**FOR IMMEDIATE RELEASE**

 

 

| **INVESTOR CONTACT:** | **MEDIA CONTACT:** |  
Carroll Wallace, CFO

Bill Marino, Managing Partner

 
Exabyte Corporation

Trippe-Marino / SJI Communications, Inc. (PR)

303-417-7049

303-988-5133

 
cwallace@exabyte.com

bmarino@trippemarino.com

 
 

 

**EXABYTE ANNOUNCES THIRD QUARTER 2005 FINANCIAL RESULTS**

 

*Cost Control Measures Continue to Favorably Impact Operating Results; Recent Analyst Report Shows Exabyte Now Clear Market Share Leader in Entry-level Tape Automation; Magnum 2U 1X7 Revenue Increases 32% Sequentially*

 

**Boulder, Colo. – November 2, 2005** – Exabyte Corporation (OTCBB: EXBY), the leading innovator in tape backup, restore and archival systems, today announced financial results for the third quarter of 2005, ended September 30, 2005.

 

Total revenue for the third quarter was $21.3 million compared to $23.8 million for the previous quarter and $23.6 million for the third quarter of 2004. Loss from operations in the third quarter of 2005, which included a restructuring charge of $470,000, totaled $2.0 million, versus $889,000 in the previous quarter and $3.5 million in the third quarter of 2004. Net loss for the third quarter of 2005 was $2.3 million, as compared to a net loss of $2.2 million in the prior quarter, which included a provision for settlement of litigation of $1.1 million. Net loss for the third quarter of 2004 was $3.9 million.

 

Quarterly revenue is typically lower in the third quarter and this seasonal trend continued in 2005. In addition, the decrease in revenue in the third quarter 2005, as compared to the previous quarter and the prior year, was impacted by reduced revenue from VXA hardware and media products, which decreased 30% sequentially and 32% year-over-year. Revenue for the quarter was also affected by an OEM customer reducing its inventory levels in anticipation of the introduction of new drive products in the fourth quarter of 2005, and a decrease in inventory levels being held by our media products distributor. In addition, the year-over-year decrease was partially a result of increased VXA drive revenue in the third quarter of 2004 related to an OEM customer requiring additional drives to meet the one-time demand of a significant customer. Legacy product revenue decreased 23% year-over-year due to thediscontinuation of all Legacy related hardware products as of the end of the third quarter 2005. Sequential and year-over-year increases in LTO automation of 23% and 126%, respectively, offset a portion of the overall revenue 

 

Exabyte Q3-05 Earnings, page 2

 

decrease. Revenue from the Magnum 2U 1X7 LTO Automation product increased 32% over the previous quarter.

 

The aforementioned restructuring charge relates primarily to the reorganization of the Company’s sales force in Europe and the resulting headcount reductions.

 

**Third Quarter Highlights:**

**•**

Automation hardware revenue continued to experience strong market acceptance and totaled $9.3 million, or 44% of total revenue, an increase from 26% of total revenue in the third quarter of 2004, and 40% in the previous quarter

**•**

Products developed and introduced to the market in the past three years contributed 64% of total revenue, as the Company continues to concentrate on expanding revenue from its VXA product line and LTO automation products

**•**

Excluding restructuring charges, operating costs decreased 7% sequentially and 13% year over year, as management continued to focus on cost reduction efforts in all functional areas of the Company

**•**

In September 2005, the Company announced the release of its new third generation VXA Packet Tape Drive, the VXA 320, which doubles the capacity and speed of the prior generation drive. This new product meets the market demand for increased capacity at an affordable price.

**•**

Fujitsu Siemens Computers has selected Exabyte’s two showcase VXA-320 products – the VXA-320 Packet Drive and the VXA-320 PacketLoader 1x10 – to market and sell to small and medium-sized enterprises in its global customer base. Fujitsu Siemens Computers will offer the products as the FibreCAT TXV and FibreCAT TX10 PacketLoader, respectively.

**•**

The “IDC Worldwide Tape QView, October 2005”, documents Exabyte’s market leadership position in the entry-level tape automation market. The report indicates that as of the end of the second quarter of 2005, Exabyte is the clear market leader in this sector with a 38% market share (in revenue), nearly twice that of the nearest competitor.

 

“The introduction to the VXA 320 represents an exciting addition to our existing product line and demonstrates our commitment to the development of innovative products that meet the needs of the market”, said Tom Ward, President and CEO of Exabyte. “We believe the VXA 320 and other new products that we expect to introduce in the fourth quarter of 2005 and in 2006 are the primary platform for the Company’s future revenue growth.”

 

 

Exabyte Q3-05 Earnings, page 3

 

 

**Other Highlights:**

**•**

On November 1, 2005, the Company announced the completion of a private sale of $9.5 million of 10% Secured Convertible Subordinated Notes and warrants to purchase shares of its common stock. The proceeds from this offering will be used for general working capital purposes, including new product development and marketing activities.

**•**

On November 1, 2005, the Company also announced a modification to its Media Distribution Agreement with Imation Corporation, which increases the Company’s gross margin on sales of its proprietary removable data storage media.

**•**

On November 1, 2005, the Company received a $1,200,000 royalty payment as settlement of certain patent infringement litigation.

**•**

Effective for trading on October 31, 2005, the Company completed a 10:1 reverse split of its outstanding common stock.

 

The Company will hold a conference call on Wednesday morning, November 2 at 8:00 a.m. MDT to discuss third quarter financial results. Interested parties can join the call by dialing **866-578-5801**, in the U.S. or **617-213-8058** internationally and entering the participant code **39566836**. The call also will be webcast from the Company web site; for information, please visit http://www.exabyte.com/earnings. In addition, the call will be recorded and available on the Company’s web site after 5:00 p.m.

 

**About Exabyte Corporation**

Exabyte Corporation (OTCBB: EXBY) is the leading innovator and provider of tape storage products. For over 20 years, the company has been recognized for its innovative engineering approach and for consistently raising industry standards in technology, quality, and data reliability for tape drives and tape automation. The Company’s products back up and restore critical business information in a manner consistently ahead of its competitors in terms of storage capacity, reliability, and transfer speeds – all at competitive prices. With award-winning VXA Packet Technology, patented ExaBoticsTM and its innovative engineering approach, Exabyte’s VXATM and LTOTM (UltriumTM) products are ideally suited for SMB and departmental servers, workstations, LANs, and SANs. Exabyte has a worldwide network of OEMs, distributors, and resellers that share the company’scommitment to innovation and customer service, including IBM, Fujitsu Siemens, Apple, Imation, Toshiba, Tech Data, Ingram Micro, and CDW. For additional information, call 1-800-EXABYTE or visit www.exabyte.com.

 

*The foregoing contains forward-looking statements related to the Company’s products and business prospects. Such statements are subject to one or more risks. The actual results that the Company achieves may differ materially from such forward-looking statements due to risks and uncertainties related to customer dependence, competition, product development, market demand, management of the business and product transitions and other such risks as noted in the Company’s 2004 Form 10-K and*

 

Exabyte Q3-05 Earnings, page 4

 

*subsequent Form 10-Qs.*

 

*Exabyte, VXA and M2 are registered trademarks, and, MammothTape is a trademark of Exabyte Corp. All other trademarks are the property of their respective owners.*

 

*###*

 

 

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