Overland Gets Enlarged

Overland Storage Inc. (Nasdaq: OVRL) this week will announce the biggest tape library in its history with the 500-cartridge NEO 8000, which the company hopes will let it cut into the market share of Advanced Digital Information Corp. (Nasdaq: ADIC) and Storage Technology Corp. (StorageTek) (NYSE: STK) at the high end of the midrange space.

The company's existing NEO 2000 and 4000 families top out at 240 cartridges. The monolithic NEO 8000, which uses the same robotic arm design as the previous-generation systems, now lets Overland cover the entire midrange tape spectrum, says president and CEO Christopher Calisi. It expects to start shipping the 8000 by the end of 2003.

"Our resellers can now use Overland for all their library needs," Calisi says. "This should lock up the midmarket for us."

Well, not necessarily. Fara Yale, research analyst at Gartner Inc., says Overland will have a challenge in trying to prove itself to higher-end enterprise customers.

"For Overland, it's moving into new territory," she says. "Traditionally in the tape automation market, they've been midrange to low end player with smaller libraries. This will put them into competition with companies like StorageTek, which is very strong in high-end markets like that."Moreover, Overland's two biggest OEM partners -- Hewlett-Packard Co. (NYSE: HPQ) and IBM Corp. (NYSE: IBM) -- are not necessarily going to be interested in reselling the 8000. IBM already sells its own tape autoloader in the segment, and for HP the NEO 8000 will be just one of several products they consider, says Yale.

Calisi acknowledges that getting resellers and OEM partners to carry the new library isn't guaranteed: "We're talking to our OEMs now... but you don't just automatically get their business. They make you bleed."

However, Overland claims that one of the main selling points for the 8000 is that it will be substantially cheaper than competitors' products. For example, a 500-slot NEO 8000 will carry a street price of around $37,000, or $74 per slot. That's compared with an ADIC Scalar i2000 with 306 cartridges priced at $40,000, or $130 per slot.

Another key distinction for Overland, according to Calisi, is that the company doesn't compete with its 600 or so resellers since it makes no direct sales. In mid-2004, Overland expects to add the ability for the 8000 to handle up to 2,000 tapes by adding additional units side by side.

Todd Spangler, US Editor, Byte and Switch