Earnings were $8.7 million, or 16 cents per diluted share, for the quarter as compared to $7.2 million, or 13 cents per diluted share, for the first quarter of fiscal 2000.
Revenue growth was exceptional this quarter as OEM sales grew by nearly $20 million over levels in the fourth quarter reflecting the ramp up of sales to IBM and continued strength among existing OEM customers, commented Chairman and Chief Executive Officer Peter van Oppen. We diverted production and engineering resources to support OEM demand but opportunities for both branded and OEM business remain robust, he said. Total OEM revenue was 45 percent of sales versus 28 percent of sales in the previous period.
North American sales of core products, which include OEM sales, grew at an annual rate of over 71 percent for the first quarter after having grown at annual rates exceeding 50 percent during each quarter of fiscal 2000. Worldwide sales of core products grew at a 51 percent annual rate for the quarter and represented approximately 86 percent of total revenue.
The Company said that, as expected, the rapid acceleration of OEM sales caused a significant reduction in gross margin as a percentage of sales. Gross margin for the first period was 29.4 percent of sales versus an average of 35.2 percent during fiscal 2000. This reduction in gross margin is generally a result of lower margins to OEM customers that are expected to be offset by lower sales and marketing costs in the long term although the Company believes the gross margin reduction was exaggerated in the first quarter. We anticipate that the product mix and production costs for our OEM business will improve as our newer, multi-product OEM relationships mature and as our business continues to shift to higher value-added products, van Oppen said. The Company has previously announced that its multi-product OEM relationships include Dell Computer, IBM and Fujitsu-Siemens.
Selling and administrative expense increased 16 percent to $12.7 million during the first quarter versus the same period a year ago while research and development expenses were $4.8 million during the period, an increase of 22 percent. Cash and marketable equity securities totaled approximately $207 million at January 31, an increase of $3 million since October 31. At January 31, the Company owned 500,000 shares of Crossroads Systems, Inc.
The Company noted that accounts receivable decreased by approximately $1.0 million during the quarter to $66.9 million and inventory increased $29 million to approximately $77 million. There was good receivable control during the period although our inventories were above acceptable long-term levels, said Chief Financial Officer Jon Gacek. The inventory increase is significant and reflects both the magnitude of sales increase and the uncertainty of demand experienced during the quarter. We are very committed to supporting our partners and our inventory tends to increase during periods of significant shifts in demand. We expect that we will see inventory reductions during the current period, he said.
