Overland counts on disk as tape sales plummet

Overland Storage continues to lose money on its tape business and is counting on SAN, VTL and its newly acquired Snap Server NAS platform to save it.

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Overland Storage Inc. reported an increase in revenue from disk products, despite another quarter of losing money. CEO Vern LoForti is looking to double disk sales with the acquisition of the Snap Server NAS platform.

Overland's revenue of $28.9 million last quarter was down 15.2% from last year and 9% from the previous quarter. Revenue from REO and Ultamus disk products increased 32.6% from last year and 63.4% from the previous quarter, which means the company's primary storage tape business fell more than the overall company figures.

For the fiscal year, Overland's revenue of $127.7 million was down from $160.4 million last year. Overland lost $8.6 million last quarter and $24.6 million for the year.

"While we're disappointed we could not report a sequential increase in revenue, the good news is the significant increase in sales of our disk-based products," LoForti said, on Overland's earnings conference call Thursday night.

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Other tape vendors reported similar trends last quarter. Quantum's disk sales doubled while tape declined, and IBM posted a 2% decline in tape revenue, while its overall storage sales increased.

Overland is clearly looking for the REO virtual tape library (VTL), Ultamus SAS-based SAN RAID array and the Snap low-end NAS platform to save the company; LoForti barely mentioned Overland's tape products on the call.

Overland did not break out revenue from tape and disk products, but LoForti said the Snap business acquired from Adaptec for $3.6 million in June was on pace for $18 million in annual revenue, and he expected that to at least double Overland's disk revenue. That means disk is still well below 20% of Overland's revenue.

LoForti also hopes to generate more revenue from Snap than Adaptec did. "Snap did not occupy a strategic fit within Adaptec," he said. "As a consequence, the Snap business suffered from continually declining resources and lack of promotion." LoForti expects Snap to bring Overland into lucrative new markets, such as video surveillance.

While increasing sales is the first priority with Snap, it's not clear when product updates will come. Overland is running out of money, with $9.7 million in cash and equivalents remaining, and LoForti revealed the company will secure financing to fund development and marketing of Snap. "We're in discussions with a lender, and we're pretty far along," he said. "We hoped to be able to announce something on this call but didn't get it done in time."

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