Q4 2007 FalconStor Software Inc. Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good afternoon, and thank you for joining us to discuss FalconStor Software's Q4 and full-year 2007 earnings conference call. ReiJane Huai, FalconStor's Chief Executive Officer; Bernie Wu, FalconStor's Vice President of Business Development; and Jim Weber, FalconStor's Chief Financial Officer will discuss the Company's results and activities and will then open the call to your questions.

The Company would like to advise all participants that today's discussion may contain what some consider forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties include delays in product development, market acceptance of FalconStor products and services, technological change in the data protection and storage and networking industries, competition in the data protection and storage software market, the potential failure of FalconStor's OEM partners to introduce or to market products incorporating FalconStor's products, intellectual property issues and other risk factors discussed in FalconStor's reports on Forms 10-K, 10-Q and other reports filed with the Securities and Exchange Commission.

During today's call there may be discussions that include non-GAAP results. If such a discussion takes place, a reconciliation of any non-GAAP results to GAAP will be posted on FalconStor's website at www.FalconStor.com under Investor Relations shortly after the call. After the close of business today, FalconStor released its Q4 and full-year 2007 earnings. Copies of the earnings release and supplemental financial information are available on FalconStor's website, again at www.FalconStor.com.

At this time I'm now pleased to turn the call over to ReiJane Huai, Chairman and CEO of FalconStor Software, Inc. Please go ahead, sir.

REIJANE HAUI, CHAIRMAN AND CEO, FALCONSTOR SOFTWARE, INC.: Thank you. I would like to characterize our 2007 accomplishments as laying a solid foundation for scalable top and bottom-line growth, along with continuing enhancement of our operating efficiency. From a technology standpoint, we're ready to unleash the most advanced network storage platform, IPStor generation 6, which has received stellar reviews from ZDNet and Storage Magazine, and was rated by CRN as the best virtualization product with same provisioning against EquaLogic, HDS and Compellent, etc.

The recently-launched VTL, virtual tape library, generation 5, was also scalable, cluster de-duplication, was rated as the number one VTL in the (indiscernible) report, and was recognized by Forrester as the number one VTL based on the completeness of the product offering and strategy.

With regards to system development, Bernie's team continued to deepen relationships with existing OEM partners while re-rolling new partners to expand our solution set and geographic coverage. The recently (indiscernible) joint venture with Chinese Academy of Science in China will provide FalconStor with a SAN based cluster file system, optimized for surveillance, archiving, while broaden our market reach in China as a good citizen in the IT industry. Also, proactively collaborate with strategic platform providers to achieve the highest level of interoperability and compatibility.

For example, besides certifying our virtual appliance with VMware, ITStor has also been certified with upcoming Windows 2008 and Virtual Iron to minimize the customers' deployment time and sustaining costs.

Our OEM partnership provides great opportunity for FalconStor to validate its innovations and to optimize the product scalability in terms of performance and capacity. Last year, EMC demonstrated the world's largest VTL, up to 1.6 petabytes, at the (indiscernible). The VTL was powered by cluster FalconStor VTL servers. Our collaboration with Huawei-3Com, especially in China, has resulted in the industry's first multiprotocol (indiscernible) and 4 gigabyte fiber channel, dual controller, Saas/SATA disk array. This can be configured and deployed as network storage, consumer data protection, or Virtual Tape Library will now be assistance of external storage appliances.

The integrated solution not only reduced material costs, but also simplifies deployment and support without sacrificing performance or scalability. With regard to green computing, we are teamed with our strategic partner, COPAN, a pioneer in MAID technology to launch the industry's first enterprise class green VTL with the duplication in 2007. We are expecting to continue our collaboration to introduce additional environmentally friendly and energy-efficient storage services in 2008.

The scalability of our technology enables FalconStor to team with channel partners to package our various solutions in many ways. For example, as a virtual appliance with VMWare which can be deployed in five minutes as a value-added service. Or as a server appliance which can be deployed in about ten minutes as a stackable iSCSI or stand-alone CDP or VTL load. Or as a view controller Saas/SATA array with (inaudible) integrative CDP or VTL personality. Or as a multiload cluster for the enterprise accounts.

Let me give you a few examples of how our scalable packages enables FalconStor to engage partners in various markets such as iSCSI or disk space backup. Instead of offering sheer capacity, we will be abling the to construct iSCSI solutions using our software platform SAK to meet the market demand for cost effective storage or disk space data protection, etc.

Those solutions can be packaged, delivered as virtual appliance or as a server based appliance or as disk array. Our rich and proven product portfolio allows us to meet the expectations of those resellers looking for competitive differentiation, quality profit margin and enterprise class training and support infrastructure.

With respect to data de-duplication, we are extremely confident in our technology, superior performance, and capacity to meet and exceed the expectations or enterprise accounts. FalconStor's Virtual Storage Appliance was embedded de-duplication, released in Q4 2007, enables corporation to deploy small-scale VTLs in the remote offices which will work in conjunction with enterprise clusters in the primary data centers. The VTL storage suppliers will also be an appealing product for the midrange market as well due to its following unique capabilities.

Number one, ultra-high speed backup to allow the customer to contain the (inaudible). Number two, extremely fast and direct de-duplication for media management through high integration with the Physical Tape Library. And lastly, its ability to run third-party packaged software directly on the VTL appliance will allow the VARs to deliver a highly cost-effective, OEM backup solution to the market.

Besides VTL, our resellers can …