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Overland Storage Reports Fiscal 2011 Second Quarter Results

February 16, 2011 - SAN DIEGO, CA

Overland Storage, Inc. (NASDAQ: OVRL) todayreported second quarter results for its fiscal quarter ended December 31,2010.

Eric Kelly, President and Chief Executive Officer of Overland Storage, said,"With the support of our channel partners worldwide, we are executing onour plan to increase sales of our higher margin branded products andservices. Branded product sales grew 21.7% sequentially and total brandedrevenue is now 92.3% of total sales, up significantly from the priorquarter," said Kelly. "Additionally I am happy to report that our revenue,gross margin and operating expenses for the first half of FY 2011 were allwithin the guidance that we previously announced. In addition to achievingthese financial objectives, we introduced a new SAN product line and a newNAS product into the marketplace as planned."

Net Revenue for the second quarter of fiscal 2011 was $17.9 million, anincrease of 2% from the prior quarter and a decrease of 12.2% from thesecond fiscal quarter of 2010. The net loss for the quarter was $0.9million, or $0.07 per share, compared to a net loss of $6.5 million, or$0.59 per share, in the prior quarter and net loss of $2.6 million, or$0.47 per share, in the second quarter of 2010. Gross margins for thesecond quarter of fiscal 2011 were 31.1%, a significant increase from 23.6%the prior quarter, and an increase from the 28.5% in the second quarter offiscal 2010. Operating expenses were $9.2 million, an improvement of $0.7million from $9.9 million the prior quarter, including $1 million in non-cash stock compensation expenses in each quarter. We ended the secondquarter of fiscal 2011 with cash and cash equivalents were $6.8 million, anincrease of $2.5 million from $4.3 million at the end of the prior quarter.

Key highlights:

-- Total branded products revenue, excluding service, increased 21.7%
sequentially and 3.2% over the same period a year ago.
-- The SnapServer® and SnapSAN™ series of disk based products
increased 53% over the prior quarter and 95% in the same quarter in the
prior year.
-- NEO SERIES® tape products increased 10.7% from the prior quarter.
-- Gross Margins for the quarter were 31.1%, up 750 basis points from the
first quarter and up 250 basis points from the same quarter in the
prior year.
-- The Company generated $3.0 million in other income from the sale of a
minority interest in proceeds the company may receive in connection
with the current IP litigation.
-- The Company launched the SnapSAN™ S1000, a new entry in the midrange
SAN marketplace. The S1000 has a modular, scalable, dual controller
architecture and was designed to anchor our SnapSAN™ portfolio and
expand our total available market.

About Overland Storage

As a leading, global specialist in backup, recovery and archive, OverlandStorage is focused on helping IT departments address data protection anddata retention challenges by incorporating innovative solutions withworld-class service and support. Overland provides smart, affordable,end-to-end data protection solutions that are engineered to store smarter,protect faster and extend anywhere.

Overland Storage products include award-winning SnapServer® networkattached storage products; SnapSAN™, NEO SERIES® tape libraries; andREO SERIES® disk-based backup and recovery appliances. Overland Storagesells its products exclusively through a select network ofvalue-added-resellers, system integrators and OEMs. The company has shippedmore than 350,000 units to small and medium-sized businesses, as well aslarge enterprises in over 60 countries across the globe. For moreinformation, visit

Except for the factual statements made herein, the information contained inthis news release consists of forward-looking statements that involve risks,uncertainties and assumptions that are difficult to predict. This reportcontains certain forward-looking statements that involve risks,uncertainties and assumptions that are difficult to predict. Words andexpressions reflecting optimism, satisfaction or disappointment withcurrent prospects, as well as words such as "believes," "hopes," "intends,""estimates," "expects," "projects," "plans," "anticipates" and variationsthereof, or the use of future tense, identify forward-looking statements,but their absence does not mean that a statement is not forward-looking.Such forward-looking statements are not guarantees of performance and ouractual results could differ materially from those contained in suchstatements. Factors that could cause or contribute to such differencesinclude: our ability to raise outside capital to adequately fund ouroperations and to service and repay debt as it comes due; our ability tomaintain and increase sales volumes of our products; our ability tocontinue to aggressively control costs; the continued availability of ournon-OEM accounts receivable financing arrangements; our ability to achievethe intended cost savings and maintain quality with our new manufacturingpartner; our ability to generate cash from operations; our ability tointroduce new competitive products and the degree of market acceptance ofsuch new products; the timing and market acceptance of new productsintroduced by our competitors; our ability to maintain strong relationshipswith branded channel partners; our ability to maintain the listing of ourcommon stock on The NASDAQ Capital Market; customers', suppliers' andcreditors' perceptions of our continued viability; rescheduling orcancellation of customer orders; loss of a major customer; generalcompetition and price measures in the market place; unexpected shortages ofcritical components; worldwide information technology spending levels; andgeneral economic conditions. Reference is also made to other factorsdetailed from time to time in our periodic reports filed with theSecurities and Exchange Commission. These forward-looking statements speakonly as of the date of this release and we undertake no obligation topublicly update any forward-looking statements to reflect new information,events or circumstances after the date of this release.

Overland, Overland Storage, Snap Server, SnapSAN, GuardianOS, SnapEnterprise Data Replicator, REO Series, REO, NEO Series, and NEO aretrademarks of Overland Storage, Inc.

 OVERLAND STORAGE, INC. CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except per share data) Three Months Ended Six Months Ended December 31, December 31, ----------- ----------- ----------- ----------- 2010 2009 2010 2009 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) Net revenue $ 17,930 $ 20,432 $ 35,503 $ 39,745 Cost of revenue 12,357 14,599 25,778 28,704 ----------- ----------- ----------- ----------- Gross profit 5,573 5,833 9,725 11,041 ----------- ----------- ----------- ----------- Operating expenses: Sales and marketing 4,349 4,546 8,945 8,820 Research and development 1,727 1,464 3,481 2,921 General and administrative 3,106 2,581 6,666 5,260 Total expenses 9,182 8,591 19,092 17,001 ----------- ----------- ----------- ----------- Operating loss (3,609) (2,758) (9,367) (5,960) Interest (expense) income, net (351) (338) (717) (722) Other expense, net 3,128 592 2,772 558 ----------- ----------- ----------- ----------- Loss before income taxes (832) (2,504) (7,312) (6,124) Income taxes 77 76 95 148 ----------- ----------- ----------- ----------- Net loss $ (909) $ (2,580) $ (7,407) $ (6,272) =========== =========== =========== =========== Net loss per share: Basic and Diluted $ (0.07) $ (0.47) $ (0.63) $ (1.29) =========== =========== =========== =========== Shares used in computing net loss per share: Basic and Diluted 12,659 5,474 11,769 4,866 OVERLAND STORAGE, INC. SELECTED BALANCE SHEET INFORMATION (In thousands) December 31, June 30, 2010 2010 ------------ ------------ (unaudited) ASSETS Cash $ 6,797 $ 8,852 Accounts receivable, net 11,921 13,257 Inventories 9,458 9,941 Other current assets 6,094 6,551 ------------ ------------ Total current assets 34,270 38,601 Property, plant and equipment, net 814 804 Other assets 4,740 4,920 ------------ ------------ Total assets $ 39,824 $ 44,325 ============ ============ LIABILITIES & EQUITY Current liabilities, excluding debt $ 28,409 $ 31,047 Debt, current portion 3,539 5,171 Other long-term liabilities 6,361 5,441 Shareholders' equity 1,515 2,666 ------------ ------------ Total liabilities and equity $ 39,824 $ 44,325 ============ ============

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ICR, Inc.

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