ADIC has bought around ten percent of the shares in Overland Storage according to Overland's SEC filings. ADIC met with Overland officials in January to discuss the futures of the two businesses and signed confidentiality agreements to do with potential transactions. Now ADIC has spent almost ten million dollars to buy 1.3 million shares and so-informed Overland CEO Chris Calisi. A joining together of Overland and ADIC was mentioned at this meeting.

The timing is significant in that the purchase took place just after news became public about the loss of HP's future OEM business from Overland. This was followed by the purchase of Zetta Systems, signaling the move into protecting primary data storage. ADIC may not have known the full story of Overland's loss-making results and forecast of a loss in 2006 - ADIC has just announced profitable results - but it certainly knows now.

With the previous January meeting it's probably feasible to consider that Overland has been pretty open with ADIC about its woes. ADIC and Overland products overlap in the SME space. Both companies have disk-to-disk backup products, with ADIC's probably being the more sophisticated product.

If both companies agree that there is over-capacity in the tape storage product business then a merger or acquisition would help remedy that. It seems obvious that ADIC would be the senior member of any joined entity.

In public Calisi has been talking up Overland, mentioning competing with NetApp. It's easy to talk about such things, but far harder to compete with NetApp outside the small enterprise space. Also Overland's primary disk protection products are not even on the streets yet and we await further illumination on its primary disk strategy.

The influence of Sun's purchase of StorageTek may pervade ADIC and Overland discussions. All three tape companies know that software is playing an increasingly strong role in data protection and this represents an opportunity to loosen the lock on data protection held by the backup software vendors.

ADIC has a more solid penetration of medium and larger enterprises. Overland could represent an opportunity in the SME space and a second opportunity in the primary data protection area. It also has its channel partners and OEM relationships. A better-run Overland could increase its profit margin. A joined-together ADIC-Overland could also eliminate some product-related costs.

If ADIC does join with Overland then life will get harder for Quantum, Qualstar, SpectraLogic, Tandberg, Breece Hill and others. Such a move could trigger more consolidation in the tape storage industry.