Last February, Tom Raimondi thought his biggest challenge as chief executive of Anaheim-based MTI Technology Corp. would be in taking on EMC Corp., the data storage powerhouse that’s been busy buying other industry players and that has scuffled with MTI over disputed patents.
But now Raimondi’s greatest test lies in turning around the troubled storage device maker.
In the past three months, he’s brought in a new executive team to try to stem a financial slide at MTI and to reverse the company’s sagging fortunes on Wall Street.
Raimondi’s hired a new operating officer and acting chief financial officer, Paul Emery, and brought on a new controller, Guy Cheney. Marc Nussbaum, former chief technical officer at Irvine disk driver maker Western Digital Corp., has joined as vice president of product development.
“Yes, we’ve had some tactical issues,” Raimondi said. “But the company’s core business was not flawed, is not flawed and is doing very well.”
Three months into his new job, Raimondi touted his plans to take on the company by launching a massive branding campaign and aggressively signing on customers in the then-booming Internet arenaBut six months later, the 43-year-old is facing a contentious fight against his own shareholders and a market that has soured considerably on MTI and the dot-com customers the company targeted.
The company, which makes storage products for computer networks, sparked a sell-off in May by announcing it would post an operating loss for its fiscal fourth quarter that cut deeply into net income. In the following quarter ended July 1, it posted an $8.7 million net loss, rather than the $500,000 profit analysts were expecting.
Since May, the company has lost about half of its market value, which now stands at $179.3 million.
EMC’s stock, meanwhile, has risen nearly 75% in the same period and the company touts a market capitalization of $210 billion.
Raimondi is optimistic. He said his company’s low stock price could make it easier to recruit new workers by offering well-priced options.
But at least 14 law firms have filed what they hope will become class-action suits against MTI’s management for allegedly failing to disclose troubles in the company’s dot-com business base and a sales-bonus plan that inflated costs and cut deeply into net income.
Shareholder suits are typical when a tech stock plunges and some observers call the lawsuits targeting MTI spurious at best. MTI’s stock, after all, had been in a downward slope since it cracked 50 in March.
But some shareholders sounding off on message boards express outrage at executive trades made just before the company made public details of its compensation plan and sales data.
According to filings made with the Securities and Exchange Commission, Raimondi exercised options in three transactions in early February that netted him a total of more than $3.1 million. Other executives also undertook a host of transactions around that time.
Angry shareholders contend company officials were aware by then that the company would not meet financial estimates and probably would see shares plunge. By delaying the bad news while cashing in options, the lawsuits allege, those officials took advantage of inside knowledge.
Still, Brion Tanous, an analyst with stock brokerage First Security Van Kasper, called MTI a solid company with good prospects for growth, despite his May 25 downgrade on the company’s shares from “strong buy” to “buy.”
MTI needs to revamp its sales commission structure and get pickier about new Internet customers, he said. But he said he believes the company can survive its recent turmoil.
“Their technology platform is highly competitive, and their next-generation platform is even faster,” Tanous said. “I’m optimistic about their product rollout over the next 12 months. Their R & D; group continues to stay at the cutting edge.”
Raimondi agrees.
“How long will it take to get back on track? Probably a couple of quarters,” he said. “How quickly will the share price rebound? Only Wall Street knows.” n
