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Overland Storage Reports Record Revenue for Second Quarter of Fiscal 2003

Announcement posted by Digital Tape Solutions 24 Jan 2003

Overland Storage, Inc. (NASDAQ: OVRL) today reported fiscal 2003 second quarter and first half results. For the quarter ended Dec. 31, 2002, Overland reported record revenue of $48.6 million compared to revenue of $45.6 million in the second quarter of the prior fiscal year. Net income for the second quarter of fiscal 2003 totaled $1.5 million, or $0.13 per diluted share, compared to net income of $2.0 million, or $0.18 per diluted share, in the second quarter of the prior fiscal year.
Revenue for the six-month period ended Dec. 31, 2002 was $83.2 million compared to revenue of $85.6 million in the corresponding six-month period of the prior fiscal year. Net income for the first six-month period of fiscal 2003 totaled $1.0 million, or $0.08 per diluted share, compared to net income of $3.0 million, or $0.28 per diluted share in the first six-month period of fiscal 2002.
In early December, Overland announced that it expected both revenue and earnings for the quarter to reach or exceed the high end of its original guidance. Strong demand for the Company's products during the last month of the quarter pushed actual results significantly higher than anticipated. Sales to Overland's OEM customers were particularly strong, complemented by continued sequential growth and record revenue in the Company's branded sales channels. Improved royalty fees from the Company's VR2 licensees enhanced margins and earnings.
The Company noted that its gross profit margin is normalizing as revenue recovers from two difficult transition quarters. Profitability for the second fiscal quarter was down in comparison to the prior fiscal year quarter as a result of increased operating expenses, primarily in the areas of sales and marketing. Over the past five quarters, in order to capitalize on the strength of its new Neo Series tape libraries, Overland substantially increased the size of its branded sales force and stepped up its marketing efforts. As a result, Overland continues to gain share in the mid-range tape automation market. Additionally, in June 2002 the Company launched a new line of software products.
Christopher Calisi, president and CEO of Overland Storage, said: "We are pleased that the transitional issues of the prior two quarters now appear to be behind us. Our largest OEM customer seems to be executing well in its post-merger environment, and we believe that its sales pipeline is now clear of the predecessor product. We entered the quarter tentatively, not being in a position to anticipate the timing of the renewal of product demand. By early December, it became clear that product was moving strongly, which we believe bodes well for the second half of our fiscal year.
"Adding to the strength of our OEM business was the commencement in November of shipments to IBM, our newest OEM customer. Sales to IBM during this fiscal quarter were much stronger than expected, and this business represents a potentially expanding opportunity for us. We look forward to providing our usual high level of service to this customer and to building the relationship in the months ahead.
"We were also pleased with another record revenue quarter in our branded business. Second quarter sales were strongest in the Americas region with sales growth of 45 percent over the prior fiscal year quarter. Our Asia Pacific office posted the largest single sale for the quarter, an especially gratifying development as our Singapore office was only opened in November 2001. The significant investments we have made in sales and marketing resources are paying off and we believe we are now positioned to leverage this channel for continued growth while slowing the relative growth of operating expenses.
"Since the summer, we have been marketing our Overland Storage Resource Manager software product. In mid-December we introduced a significant upgrade to this product; the early response it is receiving is positive. We exceeded our goal for the quarter, booking nine orders. Formal launch of the new version will occur in the next thirty days and, although the numbers are still small, our pipeline is encouraging. We understand that this is a nascent market, and it remains challenging.
"Royalties, chip sales and other VR2-related revenue reached a record high this quarter, due in large part to the successful launch of a new flagship product by one of our licensees. This too bodes well for future quarters. Although not significant to revenues, these high-margin royalties bolster our bottom line.
"Though we had anticipated revising our outlook for the remainder of fiscal 2003, we believe that, due to the traditional seasonality of the March quarter and the newness of our OEM relationships, it is more prudent to confirm the ranges we previously provided. Specifically, we anticipate third quarter revenue in the $45 to $50 million range with earnings per diluted share in the range of $0.11 to $0.17. By our fourth quarter, we hope to report record results with revenue in the $54 to $59 million range and earnings per diluted share of $0.23 to $0.28."
Mr. Calisi concluded, "Transition always presents challenge. During the prior two quarters, we faced a lower level of business that we believed would be temporary. We held our course and prepared for the ramp-up of sales we are now seeing. With that transition essentially behind us, we believe that the current levels of demand are more typical of what we will see in the coming quarters. Although these remain challenging economic times, we are cautiously optimistic about achieving a record year in both revenue and earnings."
About Overland Storage
Overland Storage, Inc. (NASDAQ: OVRL) is a leading global supplier of innovative hardware and software storage solutions for mid-range computer networks. The company's reputation for delivering high availability products, including its award-winning automated storage libraries and the industry's first family of fully open storage management software solutions, sets the standard for intelligent, automated and scalable storage. Overland sells its products worldwide through leading OEMs, commercial distributors, storage integrators and value-added resellers. For more information, visit Overland's Web site at www.overlandstorage.com.
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For further information please contact Tracey Brown, DTS on: (02) 9496 1127