The Rebirth of Overland Storage

It’s been a long, strange trip for Overland Storage (NASDAQ: OVRL). Best known in recent years for the tape backup libraries it sold through Hewlett-Packard, Overland is in the midst of an iSCSI-focused renovation at the hands of former Snap Appliance and Data Robotics execs. Could this reboot breathe new life into Overland as well as the SMB storage market it is focused on?

Snap and Overland – Hot Potato on a Sinking Ship?

The future of Overland is tied to Snap Appliance, makers of entry-level network-attached storage (NAS) systems. Current Overland CEO, Eric Kelly, snapped up the company in 2002 for just $10 million, quickly flipping it to Adaptec for $100 million. But the storage system market wasn’t right for the controller maker, so Kelly stepped up and directed Overland to repurchase Snap in 2008.

With Overland running a reported 70% of its business through Hewlett-Packard, that company’s decision to switch suppliers represented a potentially life-threatening challenge. Losses rang up and the company’s stock was pummeled. Shares of OVRL traded over $20 in 2006, but had slipped below $3 in 2008. Earnings declined, slipping into the red in the fourth quarter of 2005. The company hasn’t reported a profit since 2006 and the 2009 balance sheet shows a net negative total equity.

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The situation at Overland apparently does not appear quite as bleak to insiders. Eric Kelly stepped up to the helm as CEO in January of 2009 and quickly set about assembling a new management team. He brought in former  Snap and Data Robotics marketing whiz Jillian Mansolf in July, presumably to focus on the Snap Appliance storage systems.

Now Overland has taken another step, appointing BlueArc and Data Robotics founder Geoff Barrall as CTO and VP of Engineering. Kelly, Barrall, and Mansolf are a formidable team, lending the company the credibility it needs to steer Overland out of trouble.

Overland is in the process of expanding its Snap operations and moving it from Milpitas to San Jose. This month, the company revamped its NEO tape libraries and launched a new line of Snap appliances featuring enhanced support for VMware and Hyper-V. Overland also outsourced product manufacturing to Foxconn, improving gross product profitability.

On the financial front, Overland shored up its finances with $12 million in private equity funding on February 22.

A Full-Line Storage Company?

Although known primarily for its NEO line of tape libraries, Overland has a much broader product portfolio. The company sells a line of virtual tape libraries that once used IBM’s Diligent deduplication technology but this relationship is long over.

The Snap line has expanded into both NAS and iSCSI SAN primary storage arrays as well. Although the low-end 2-drive SnapServer 110 might not look like much, the rack-mount SnapServer 600 series can be expanded over 100 TB. This is accomplished by adding storage expansion chassis behind the slim 1U SnapServer head, but we suspect I/O capacity and reliability will be limited when daisy chaining seven expansion units on a single SAS port.

Overland’s storage lineup puts it squarely into the exploding small- and medium-sized business storage market. With server virtualization and database applications demanding ever more capacity and performance, many smaller IT operations are looking to add networked storage. But even the entry-level products of storage titans like EMC and NetApp are out of reach for these small shops, leaving a hole in the market. Companies like Overland are rushing to take advantage of this market with devices like the SnapServer, Data Robotics’ Drobo Elite, and EMC’s Iomega ix4 line. Those that offer low cost, ease of use, and integration with Windows and VMware are likely to be very successful over the next few years.

Overland may just surprise us all with a serious resurgence. CEO Kelly has lined up a great management team, brought in extra cash, and refocused the company on a nascent market opportunity. Not bad for a company many had long written off!

Listen to Overland CEO Eric Kelly on the InfoSmack podcast