Overland Storage this week cut its workforce and implemented an across-the-board pay cut in the wake of the economic downturn.
The moves, however, have solution providers concerned about the company's future.
Overland on Thursday said in a filing with the Securities and Exchange Commission that it had decided to cut its workforce by 53 employees, or about 17 percent. This would be in addition to the employees let go last month.
The company also implemented a companywide pay cut of 10 percent for all its salaried employees, including its executives. That pay cut is slated to last until the company returns to profitability, the company said.
The move comes a month after Overland closed a two-year accounts receivable financing agreement under which Marquette Commercial Finance may finance up to $9 million of Overland's domestics accounts receivables.
The cuts are not expected to affect channel operations for Overland, said Ravi Pendekanti, the company's vice president of worldwide sales and marketing.
"We're not changing any programs, and we're not changing our channel," Pendekanti said. "There's no change to our commitment."
Instead, many of the layoffs are coming from a restructuring under which Overland is reducing overlapping positions in sales and marketing, Pendekanti said.
For instance, the company until this month had separate teams focused on disk and on tape products despite the company's move over the last couple years to place more focus on its growing disk business. "We're getting rid of the overlay people, and keeping people with expertise across the board," he said.
Overland also eliminated duplicate marketing teams in the U.S. and the EMEA (Europe, Middle East, and Africa) territories who have had separate programs, and consolidated the functions into a single team in the U.S. with one person in Europe coordinating efforts there.
Solution providers working with the storage vendor expressed concerns at the changes at Overland and the hope that the changes will result in a leaner, more profitable organization.
One solution provider, who requested anonymity, said Overland is not in a unique position, but instead is one of many companies going through layoffs.
"Overland did get new funding," the solution provider said. "But there's lots of belt tightening. This is a tough time for everyone."
The solution provider said it is too early to start worrying about Overland. "They have a 20-year track record, and know how to run a lean shop," the solution provider said. "They have such a good reseller base, and they won't abandon us."
Another solution provider, who also requested anonymity, said it would be nice if somebody would acquire Overland. "I don't know what's going to happen," the solution provider said.
One worry is how the accounts receivable funding is being handled, specifically the move to factor their receivables, which means that a third party takes the incoming money and, after expenses, sends the surplus to the vendor, the solution provider said.
"That's a bad thing," the solution provider said. "Any company I have been involved with who is factoring their receivables, it's the beginning of the end."
Not at all, Pendekanti said.
Factoring of the receivables comes from the fact that the funding is asset-based lending under which Overland assets are used as collateral, he said. "The sales processes and the payment processes haven't changed," he said. "But I guess we need to go to our partners and make sure they are aware of how this works. There's no difference for partners. It's absolutely transparent. But there might be a problem with perceptions."
All the news from Overland isn't bad. For instance, the company last month said it entered into an exclusive sales and marketing relationship with Keating Technologies, a company that provides leading branch outsourcing services to the Canadian market. Keating will deliver integrated sales and marketing services to Overland's solution providers and distributors in Canada.
Going forward, Overland plans to unveil a couple of new strategic OEM relationships in some new solutions-focused markets, Pendekanti said. For instance, the company has been developing solutions such as video surveillance to work with its core storage products, he said.
Overland seems to be making fiscally responsible moves to make sure they can continue the flow of products through the channel, said John Zammett, president of HorizonTek, an Overland partner.
"They are a major part of our product offerings," Zammett said. "If they're having problems, we're having problems. But so far this hasn't affected our Overland business. We have some major account opportunities. A lot of our customers are long-term accounts who trust us to make the right choice for them."