Overland Storage Fiscal 4Q10 Financial Results

Overland Storage, Inc. announced its financial results for the fourth quarter and fiscal year ended June 30, 2010.

Overland Storage reported revenue of $19.3 million for the quarter ended June 30, 2010, an increase of 3.7% from the prior quarter. The net loss for the fourth fiscal quarter was $4.2 million. This includes $1.2 million of non-cash, stock compensation expense.

For the twelve months ended June 30, 2010, the company reported revenue of $77.7 million, compared with $105.6 million for the twelve months ended June 30, 2009. The net loss for fiscal year 2010 was $13.0 million, compared with a net loss of $18.0 million in the prior fiscal year.

Cash and cash equivalents as of June 30, 2010 were $8.9 million compared with $5.5 million as of June 30, 2009.

Eric Kelly, President and Chief Executive Officer of Overland Storage, said: " We are pleased to have stabilized revenues, as the growth of our strategic branded products and stability of our service business has helped to compensate for continuing declines in the OEM business and challenging global economic conditions. This provides the foundation necessary to drive future revenue growth."

Kelly added: "Looking ahead, we remain focused on three strategic priorities - implementing a new asset light business model, driving innovation and expanding our addressable markets. We look forward to describing key milestones in upcoming months and are pleased to resume providing forecasts of certain operating metrics."

Business Outlook
Based on information available as of August 26, 2010, Overland Storage is issuing guidance for the first half of fiscal 2011 as follows: the company expects first half revenue to be in the range of $35 million to $38 million, gross margin in the range of 27 to 31 percent and operating expenses in the range of $18 million to $20 million, including non cash stock compensation charges of $1 to $2 million. Our ability to continue to execute and hit our targeted milestones will assist us in our goal of becoming profitable during fiscal 2011.

Overland Storage’s New iSCSI San Solution Delivers Effortless Data Management and Data Protection

Overland Storage, which operates in the same industry as companies like Quantum Corporation and Hewlett Packard, Inc., noted that its SnapServer SAN S2000 expands Overland’s market reach across the data lifecycle.

Overland Storage, the trusted global provider of effortless data management and data protection solutions across the data lifecycle, today announced the new Overland SnapServer SAN S2000: a feature rich, resource-efficient iSCSI SAN platform for businesses with growing data. The SnapServer SAN S2000 enables companies with Windows, VMware, Hyper-V, UNIX, Linux, or Mac OS X to take advantage of SAN capabilities that have traditionally been considered too complex to manage without specialized expertise, including active-active mirroring and failover, snapshots, replication and Microsoft Cluster Server support. Featuring automated capacity expansion, the solution enables policy-based storage volume growth to occur in a just-in-time manner without IT intervention, eliminating guesswork and over-provisioning. The SnapServer SAN S2000 scales effortlessly to 120TB and is a cost effective solution for businesses with virtualized server environments or storage consolidation requirements.

Optimized for Use in Virtualized Server Environments

• VMware –The SnapServer SAN S2000 integrates directly into the VMware management application to provide a host of advantages that include: simplified data store creation wizards for provisioning targets, the ability to provision storage for ESX clusters within VMware utilizing customized SnapServer tools, single interface configuration for SnapServer targets and VMware high availability for ESX data stores using native VMware utilities (DRS, HA, VMotion) with the SnapServer SAN active-active failover
  option.


• Microsoft Hyper-V –The SnapServer SAN S2000 is certified to support Windows Hyper-V Server for Microsoft virtualization deployments. With customized tools developed for the SnapServer SAN it enables simplified management of Hyper-V for backup utilizing VSS (volume shadow copy services), replication and mirroring. In addition the SnapServer SAN supports direct pass through access for guest virtual machines enabling higher performance and security.

Simple Management and Deployment

“The new SnapServer SAN S2000 has allowed us to provide networked block-based storage to multiple servers and easily manage our data growth from a single interface,” said Darren Dong, director of communications and web development at Riverside Community College District, an early beta tester of the SnapServer SAN S2000. “Our Fibre Channel SAN was making it difficult and expensive to map across multiple systems. The SnapServer SAN S2000 allows us to easily manage existing connections and create new ones as needed. We now spend a fraction of the time setting up and monitoring our storage solutions due to the ease of use of the S2000 and SnapServer Manager.”

Effortless Data Management and Data Protection, Wherever Data is Located

The SnapServer SAN S2000 is the first iSCSI SAN solution to fully integrate autoprovisioning, an automated capacity expansion feature. With this feature, storage volumes are automatically expanded based on predefined policy – without requiring intervention. Disk usage is also tracked, giving IT administrators the ability to easily monitor and manage disk capacity consumption across the organization. Companies with standalone or clustered Windows servers running business critical applications, such as Microsoft Exchange and SQL Server, can utilize the SnapServer SAN solution’s active-active failover capabilities to ensure high availability and maximum uptime. Advanced replication functionality that supports up to 256 snapshots and failover ensure data is protected and accessible at all times – regardless of its location – while accelerating backup efficiency.

“Businesses large and small face similar data storage growth challenges – but often without the resources or expertise to effectively deploy a SAN. They need a solution that can be easily deployed, is simple to manage and can accommodate growing amounts of data,” said Benjamin S. Woo, program vice president of enterprise storage systems at IDC. “Especially as more companies deploy virtualized environments, it becomes even more complex to manage data
growth over the long term. With autoprovisioning technology like that in Overland SnapServer SAN S2000, companies can ensure that their storage solution can support business growth without having to pre-determine storage requirements or running the risk of over-provisioning.”

