News

posted on 25 April 2008 10:30

Data protection supplier Overland Storage reported reduced losses for its Q3 fy08 quarter but identified its channel sales as under-performing.

Net revenue was $31.8 million, down 15.9 percent on Q3 fy07. The net loss was $4.9 million ($0.39/share), substantially reduced from the Q3 fy07 net loss of $9.2 million ($0.72/share).

The company is turning the corner. Overand stated that its Q3 fy08 gross profit of $7.7 million improved 54 percent from the Q3 fy07  $5.0 million gross profit, despite declining revenue. On a sequential basis, gross profit decreased only 1.0 percent from $7.8 million in the fiscal 2008 second quarter, despite the 6.7 percent decline in revenue.

Operating expense of $12.4 million in the fiscal 2008 third quarter declined 12.7 percent from $14.2 million in the fiscal 2007 third quarter. Sequentially, operating expense decreased 10.8 percent from the fiscal 2008 second quarter level of $13.9 million mostly because the second quarter included a non-recurring $1.3 million purchase of software that is being used in a development project.

A large contributor to the revenue decline were lower sales to HP, its largest  OEM customer, due to the previously reported ending of the OEM contract. Channel sales of branded product did not make up for this.
 
Overland's president and CEO, Vern LoForti, said: "We were disappointed in the performance of our channel sales this quarter. Although the March quarter is historically a seasonally slower quarter than December, we had hoped to reverse that trend this year. Unfortunately, this did not happen, although the sequential decline was much less than in the prior two years. For several months, we have been working to both expand our sales force, and through training and close monitoring, amplify its performance."

"During the quarter, it became apparent that we still needed to make a number of personnel changes in EMEA and in the Americas, and we took corrective action. Consequently, our sales pipeline was interrupted, setting back our efforts to grow our branded business. This interruption underscores the importance of sales personnel maintaining close and frequent contact with channel partners. On the positive side, we have been very pleased with the strong performance posted by many of our newer hires. We believe that we have corrected the personnel issues, and put new management in place to help ensure that we can resume sales growth."

"We are especially encouraged by our improved gross profit margin, and proud to report the fourth consecutive quarter of margin growth. We have come a long way from the 13.3 percent we reported a year ago to the 24.2 percent we reported today. As we continue to invest in our sales force, we are spending conservatively on other areas of the company."

"... we continue to manage our receivables, inventories and other working capital closely. We were pleased with the $19.1 million quarter-end balance of cash and short-term investments, and will continue our cash preservation efforts ... The combination of compelling products, strong channel partner relationships, well-designed marketing programs and an expanded and disciplined professional sales force are the elements we need to return Overland to profitability."

^{[Paul Roberts, news editor.]}