By Staff Report Monday, September 29th, 2014

A year ago, the management team at Simi Valley-based Qualstar was ousted by Florida-based BKF Capital, which vowed to cut costs and executive compensation while expanding international sales. (Stephen Nellis / Business Times photo)

Qualstar cut its annual loss to $5.6 million — almost half of what it had been a year earlier — but investors weren’t happy with the company’s slow progress as it struggles to return to profitability.

Shares of Qualstar plummeted 6.9 percent to close at $1.21 on Sept. 29 after the company reported its fiscal year 2014 results.

The Simi Valley-based company makes tape-based backup hard drives that can hold up to 73 petabytes of data, the equivalent of 7,300 one-terabyte hard drives. The firm’s N2Power division also makes high-efficiency power supplies for converting AC power to DC.

In mid-2013, Florida-based BKF Capital Group ousted former Qualstar CEO Larry Firestone and replaced him with its own leader, Steve Bronson. Bronson’s management team said it would cut costs, including executive pay, and expand international sales in an attempt to restore profitability at Qualstar.

Bronson’s team quickly reversed a move by Firestone’s regime to outsource Qualstar’s manufacturing. The company has since consolidated its operations at its Simi Valley headquarters but had to pay millions of dollars to sever the contract with the outside manufacturer and repurchase inventory.

The new management has said it reversed course because it believes “that bringing the tape library manufacturing back to Qualstar will benefit our customers by providing better product quality and service” and “will also give us more control over our inventory levels, and improve our flexibility in inventory planning.”

Qualstar’s revenue dropped 13 percent during the year to $10.9 million. Its net loss was $5.6 million, or 46 cents per share, compared with a $10.4 million loss a year earlier.

Qualstar had $7.2 million in cash equivalents and marketable securities as of June 30, down from $13.8 million a year earlier. Inventories surged to $3.2 million — twice as much as a year before — as the company repurchased product from the former contract manufacturer.

“Qualstar’s fiscal 2014 accomplishments are a direct result of streamlining our core business structure and decision-making processes as ‘One Qualstar’,” CEO Bronson said in a statement. “By recruiting seasoned executives and building a proactive in-house marketing team, we continue to strategically reinforce and improve Qualstar’s overall business management.”

Qualstar suffered a per-share loss of 6 cents in the fourth quarter, down from a 28-cent loss a year earlier. Revenues for the quarter ended June 30 were $2.7 million, down 5 percent compared to $2.9 million in the same quarter a year earlier. Its loss from operations was $700,000, down from $3.5 million a year earlier.

The company recorded a gross margin of 30 percent during the quarter, up from 12 percent a year earlier, as it slashed engineering expenses.

“Qualstar’s loyal resellers and new partners from around the world have shown their enthusiastic endorsement of the new and refreshed product lines and are experiencing first-hand the renewed vitality and vigor of Qualstar as we support and enable our channel partners to be successful,” Daniel Jan, Qualstar’s executive vice president, said in a news release.