Overland Reports Q4

SAN DIEGO -- Overland Storage, Inc. (Nasdaq: OVRL - News) today reported fourth quarter and full-year results for its fiscal year ended June 30, 2007.

Net revenue for the fiscal 2007 fourth quarter was $34.1 million, compared with $41.7 million for the same period a year ago. The company reported a net loss of $6.0 million, or $0.47 per share, for the fiscal 2007 fourth quarter compared with a net loss of $6.8 million, or $0.52 per share, for the same period a year earlier.

For the fiscal year ended June 30, 2007, the company reported net revenue of $160.4 million compared with $209.0 million for the prior fiscal year. The net loss for the year was $44.1 million, or $3.45 per share, compared with a net loss of $19.5 million, or $1.42 per share, a year earlier. Included in the fiscal 2007 loss is an $8.4 million charge, or $0.65 per share, related to the impairment of acquired technology.

The company noted that revenue for its fiscal 2007 fourth quarter decreased 18 percent from the prior year quarter, due primarily to a 22 percent decline in sales to the company's largest OEM customer. Although product sales in the company's branded channel declined 17 percent from the prior year quarter, sales of spares and service posted a 30 percent gain. Softness in the company's branded channel, also noted by other industry participants, was experienced in both the company's tape and disk-based appliances. The company noted that due to a June launch of REO 4500, REO 9100 and ULTAMUS(TM) RAID 4800, these products did not materially contribute to revenue in the fourth quarter.

The company posted sequential improvement in gross margin from 13.3 percent in the fiscal 2007 third quarter to 18.1 percent in the fiscal 2007 fourth quarter. On a year-to-year basis, the 18.1 percent in the fiscal 2007 fourth quarter compared to 22.3 percent in the fiscal 2006 fourth quarter. Gross margin in both the fiscal 2007 third and fourth quarters was negatively impacted by under-absorbed manufacturing costs, although to a significantly less extent in the fourth quarter.Operating expenses of $12.0 million in the fiscal 2007 fourth quarter declined by approximately $6.4 million or 35 percent compared to the fiscal 2006 fourth quarter. R&D spending declined 52 percent, or $2.8 million, reflecting the completion of many of the company's product development programs as well as staff reductions. Sales and marketing expenses declined 29 percent, or $2.7 million, reflecting lower spending on marketing programs and staff reductions. G&A expenses declined 25 percent, or $0.9 million, primarily as a result of decreased spending on IT projects and reduced legal and accounting fees.

"I am extremely pleased to announce that Vern LoForti, who has been Overland's CFO for nearly 12 years, is now our new president and CEO and a member of our board of directors," said Scott McClendon, chairman of the board, and former interim president and CEO. "Vern and I worked closely together during the years when I was CEO, and again since last November when I returned to the company in a full-time capacity. No one knows the company better, and no one is better qualified to execute the strategy and lead the company in its return to profitability. The board recognizes that Vern's strengths and knowledge go well beyond the functions of finance. He is a leader and a confidence builder."

Overland Storage Inc.