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Overland Storage preps private cloud rescue

Oh my white fluffy knight, take me away from all this

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Troubled tape and disk storage vendor Overland Storage has seen revenues drop and losses rise over its last fiscal year, but fared better in its final quarter. A clustered filer product and private cloud offering is coming, hopefully lifting Overland out of the prolonged hole it has been in.

The fourth quarter (Q4 2011), ending on 30 June, saw revenues of $17.6m, down from the $19.3m recorded in Q4 2010, with net losses also down from the Q4 2010 figure of $9.7m at $9.2m. Encouragingly, gross margin – which was 29.3 percent in the year-ago quarter – was 32.5 per cent in Q4 2011.

The full year FY11 figures masked this, with revenues of $70.2m, $7.5m lower than fiscal 2010 revenues of $77.7m. The net loss in 2010 was $13m and this increased to $14.5m in 2011. The gross margin for 2010 was 27.7 per cent and this increased to 30.2 per cent in 2011, with three consecutive quarters of over 30 per cent gross margins. SnapServer and SnapSAN disk-based product revenue grew 32.7 per cent year-over-year. So it was not all bad news, numerically speaking.

But, obviously, the few examples of product sales growth, the margin increases and operating expense reductions weren't enough, necessary, vital even, but far from enough.

Basically Overland stuck to its hard road in 2011, salami-slicing its costs down, building up its channel – there are now more than 1,500 resellers worldwide - buying NAS clustering assets from the failed MaxiScale; entering new vertical marketing segments; and developing new product technology. BlueArc and Drobo founder Geoff Barrall is running the product engineering and development factory, so to speak, otherwise known as the rescue department.

That's the hope, the prayer: that Barrall's vision and drive will pluck a technology rabbit out of Overland's development hat to rescue the company.

One other potential lift to revenues could come from the patent infringement lawsuit against German autoloader supplier BDT, IBM and Dell. That could help sweeten the bitter pill of losing the tape library OEM deal with HP, a contract which finally came to an end in the fourth quarter.

Overland said this about the lawsuit: "An International Trade Commission (ITC) trial was completed on September 7, 2011, with a ruling from the ITC expected by November 23, 2011. We are represented by DLA Piper LLP, the largest law firm in the world. We were pleased with the development of the evidence at the trial and we remain optimistic about the case."

It could lose though, as such lawsuits are a bit of a lottery.

CEO Eric Kelly mentioned forthcoming products in his earnings remarks: "In fiscal 2012, we expect to release a clustered NAS solution and a private cloud offering designed to enable our entry into additional fast growing markets."

That's more like it.

The company said this would enable it "to bridge the gap between traditional disk storage and cloud storage solutions, which would enable data storage infrastructures to scale extensively without sacrificing reliability and performance". The new products will use the MaxiScale technology and Overland's Snap Guardian operating system.

A manufacturing partner was selected for the forthcoming disk products, note the plural, in Q4, and the release referred to a "new Snap platform".

Eric Kelly said: "With the selection of our strategic manufacturing and materials partners, and the next-generation design and architecture of our new product offerings, we plan to deliver a new level of functionality, performance and pricing to address the requirements of the distributed enterprise and the small and medium enterprise customers." Ah, every Overland customer, channel partner and investor has been waiting for this.

They can look forward to improved Snap Appliance products, a clustered NAS product and a private cloud offering in fiscal 2012 – that is by 30 June, 2012.

Overland employees, its channel partners, investors and customers could perhaps begin to hope that the company might move into profit in a late 2012 quarter. That would be a long, long-awaited event and everyone involved would be over the moon.

Let's not go over the top though. Put hope to one side. The company still has a lot of hard grinding to do and there are no guarantees about the eventual outcome. ®

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