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Short Sellers Pound Overland Storage, Share Price Continues to Drop

The board of directors for Overland Storage Inc. probably rues the day when it decided to pass on an offer to sell the business, which makes data storage systems.

In November 2005, Overland’s directors deemed a $7.90 per share offer by ADIC, a Northwest data storage device maker, inadequate.

Of course, at the time, Overland’s stock was trading a bit above the offer, so who could blame them?

But since then, Overland’s prospects for turning things around look about as possible as John McCain winning the Republican presidential nomination.

As of July 17, shares of the company, traded under OVRL on the Nasdaq, were down to $2.40. In the past year, the stock has lost two-thirds of its value, and speculators are betting it drops even more.

According to data at the Yahoo Finance Web site, 76,000 shares of OVRL had been sold short as of mid-June. Short sellers borrow shares from a brokerage with the intention of selling them, then buying them back at a lower price and making a profit on the difference.

The message boards on OVRL are rife with negative comments, likely left by short sellers hoping to drive down the price even more.

ADIC was an existing shareholder of OVRL when it began buying up more shares in the late summer of 2005 before making a formal offer to Overland’s board worth $112 million.

But Overland’s board and then-Chief Executive Officer Chris Calisi decided they wanted nothing to do with ADIC. The company even adopted a poison pill shareholder rights plan to defend itself.

It’s been two years since Overland has seen a profit, which is also making a dent in its capital.

As of March 31, it held cash and short-term investments of $21.2 million, or about a third of the $62.5 million held at June 30, 2006.

For the nine months, Overland reported a net loss of $38.1 million on revenue of $126.4 million. In the prior year’s nine-month period, the company reported a net loss of $12.7 million on revenue of $167.3 million.

In April, the company cut its staff by 54 positions. Total employment is now 325 people, including 253 in San Diego.

In September, the company had 400 employees.

Despite its troubles, Overland continues to launch new products and puts a positive spin on news events whenever possible.

A recent release on a new data recovery and tape backup system said it had deployed 5,000 of the units with a per-unit cost of $18,177.

Since Calisi was sent packing in October, Chairman Scott McClendon has stepped into the CEO’s role, which was supposed to be temporary.

Perhaps a turnaround specialist can put things right for Overland, or there may be a white knight on the horizon.

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NextWave Buys Telecom Stake:

NextWave Wireless Inc., a local provider of mobile broadband products and technologies, said it signed a definitive agreement to acquire all the shares of IP Mobile, a Japanese telecom firm owned by Mori Trust Co. Ltd. of Japan.

Upon the closing of the transaction, NextWave would hold a 69.2 percent stake in IP Mobile. Terms of the agreement weren’t disclosed.

The investment is aimed at helping IP Mobile accelerate its deployment of its 4G wireless broadband technology before the end of the year in Japan, said Allen Salmasi, CEO of NextWave Wireless.

Founded in 2002, IP Mobile received a nationwide concession of spectrum in the 2 GHz frequency band in 2005.

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Phoenix Gets Big Boot Contract:

Phoenix Footwear Group Inc., a Carlsbad maker of shoes and sportswear, said it was awarded a five-year contract from the Department of Defense for hot weather infantry combat boots that could be worth up to $99 million.

The contract is with Altama footwear, which has been a prime contractor for the DOD for more than 35 years.

Altama also markets and sells its boots to federal, state and local agencies, military schools and law enforcement agencies.

Altama was acquired by Phoenix Footwear in 2004.

Among the brands under the Phoenix wing are Tommy Bahama, Trotters, Softwalk, Strol and HS Trask.

Traded on the American Stock Exchange under PXG, shares of the stock closed July 17 at $3.63 and have ranged from $1.28 to $5.65 in the past 52 weeks.

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Ticker Takes:

ImageWare Systems Inc. was awarded a $1.35 million order for its software from an undisclosed systems integrator working with a federal agency. Cubic Corp. disclosed it paid Ralph Marshall, a lobbyist, $40,000 in the first half of this year for his services.


Send any news of locally based public companies to Mike Allen via e-mail at

mallen@sdbj.com

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