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Overland Storage Inc. Reports Operating Results (10-Q)

May 13, 2009 | About:
10qk

Overland Storage Inc. (OVRL) filed Quarterly Report for the period ended 2009-03-29.

Overland Storage Inc. is a global supplier of innovative hardware and software storage solutions for mid-range computer networks. The Company's reputation for delivering high availability products sets the standard for intelligent automated and scalable storage solutions. Overland sells itsproducts worldwide through leading OEMs commercial distributors storage integrators and value-added resellers. Overland Storage Inc. has a market cap of $6.9 million; its shares were traded at around $0.54 with and P/S ratio of 0.1.

Highlight of Business Operations:

We reported net revenue of $83.5 million for the first nine months of fiscal 2009, compared with $98.8 million for the first nine months of fiscal 2008. The $15.3 million decline in net revenue was almost entirely due to a decline in sales to HP. The decline in net revenue resulted in a net loss of $15.4 million, or $1.20 per share, for the first nine months of fiscal 2009, compared with a net loss of $16.0 million, or $1.25 per share, for the first nine months of fiscal 2008.

Liquidity and capital resources. Historically, our primary source of liquidity has been cash generated from operations. However, we incurred a net loss of $15.4 million during the first nine months of fiscal 2009 and used $7.1 million in cash to fund our operating activities, including the Snap Server operations. Our cash balance has decreased by $15.3 million compared with our cash, cash equivalents and short-term investments balance at March 31, 2008, and by $5.9 million compared with our cash, cash equivalents and short-term investments balance at June 30, 2008. At March 31, 2009, we had a cash balance of $3.8 million, compared with $9.7 million of cash, cash equivalents and short-term investments at June 30, 2008. Cash management and preservation continues to be a top priority. However, to achieve positive operating cash flows, we must focus on generating additional revenue, improving our gross profit margins and continuing to improve operational efficiencies.

Net Revenue. Net revenue decreased to $22.3 million during the third quarter of fiscal 2009 from $31.8 million during the third quarter of fiscal 2008. The decrease of $9.5 million, or 29.9%, was primarily the result of anticipated lower OEM revenue from HP. The decrease related to OEM revenue was partially offset by $1.9 million in revenue from Snap Server products, which we began recognizing in the first quarter of fiscal 2009. Branded revenue in all geographic regions, comprising Americas, Asia Pacific (APAC) and Europe, Middle East and Africa (EMEA), showed a reduction in net revenue in the third quarter of fiscal 2009 compared with the second quarter of fiscal 2009, and compared with the third quarter of fiscal 2008. International net revenue during the third quarter of fiscal 2009 represented 46.4% of total net revenue, compared with 51.2% of total net revenue for the third quarter of fiscal 2008.

Net product revenue from OEM customers decreased to $6.3 million in the third quarter of fiscal 2009 from $12.6 million in the third quarter of fiscal 2008. The decrease of $6.3 million, or 50.0%, was primarily a result of a $6.7 million, or 48.8%, decrease in sales to HP. Sales to HP represented approximately 31.6% of net revenue in the third quarter of fiscal 2009, compared with 43.2% of net revenue in the third quarter of fiscal 2008.

Net product revenue from Overland branded products, excluding service revenue, decreased to $9.7 million during the third quarter of fiscal 2009 from $13.8 million during the third quarter of fiscal 2008, a decrease of $4.1 million, or 29.7%. The decrease reflects an overall decrease in sales volume for certain branded products, partially offset by $1.9 million of revenue from Snap Server products in the third quarter of fiscal 2009, which we began recognizing in the first quarter of fiscal 2009.

Gross profit on product revenue was $2.8 million for the third quarter of fiscal 2009, compared with $5.3 million for the third quarter of fiscal 2008. The decrease of $2.5 million, or 47.2%, was due to a reduction in OEM sales for the third quarter of fiscal 2009, partially offset by revenue from Snap Server products that we introduced to the market in the first quarter of fiscal 2009. In spite of the addition of Snap Server revenue, which carries a higher gross margin than our other product lines, the overall gross margin percentage for product sales decreased to 17.6% for the third quarter of fiscal 2009 from 20.0% for the third quarter of fiscal 2008. The decrease in gross margin percentage for product sales for the third quarter of fiscal 2009 compared with the third quarter of fiscal 2008 was due primarily to a decrease in sales of our branded NEO product and of spare parts, each of which carries a higher gross margin than our other product lines as a whole.

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