Overland's Woes Widen

Overland, which recently got dumped by its second OEM partner in 14 months, announced its Q1 results this morning, posting revenues of $41.8 million, down from $58.5 million for the same period last year and way below analyst estimates of $46.45 million. (See Overland Posts Q1 Results and Overland Loses Another Partner.)

The vendor, which was ditched by OEM partner Dell earlier this month, posted a Q1 net loss of $20 million, or $1.54 per share, compared to a net loss of $2.9 million, or $0.21 per share, a year earlier. (See Dell Boots Overland and Overland Grabs New Partner.) Analysts had estimated a loss of 44 cents per share.

The vendor's shares fell $1.12 (21.62 percent) to $4.06 in trading today.

"Losing the Dell business is obviously a deep disappointment for us," said Overland CEO Christopher Calisi on a conference call this morning, adding that the vendor was also dogged by "production issues" during the quarter.

For some time now, Overland has been wrestling with problems at its contract manufacturer, and is now in the throes of shifting manufacturing back to its own San Diego facility, which it expects to complete by the end of this calendar year. (See Overland Looks for Rebound.)"There will be a two- to three-week period where there will be literally parts on trucks coming over to Overland," added Vern LoForti, the Overland CFO, on this morning's call.

The production problems, however, contributed to a product backlog of $6.1 million at the end of the quarter, and Overland execs admitted that this impacted Q1 revenues.

Overland also revealed that it will be closing the Seattle R&D facility of CDP vendor Zetta Systems, which it acquired last year, as well as significantly cutting its software engineering headcount. (See Overland Overtakes Zetta and Overland Buys Zetta.) According to Calisi, this was due to "limited market acceptance," of the Zetta product. The Overland workforce will be reduced by 30 people.

In today's results, Overland wrote off $8.2 million worth of intangible Zetta assets as part of its reorganization effort. "Our goal in this restructuring is to greatly reduce our expenses and reach profitability this year," added the CEO.

Today's results nonetheless pile the pressure on Calisi and his team after a torrid 12 months. Last year the company was dumped by its main OEM partner HP, lost $14.6 million, and fought off a hostile takeover attempt by ADIC. (See Overland Loses HP OEM Deal, Overland Guides Under, ADIC Courts Overland, Overland Enacts Poison Pill , and Overland Rejects ADIC Offer.)Set against this backdrop of uncertainty, one analyst on today's call urged Overland to reconsider its future. "A decade has shown that youre tilting against windmills," he said. "If I was back in grad school I would use you as a case study in misplaced optimism in staying independent in a world of goliaths -- but good luck."

"Thank you," was the terse response from Calisi, who used this morning's call to outline much of Overland's future product roadmap. The company, he explained, will soon take the wraps off a four-rack-unit high version of its ArcVault SMB tape appliance. (See Overland Unveils ARCvault and Overland Ships SMB Libraries.)

The vendor is also planning to make an addition to its Ultamus family of RAID storage arrays, the Ultamus 1200, as well as a hardware and software upgrade for its REO line of backup appliances. "As we enter calendar 2007, we should have a new [REO] platform with greatly enhanced capability," Calisi said.

The CEO also downplayed concern about Overland's lack of a "significant" OEM partner as it moves forward. "70 percent of our Q4 revenue forecast will come from our branded business," he said, adding that the vendor is also on the lookout for new OEM deals.

At least for the time being, however, Overland is still benefiting from HP's deep pockets. Despite the hardware giant's decision to pull the plug on its OEM deal, HP is apparently buying robust amounts of gear for resale. "We were surprised by the strength of HP demand for our NEO 2000," said LoForti, explaining that this accounted for 51 percent of total Q1 revenues, up from 49 percent in the same quarter last year.— James Rogers, Senior Editor, Byte and Switch