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Firm Courting Overland Decides to Back Away

Overland Storage, a San Diego-based maker of data storage products, is probably breathing a bit easier these days on the news that its unwanted suitor has given up its quest to buy the company.

On Nov. 16, Advanced Digital Information Corp., based in Redmond, Wash., and a much larger storage firm, said in a letter to Overland’s board that it was withdrawing its offer to acquire the entire company.

ADIC had already owned a bit more than 9 percent of Overland, mostly from its purchase of about 1.3 million shares in August, and had been trying to strike a deal with Overland for months.

“Although we continue to believe in the merits of a business combination between our two companies, and that such a combination would be in the best interests of our respective shareholders, we have decided to withdraw our offer after your continued refusal to engage in any dialogue with us,” said Peter van Oppen, ADIC chairman and CEO, in his letter.

Besides adopting a shareholders’ rights plan called a poison pill to defend itself from unwanted acquisitions, Overland shareholders recently approved increasing the authorized number of outstanding shares from 25 million to 45 million at its shareholders meeting Nov. 15, another maneuver to stave off a hostile takeover.

ADIC’s offer to pay $7.90 per share, or about $112 million, for Overland, was deemed inadequate by its board, said Overland spokeswoman Cynthia Bond.

Overland hired Needham & Co. to advise it on the transaction, and the board determined it shouldn’t continue discussing the matter, Bond said.

“I don’t think our shareholders want to be sold out on the cheap,” she said.

On Nov. 21, Overland’s Nasdaq stock closed at $7.95, and has ranged from $6.28 to $17.34 over the past 52 weeks.

ADIC began its concerted effort to buy Overland shortly after the San Diego firm announced its largest customer, Hewlett-Packard Co., wasn’t buying its storage products next year. HP accounts for more than half of Overland’s annual sales of about $200 million.

Overland announced it has lined up a “new, tier one OEM (original equipment manufacturer) customer” and “expects this contract to contribute significantly to its profitability over the three-year life of the contract,” but wouldn’t reveal the customer’s name until its next quarterly earnings report.

Although an analyst who covers the company surmised the customer is Dell Inc., Bond declined to confirm or deny the information.

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Shareholder Calls For Sale:

Discovery Equity Partners, an Illinois-based investment firm that owns about 1 million shares of Ashworth Inc. has asked the firm’s management to sell the company.

Discovery, which made its wishes known in a letter to the company’s board on Nov. 4, said after discussing the issue with other shareholders, it felt compelled to request the sale so that investors could see “an immediate, higher stock valuation.”

Ashworth, a Carlsbad-based maker of golf apparel mainly for Callaway Golf Co., did not comment on the letter.

The letter said among the more promising buyers of Ashworth would be Fortune Brands, Liz Claiborne, and K2, the sporting goods manufacturer that also calls Carlsbad home.

Discovery Partners said given Ashworth’s recent financials, and the market, it could fetch about $12 per share, or about $210 million.

As of Nov. 21, Ashworth was trading at $8 on Nasdaq, which gave it a market capitalization of about $112 million.

For its third quarter Ashworth reported a net loss of 3.4 million on revenues of $48.3 million compared to net profit of $500,000 on revenues of $42.8 million for the like period of 2004.

For the nine months, it reported net profit of $1.5 million on sales of $149.5 million.

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Software Buy:

Bakbone Software has yet to complete its financial audits of two previous fiscal years, but apparently there’s enough in the kitty for the local company to buy another company. Earlier this month, it announced the purchase of Constant Data, a private, Minnesota-based firm that makes data replication software, for $5.5 million in cash and contingent payments.

In an update to shareholders in October, Bakbone Chief Executive Officer Jim Johnson put a positive spin on the firm’s continuing attempts to restate past financial results, but gave no definitive date when all the work would be completed.

Earlier this year, Johnson said the work would probably be completed in June.

“We are making progress, but it is slower than anticipated. We are working diligently to get the company through this stage of its financial audits. When a public company changes its revenue recognition policy, it is an exhaustive process, which requires the detailed review of transactions, which have transpired over many years.”

Bakbone hasn’t filed required quarterly financial reports with the Securities and Exchange Commission since September 2004. The firm was delisted from the over-the-counter bulletin board in February following an earlier delisting of its stock from the Toronto Stock Exchange.

