DG Sees Q3 Loss as Clariion Investment Takes Toll.

Data General Corp posted a third-quarter loss of $3.1m on revenue up 1.3% at $355.9m, compared to a loss of $155.1m in the year-ago period, which included $135m in restructuring charges. On a per- share basis, the loss was $0.06 but included a gain from the sale of investments of $0.06. The resulting pro forma loss of $0.12 just edged out the expectations of analysts surveyed by First Call, who were looking for a loss of $0.13.

As the company had warned in May, the bottom line shows the strain of heavy investment in the Clariion storage business as it moves to massively increase the sales force for the product line. DG has pledged to hire more than 450 people over the next 18 months and says the additional expense of the hiring and related marketing efforts during the year-and-a-half period will amount to more than $100m.

Echoing management remarks from the prior quarter, the company said Fibre Channel products represent more than 60% of the storage business. Overall Clariion revenues were up 10% year- over-year and saw nearly 50% growth when the declining Hewlett- Packard business is factored out, as direct end-user sales continued to ramp up. DG claims the Aviion server business also saw a year-over-year revenue increase amid solid demand for high- end Windows NT and NUMA-based servers, although it declined to provide a specific growth figure.

For the nine-month period, the company reported net income of $15.1m, or $0.30 per share, on revenue that was essentially flat at $1.08bn. The results include a gain of $7.5m, or $0.15 per share, resulting from a settlement with the IRS related to taxes paid during the company's 1983 through 1991 fiscal years, and an additional gain of $9m ($0.18), from the sale of investments.