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Another question mark is raised over the future of Overland Storage. It is to lay off 54 people; that's a 14 percent reduction.

Overland has still not found a replacement CEO. The staff cuts apply across the company and include executive people and a slight re-organisation. It is a second round of retrenchment following write-downs of assets after the ULTAMUS protected primary drive array launch.

Chief strategy officer and VP Michael Kerman takes on global marketing and product management. He replaces the previous global marketing VP, Christie Huff, who leaves the company - in a huff perhaps?

Robert Farkaly, who was in charge of product management, gets promoted to global sales VP. He has to get the sales chestnuts out of the fire. Farkaly replaces Philippe Cazaubon in the worldwide sales VP role. Cazaubon returns to his previous job as VP in charge of Asia-Pacific sales. Presumably the worldwide job was too much for Cazaubon but Asia-Pacific is not. The fact of his staying on is a credit to him and says something about his faith in the company.

Other spending cuts are being considered and the company expects to save $5.5 million a year. Scott McClendon, Overland's chairman, interim president and CEO, said: "It is now time for us to reduce our cost structure and concentrate on returning Overland to profitability." No one would disagree with him there. ...

"We are hopeful that the new products we are bringing to market will help enable a return to top-line revenue growth and that our spending reductions will promote a faster return to profitability."

Among those new products are the 38TB, 4U ARCvault, LTO 3 automated tape product. Overland has had good success with the ARCVault product line.

Red ink

Overland said it expected to report earning of approximately $37.5 million in its third fiscal quarter, ended March 31, 2007, on April 26, 2007. This would compare with revenue of $48.2 million for the same quarter in Overland's FY 2006 which produced a loss of $7 million. The Q3 FY 06 number was $10.1 million down on the Q3 FY05 revenue of $58.3 million.

In Q2 FY07, Overland reported a loss of $8.9 million on revenue of $46.0 million. With this background Overland will surely announce a loss for Q3 FY07, and the staff cuts and other cost-saving measures are paving the way for this. We can expect a fair amount of red ink. Hopefully the Q3 loss will be smaller, but perhaps not. These latest cuts weren't announced then.

Background

Briefly Overland ships NEO and ARCvault automated tape products and REO disk-to-disk (D2D) backup products. Its ULTAMUS RAID-protected primary disk arrays, announced last year, are the reason it currently has no CEO and needs to make staff reductions.

While being good, indeed award-winning products, they were developed when, it has to be said, there was no shortage of other, more experienced, drive array vendors offering as good if not better products.

Ex-CEO Christopher Calisi wanted to have a complete set of protected data storage products: primary; secondary (D2D); and tape. No other data protection vendor has embarked upon such a strategy, and it is unlikely that they will. He also embarked upon a disastrous manufacturing outsourcing effort which had to be abandoned and Dell and HP OEM arrangements suffered under his watch.

He successfully fought off an attempted take-over by ADIC. This may not have been the ideal thing for him to have done though. It is not clear if Overland can look to a white knight-type takeover now. Since then, ironically, ADIC itself had been bought by Quantum.

Because of the CEO cavity Overland now has no strategic plan other than to cut costs, sell its products as well as it can, and recruit a new CEO who can see a way forward for the company. That way forward will include both product and channel aspects.

Overland is pressing ahead with ULTAMUS. It recently signed an OEM deal with Xyratex to integrate Xyratex’s F5402E 4Gbit/s Fibre Channel SAS/SATA RAID system into its ULTAMUS RAID 1200 product. There can be a combination of 12 SATA (Serial-ATA) II or SAS (Serial-Attached SCSI) drives and up to 9 TB (terabytes) of storage capacity in each 2U rack-mountable enclosure.

The system can scale up to 60 drives and 45 TB of data. It can be deployed as a standalone solution or in conjunction with the REO, NEO and ARCVault products.

The recently-announced REO 1500 is a virtual tape library which can be configured for disk-to-disk backup. Although much better in terms of VTL capabilities and performance than the preceding REO 1000 it does not have a data de-duplication capability. De-duping seems to be becoming a standard feature offering of virtual tape libraries.

Overland sells products into the SMB market. So too does NetApp (StoreVault) and HP (All-in-One), also Dell and IBM.

This is a tough market and Overland will not have an easy job bringing itself back into profit and growth. We can expect bad news this quarter. Hopefully, at FY07 year-end, the signs of a turn-around will be apparent and a new CEO will have been appointed. Let's hope then that Overland is over the worst and not, definitely not, looking as if it is over the hill.