Overland Storage to Focus on Channel Expansion
03 August 2005 - 10:30PM
PR Newswire (US)
SAN DIEGO, Aug. 3 /PRNewswire-FirstCall/ -- Overland Storage, Inc.
(NASDAQ:OVRL) today said that Hewlett-Packard Company, its largest
OEM customer, has informed Overland of its decision not to purchase
its next-generation, mid-range tape automation product line from
Overland. The company expects HP to begin purchasing the first
product of this new line from an alternate supplier during calendar
2006. Although HP will continue to purchase the tape automation
products currently supplied by Overland for some time, the new
product will eventually replace the majority of those purchases.
The company cannot predict how quickly this transition will occur,
but believes the impact to the company's revenue during its current
fiscal year ending June 30, 2006 will be minimal. In light of this
anticipated loss in future revenue, the company intends to focus
heavily on the delivery of new higher-margin products through its
branded channel during fiscal 2006. Overland noted that its current
three-year contract with HP expires in July 2006. Typical of most
OEM contracts, it does not commit HP to buy specific quantities of
product at any time. It is customary at this point in a product
lifecycle for OEMs to plan for the next-generation product and its
suppliers. "Although our OEM business has declined in the last
year, our branded business has grown approximately 20 percent per
year in each of the last two years and now represents nearly $100
million in annual revenue," said Christopher Calisi, president and
CEO, Overland Storage. "In fiscal year 2006, this higher-margin
channel will receive not only additional focus, but several new
products to deliver to the marketplace through our worldwide
network of distributors, direct marketers and VARs. Although we
will have a lower revenue base due to the HP loss, we anticipate a
significant increase in our gross profit margin percentage
resulting from a higher concentration of branded sales. "We remain
excited about the many opportunities that lie ahead for Overland,"
continued Calisi. "We have a strong balance sheet and cash
position, and intend to use this strength to fill out our tiered
storage strategy consisting of protected primary disk storage,
secondary disk-based backup and tertiary tape automation devices.
"Our legacy is tape automation, and Overland now holds the market
leading position in the mid-range for archive solutions with our
award-winning NEO SERIES(TM) of tape libraries. We are also deep in
development of a next-generation tape platform with a target launch
in our branded channel in the first quarter of calendar 2006. This
new family of value-based loaders, mini-libraries and libraries
will take advantage of new half-height drive technology and will
complement our premium line of scalable NEO products. "Over the
past year we achieved a market-leading position with the REO
SERIES(TM), our award-winning line of disk-based backup and
recovery appliances. We are also pleased, subsequent to the recent
announcement of VTL capability, with the growing sales of our REO
backup appliance, now at nearly 1,500 units sold worldwide. We will
continue to introduce new REO products and expand functionality
throughout the coming year. "We intend to add a third storage
product line that will allow Overland to enter the protected
primary storage market, a market that is several times the size of
the markets we currently address. For some time now, we have been
evaluating potential software acquisitions. Our goal is to have,
via acquisition, a primary storage offering in market by the end of
calendar 2005. "Changes, such as the cessation of a long-standing
relationship, present challenges that must be viewed as
opportunities. We intend to leverage our worldwide network of
resellers, arguably one of the most powerful sales channels in our
industry, to become the leader in mid-range protected tiered
storage solutions," Calisi concluded. The company intends to
discuss this issue further in its upcoming fourth quarter fiscal
2005 conference call scheduled for Monday, August 15, 2005, at
10:30 a.m. eastern daylight time. About Overland Storage Now in its
25th year, Overland Storage delivers world-class data protection
solutions designed to ensure business continuity. Focused on backup
and recovery, Overland's data protection solutions include the REO
SERIES(TM) of disk-based backup and recovery appliances and the
award-winning NEO SERIES(TM) of tape libraries. Overland sells its
products worldwide through leading OEMs, commercial distributors,
storage integrators and value-added resellers. For more
information, visit Overland's Web site at
http://www.overlandstorage.com/. Except for the factual statements
made herein, the information contained in this news release
consists of forward-looking statements that involve risks,
uncertainties and assumptions that are difficult to predict. Words
and expressions reflecting optimism and satisfaction with current
prospects, as well as words such as "believe," "intends,"
"expects," "plans," "anticipates" and variations thereof, identify
forward-looking statements, but their absence does not mean that a
statement is not forward looking. Such forward-looking statements
are not guarantees of performance and the company's actual results
could differ materially from those contained in such statements.
Factors that could cause or contribute to such differences include
the speed at which HP transitions from the products it currently
buys from the company to its next-generation products to be
purchased from another vendor; possible delays in new product
introductions by the company including the company's next
generation tape library platform and enhancements to its REO line;
risks and uncertainties associated with potential acquisitions
under consideration for the company's entry into the primary
storage market, including uncertain timing and possible integration
difficulties; market acceptance of the company's new product
offerings; the timing and market acceptance of new product
introductions by competitors; delays, unbudgeted expenses,
inefficiencies and production problems that may result from the
transition of manufacturing to Sanmina-SCI; worldwide information
technology spending levels; unexpected shortages of critical
components; rescheduling or cancellation of customer orders; loss
of a major customer; the timing and amount of licensing royalties;
general competition and price pressures in the marketplace; the
company's ability to control costs and expenses; and general
economic conditions. Reference is also made to other factors set
forth in the company's filings with the Securities and Exchange
Commission, including the "Risk Factors," "Management's Discussion
and Analysis" and other sections of the company's Form 10-K
currently on file with the SEC. These forward-looking statements
speak only as of the date of this release and the company
undertakes no obligation to publicly update any forward-looking
statements to reflect new information, events or circumstances
after the date of this release. Overland, Overland Storage, REO
SERIES and NEO SERIES are trademarks or registered trademarks of
Overland Storage, Inc. DATASOURCE: Overland Storage, Inc. CONTACT:
Vernon A. LoForti, CFO, , or Cynthia A. Bond, Director of Corporate
Communications, , both of Overland Storage, Inc., +1-858-571-5555
Web site: http://www.overlandstorage.com/
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