,000 1,179,000 5,727,000 4,133,000

Income from

operations 3,737,000 1,837,000 12,710,000 6,507,000

Interest income 17,000 9,000 54,000 41,000

Income before income

taxes 3,754,000 1,846,000 12,764,000 6,548,000

Provision for income

taxes 1,448,000 688,000 4,968,000 2,562,000

Net income $ 2,306,000 $ 1,158,000 $ 7,796,000 $ 3,986,000

Basic earnings per

share $ 0.30 $ 0.17 $ 1.10 $ 0.60

Diluted earnings

per share $ 0.23 $ 0.12 $ 0.80 $ 0.42

Weighted average

shares outstanding

- basic 7,696,000 6,656,000 7,119,000 6,629,000

Weighted average

shares outstanding

- diluted 10,093,000 9,472,000 9,742,000 9,467,000

Qualstar Corp.

Consolidated Balance Sheets

June 30,

2000 1999


Current Assets:

Cash $18,976,000 $ 2,134,000

Receivables, less allowances of

$420 in 1999 and $470 in 2000 7,276,000 4,915,000

Inventories 8,657,000 4,651,000

Other current assets 1,603,000 774,000

Total current assets 36,512,000 12,474,000

Non-current assets 1,472,000 476,000

Total assets $37,984,000 12,950,000

Liabilities and Shareholders' Equity

Current and deferred liabilities $ 2,952,000 1,310,000

Shareholders' equity 35,032,000 11,640,000

Total liabilities and shareholders'

equity $37,984,000 12,950,000


Qualstar Corp., Canoga Park

Matt Natalizio, 818/592-0061

818/592-0116 fax


BW0436 AUG 16,2000



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