Features and Benefits

• Automated capacity expansion – The SnapServer SAN S2000 easily manages storage growth with an autoprovisioning feature that tracks disk usage and automatically extends volumes that reach pre-defined thresholds, without requiring IT intervention.


• Simple storage management – With SnapServer Manager, IT managers can easily monitor and manage all SnapServer SAN and NAS systems remotely or locally via a Windows-based application or via web browser in heterogeneous environments.


• Maximized application uptime – SnapServer SAN S2000 ensures that essential applications are available at all times by supporting active-active mirroring and failover, and is fully compatible with the Windows Multi-Path I/O (MPIO) framework; also supports Microsoft Cluster Server.


• Disaster recovery – The inclusion of a VSS provider (Volume Shadow Copy Services)supports business continuity in the event of a disaster and increases backup efficiency while ensuring application consistency during backup and replication. It also enables SnapServer SAN S2000 to handle up to hundreds of thousands of replication recovery points.


• Twelve drives expandable to 120TB – The SnapServer SAN S2000 is a 2U base system that can seamlessly be expanded up to 120TB utilizing SnapServer E2000 expansion units.

“The SnapServer line has always been known for delivering rock-solid, reliable products for IT departments that need effortless and cost-effective storage solutions.

The SnapServer SAN S2000 not only builds on this reputation, but actually brings a new level of innovation and sophistication to the product line,” said Eric Kelly, president and CEO, Overland Storage. “We remain completely focused on listening to and addressing the specific storage needs of businesses by offering storage solutions that can quickly and easily be deployed within existing environments for instant scalability and reliability. Overland strives to deliver storage solutions that are truly effortless for businesses of any size.”

Overland Storage Inc.: Eric Kelly, President and CEO

Eric Kelly has served as President and Chief Executive Officer of Overland Storage, Inc., since January 2009, and as a board member since 2007. His most recent corporate position was Vice President and General Manager of storage systems solutions at Adaptec, Inc. Prior to that, he served as President and CEO of Snap Appliance, which was acquired by Adaptec. Two years earlier, Mr. Kelly engineered the purchase of Snap from Quantum Corp., having recognized the inherent value in Snap, where the main product he drove became the volume market leader in network-attached storage (NAS) appliances. Mr. Kelly earned an MBA from San Francisco State University and a B.S. in business from San Jose State University.

Please give us a brief history and background of Overland Storage.

Mr. Kelly: It's our 29th year of business. Overland (OVRL) originally started off as a tape company, and the business was really designed around providing products to a major OEM, which was HP. At one point, HP represented about 65% to 70% of Overland's business. The other piece of Overland's business was a very fast-growing and well-supported distribution channel around the world. And with those two pieces of the business, it grew very well. Our fiscal year 2009 ended in June, and we reported a little over $105 million in revenue. We have over 1,000 partners worldwide.

We support and sell solutions in more than 60 different countries and have over 300,000 units installed around the world - over 100,000 units across tape-based products and over 200,000 across our disk-based product lines. Through an acquisition that we made back in June of 2008 - we acquired a company by the name of Snap Appliance that was part of Adaptec - we now have two very strong brands, the Overland brand and the Snap Appliance brand.

In the 29 years Overland has been in business, technology has changed drastically. Talk a bit more about what your business strategy is today and going forward.

Mr. Kelly: Our strategy today is to provide effortless data protection and data management solutions end-to-end, from online to nearline to archival, all the way to the cloud. We're doing that through a seamless management layer that is very simple to use, very easy to install, and it stems from the ease of use that Snap Appliance delivered to its customers for many years. I'll use the example of whether you have an iPhone or an iPod, or now the iPad, you have a very seamless, very easy to use, very intuitive interface. In the storage arena, ease of use is a very strong requirement that we hear from both our customers and our partners. For example, the product that we announced a couple of weeks ago, our iSCSI SAN product, SnapServer SAN, uses the same effortless management interface that we have on our SnapServer NAS products.

Tell us more about your main product lines and particularly the latest technological advances you've made.

Mr. Kelly: We have a network-attached storage product line, SnapServer NAS. The intelligence behind that is GuardianOS, which is our network-attached storage operating system. There are very few of those out in the industry that have been around as long as we have; we were probably one of the original network-attached operating systems. You now have NetApp, you have Microsoft and their storage server product line, and then you have EMC and maybe a few others that have enterprise-class operating systems in that arena.

With the product that we just announced, SnapServer SAN, we feel we're changing the playing field in terms of delivering enterprise solutions to the mid-tier customer base at a different price point and value proposition. We offer required enterprise features, such as snapshots, replication, support for VMware, and we also have what people have come to know as thin provisioning - we call it "auto-provisioning," but it's a similar architecture. We're able to deliver all of that at a sub-$15,000 price point.

You mentioned having 300,000 units around the world. Talk about your customer base. Is there a typical Overland Storage customer? And what's the range of your customer base in terms of the company and industry size? Are they in the U.S. versus overseas?

Mr. Kelly: We have a two-tiered, go-to-market strategy. We work 100% through our reseller partners, our value-added resellers. In terms of the geographic makeup, about 60% of our revenue is in the U.S., 40% is outside of the U.S. And of that 40%, probably 90% of that is in the European region. We have a pretty broad customer footprint geographically. We're not tied to any one vertical, so whether it's oil and gas, utility, technology, education, government, retail, health care or the financial market space, we have a fairly even distribution of customers. It allows us to not have ups and downs just because one vertical happens to be stronger in one quarter than another. It also gives us a good distribution in terms of geographic presence. As for the typical customer, we have several types. One is the distributed enterprise.