Restoring channel relationships

Chris James, Overland's marketing VP for EMEA, reckons that Overland is now on its way back and stabilised. Concerning OEM relationships he said, yes, Dell did not take ARCvault, but that was a bit of a blessing in disguise he implied, saying Dell is: "a finance company wanting supply at ever-decreasing margin. It wanted to change the drive, the robotics, etc. and it got to the point where it wasn't the same product." James said Dell is not an engineering company and doesn't understand engineering needs, like a long-term supply of volume product. HP on the other hand is an engineering company and does understand.

One 3-year contract came to its end with HP but it is still taking Overland tape libraries for its MSL range and shows all the signs of continuing to do so. James aid: "HP has not gone away. The last two quarters were the best ever. Supply is carrying on and HP rarely takes product off its books... The OEM side of the business is now stable and happy."

The Neo range has been refreshed with LTO4 available. James was keen to refute Quantum criticism that Neo is now an old product: "NEO LTO4 is almost 100 percent new compared to Neo LT03, with new drives, new robotics, power supply and version 4 of the Protection OS. There is no commonality with the NEO of five years ago except its compatibility."

Bell Micro took the ARCvault product and it is proving successful. The ARCvault also now comes with LTO 4 too: "The tape side of the business is alive and well."

LTO4 encryption use is slow to take off because the sale involves talking to customer security people as well as backup/archive IT people, and sales cycles get lengthened as a result. Also backup products don't universally support the facility. LTO4 encryption will have to fit in with customers' general security/encryption policies in the future.

Manufacturing is now back in house with a new state-of-the-art manufacturing facility: "We regained speed, quality and hands-on manufacturing management experience." Resellers can now once again specify a delivery time for Overland product to customers: "We lost that but it's now back again."

The Ultamus range is doing well but: "obviously we'd like to see more of it."

Street expectations

Wall Street is looking for profitability but: "that's not expected for another two quarters." (I'd add an 'at least' here being cautious.) James said the Street is also looking for a cessation of Overland burning through its cash. The regaining of a positive cash flow and the stripping out of almost $13 million dollars of expense shows that that objective has been achieved.

Thirdly the Street wants to see new product adoption: "We've refreshed every product in the last seven months. There has been lots of R&D. The cash burn has now stopped. The new products are selling."

"We have quite a few million in the bank. Our nearest competition (Quantum) has just had to re-negotiate its $400 million loan. Overland just doesn't have a $400 million overdraft and doesn't have to service that debt."

(Continue to part 3 here)