Overland Gets New CEO, Reports Financials


The San Diego-based manufacturer of tape and disk-based backup appliances on Thursday used its 2007 earnings call to introduce Vern LoForti, the company's CFO for the past 12 years, as its new CEO.

LoForti replaces Scott McClendon, Overland's chairman, who assumed the CEO position on an interim basis following the abrupt resignation of CEO Chris Calisi in November.

Overland is going through a period of transition due to a couple of significant OEM losses, the decision to restart in-house manufacturing of its storage arrays after a disastrous experiment at outsourcing the function, and a restructuring and layoff in April which resulted in it losing its channel chief.

That rough patch shows in the company's financials.

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The company reported revenue of $34.1 million for its fourth quarter, ended June 30. That compares with revenue of $41.7 million for the same quarter a year ago. The company lost $6 million, or 47 cents per share, in the quarter, slightly better than the $6.8 million, or 52 cents per share, it reported a year ago.

For the year, revenue was $160.4 million, down from $209 million for the prior year. For the year, the company lost $44.1 million, or $3.45 per share, compared to a loss of $19.5 million, or $1.42 per share, in 2006.

Solution providers said they hope the new CEO can help Overland improve its financials. However, they said they had little interaction with LoForti, and so are unsure of the impact his appointment as CEO will have on the channel.

Jeanne Wilson, president of Condor Storage, a Sedona, Ariz.-based storage solution provider and Overland partner, said she has faith Overland will work out its issues.

"As a reseller, I can't say all this talk about Overland doesn't make me apprehensive," Wilson said. I hope it works out. They've had their share of misfortunes. But Overland has great product. And they're wonderful folks to work with. They are unusual in that they really do care about their partners and their customers. They go the extra mile for every deal."

Dave Cerniglia, president of Consiliant Technologies, an Irvine, Calif.-based storage solution provider, said that the tape industry is not as strong from a sales perspective as it was in the past, and so Overland started down the disk-based appliance path.

"It's hard for a tape vendor to jump in and say it is going to the disk market with an OEM product," Cerniglia said. "They need to do some cross-over marketing. And they will."

Like Wilson, Cerniglia said Overland has a channel program that has not been impacted by changes at the company. "Overland does treat its partners really well," he said. "And they make sure we make money selling it."

In an interview with CMP Channel, LoForti said he knows that he has work to do to bring Overland back to profitability.

However, he said that while the fiscal 2007 financial picture looks disappointing, it does have some bright spots. For instance, he said, July sales looked good, and he expects an uptick in the September quarter, despite it being a seasonally slow period.

The fourth quarter for Overland was a cash flow-positive one, he said. "A positive cash flow was something Wall Street wanted to see," he said. "It was something we worked at. A drop in operating expenses was also important to us."

Going forward, Overland needs to do more than cut expenses to grow, LoForti said.

"There was some expectation from certain people that we could cut our way to profit," he said. "We could keep cutting expenses and chasing our tail forever. But that is not in the best interest of our customers and partners. We need to increase sales. Our new vice president of worldwide sales, Bob Farkaly, is working on this."

Overland plans to increase its spending on marketing this quarter, and will spend smarter than in the past, LoForti said.

"Before, we didn't do a good job of managing our market development fund dollars," he said. "There were smaller partners who, through our ineptness, got a larger share of marketing dollars than larger, more deserving partners. That's changing."

Overland is also planning to release four new enhancements to its REO line of virtual tape libraries by year-end, including two major software enhancements and two major hardware enhancements starting this quarter, LoForti said.

The company is also extending its OEM relationship with Hewlett-Packard on the tape library side. The future of that relationship had been in doubt for some time, as HP had signaled it planned to wind it down, and signed an OEM deal with another vendor. However, LoForti said, Overland worked with HP on HP's launch of LTO-4 tape drives.

HP has also agreed to re-launch its MSL tape library, OEM'd from Overland, with the new LTO-4 tape drives, LoForti said. "They didn't just say, here's an upgrade," he said. "This helps our long-term revenue, and enhances our relation with HP."