The company’s shares now trade on the Pink Sheets electronic exchange and closed Nov. 18 at $1.66, giving it a market cap of $107 million.

Johnson also told shareholders the firm is expanding its markets and for the first six months of its fiscal year ended Sept. 30, it had bookings, or signed contracts, of $20.7 million. That was 27 percent above the same period for the previous fiscal year. It also held cash of $14.7 million at that date.

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Going To Cleveland:

Carlsbad-based ViaSat Inc., a maker of satellite and wireless equipment, said it acquired Efficient Channel Coding Inc., a producer of broadband communication integrated circuits and satellite communications systems for $16.5 million plus assumption of stock options with a predetermined value of $9 million over the next two years.

Privately held ECC was founded by two Cleveland engineers in 1996, and has 55 employees. The deal is expected to close during this quarter.

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Another Acquisition:

SYS Technologies, a San Diego-based provider of information technology services mainly to defense customers, said it plans to acquire another smaller firm, cVideo, a San Diego-based digital video applications firm, for $1.5 million in cash.

Assuming the transaction closes during the current quarter, it would be the fourth acquisition done by SYS this year. It also acquired a product line from another company.

While some 90 percent of SYS’ clients are connected to the federal Department of Defense, cVideo’s focus was in the commercial security market. Its video software was coupled with wireless technology developed by Qualcomm Inc. in a wireless video surveillance system employed at the 2003 Super Bowl in San Diego.

“We intend to take these same capabilities together with our growing technology and engineering service base to further redevelop the existing cVideo markets as well as to introduce these products to our Defense and Homeland Security markets,” said Cliff Cooke, the CEO of SYS.

Annual revenues for cVideo were about $3 million. It has 15 employees.

SYS, which moved trading from the OTC bulletin board to the American Stock Exchange this year, closed $4.18 on Nov. 18, and ranged from $2.25 and $5.98 during the past 52 weeks.

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New Estimates:

Advanced Marketing Services Inc., a book distributor to mainly warehouse retailers, released some new estimates on financial results for the fiscal year ended March 31, 2005, and March 31, 2003.

The company that has been the focus of a federal investigation into its accounting procedures reported its estimates on a per share basis, and did so with the proviso that an ongoing audit may alter the figures.

Since a raid on its headquarters in 2003, three employees have been indicted and two have pleaded guilty to felony charges related to fraudulent financial reporting.

AMS said its independent auditors have yet to finish audits of restated results, but they are getting closer.

For the 2005 fiscal year that ended March 31, AMS said the estimated net loss per share is between 96 cents to $1.06, which is worse than the original estimated per share loss between 73 to 83 cents per share. No dollar figures were provided.

The company said most of last year’s loss was caused by “the costs of the ongoing government investigations and related litigation, and the costs of the consolidation of the company’s distribution and returns centers.”

Now trading on the Pink Sheets exchange under MKTS.PK, shares closed at $3.85 on Nov. 18, and have ranged from $3.61 to $11.40 in the past 52 weeks.

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Going South:

Jmar Technologies, Inc., a Carlsbad-based maker of laser equipment used in the manufacture of semiconductors, said its water quality monitoring system called Biosentry is being tested at two major beverage manufacturing plants in the Yucatan in Mexico.

After final operational testing at two plants, Kimpen, SA de CV, is expected to purchase an additional 15 systems for each of its plants in the region, Jmar said.

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Venture Fundings:

Aperio Technologies, a Vista-based medical technology company, closed a $17 million Series B round of venture investment. Galen Partners and Advanced Technology Ventures were the lead investors. Inetcam Inc., a San Diego-based developer of multimedia applications for wireless devices, obtained $12.5 million in venture funding from Equal Elements.

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Ticker Takes:

Peregrine Systems Inc. set a special shareholders meeting to approve the sale of the company to Hewlett-Packard Co. at Dec. 15. HP is buying the San Diego enterprise software company for $425 million or $26.08 per share. Javo Beverage nearly tripled sales for its third quarter to $2.68 million, and hit $4.75 million for nine months. AmNet Mortgage funded $4.5 billion in new mortgages during the third quarter, up 119 percent from the same quarter in 2004. Kintera Inc. announced the sale of 4.5 million shares in a private placement at $3 per share to raise about $13.5 million.

Send any news of San Diego-based public companies to Mike Allen via e-mail at mallen@sdbj.com. He can be reached at (858) 277-6359.


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