Overland Data Supercharges Linear Tape Drive Market with New VR2 Technology.

SAN DIEGO, Calif--(BUSINESS WIRE)--Dec. 11, 1997--Overland Data Inc. (Nasdaq NMS: OVRL), a technology leader in data storage and backup products, Thursday announced a major development in data recording technology with an advanced encoding technique for linear tape drives.

The company's new Variable Rate Randomizer (VR2) encoding technology produces up to two times the native capacity and native data transfer rate performance of existing linear tape technologies without requiring any changes in tape path design, recording heads, and/or media.

This is accomplished by achieving rate efficiency of greater than 99 percent, making it one of the most efficient Partial Response Maximum Likelihood (PRML) implementations ever developed. The technology was previewed at the recent Comdex show in Las Vegas. A number of analysts and storage editors agreed that VR2 is one of the greatest advances in tape technology in recent years.

Overland Data's groundbreaking VR2 technology could potentially be applied to existing linear tape devices, such as IBM Magstar(a) and IBM Magstar MP(a), Quantum DLT(a), Travan(a), MLR(a), and SLR(a). The technology could also be applied equally as well to future linear tape drive platforms. VR2 technology operates completely independent of any additional techniques used to increase capacity and performance of linear tape drives such as data compression, additional tracks and improved media.

Scott McClendon, president and CEO at Overland Data, said the breakthrough VR2 technology has the potential to energize the $1.77(a) billion 1996 linear tape drive market and allow it to keep pace with improvements in capacity and performance achieved by disk drive manufacturers.

"The disk drive industry has been quick to react to the user demand for higher capacities at reasonable costs brought on by storage-intensive applications such as multi-media and the internet. We believe that VR2 may represent a vital step in enabling linear tape drive vendors to quickly deliver superior price-performance value that customers are demanding of their tape backup solution," said McClendon.

"We also believe that VR2, can be as significant for the tape industry as the benefits derived from Intel's move from the 486 to the Pentium processor was to the computer industry."

McClendon also noted that the creation of VR2 demonstrates Overland Data's outstanding technical talent and has the potential to expand the company business into a new area of the data storage market. Overland Data designs and manufactures tape drives and automated tape library solutions for resellers and endusers worldwide, and the VR2 technology is targeted at linear tape drive manufacturers. McClendon noted that the response to date to the technology by leading tape drive suppliers has been excellent and that the company is in the process of discussing several strategic licensing agreements.

VR2 technology is Overland Data's latest technical achievement, following other company innovations such as the industry's first half-inch cartridge tape drive capable of reading and writing IBM 18- and 36-track formats, and the unmatched scalability and configuration flexibility of the award-winning DLT LibraryXpress product line.

Once successfully implemented, VR2 technology has the potential to enable linear tape drive manufacturers to immediately extend the product life of current product families. The technology, including the associated drive electronics development, may offer significant reductions in manufacturing and engineering expenses and time to market delays that are common when transitioning to new generations of heads and media. By utilizing existing head, tape path and media components, VR2 removes the risks associated with new, unproven designs, enabling better manufacturing yields based on a mature drive platform.

VR2 technology also creates the potential for drive vendors to reposition their product into new market segments. For example, if Travan NS or Tandberg's MLR drives were to be successfully equipped with VR2 technology, it would assist them in competing at the lower end of the mid-range tape market with Quantum's DLT4000 drives and the newest generation of 8mm technology, including Exabyte's Mammoth(a) and Sony's AIT(a) products. Such VR2-equipped drives would provide users with a backup solution with significantly more capacity and speed for a minimal price increase.

Overland Data's preview of its revolutionary VR2 technology at Comdex in Las Vegas was greeted with universal enthusiasm. Mark Ferelli, Editor of Computer Technology Review and Storage Management Solutions and well respected commentator on the storage industry, called the company's VR2 technology "the most significant development in tape technology in recent years," following a technology briefing at the show. "This use of PRML read channel electronics pre-stages a new generation of high-performance linear tape products with higher reliability than even the current generation enjoys."

Reactions from the leading market research analysts who follow the tape industry were equally upbeat about the potential impact of VR2.

According to Fara Yale, Director and Principal Analyst at Dataquest, "If the VR2 technology is able to achieve the same performance on production level tape platforms as it has in the Overland Data testing labs, I believe it has the potential to significantly alter the competitive landscape of the tape industry in 1998 and beyond."

Ray Freeman, president of Freeman Associates, pointed out that "VR2 technology can neutralize one of the advantages, PRML, enjoyed by helical scan tape, and improve the competitive footing of linear technologies overnight in market segments historically dominated by helical scan."

"Overland owns and is making available a next-generation technology which extends the future of tape while offering the ability to maintain backward compatibility. VR2 has the potential to become the next standard for linear tape drives," commented Michael Peterson, President of Strategic Research.

The PRML data encoding which is a part of Overland Data's VR2 technology is widely used in hard disk drives because of the benefits realized in data integrity with high capacity applications. However, applying PRML to a linear tape format while simultaneously employing a very efficient data encoding scheme is challenging due to instantaneous speed variation (ISV) which is a characteristic of all linear tape platforms.

Overland Data engineers addressed these problems with VR2 technology by developing a new variable-rate encoding technique with a non-deterministic randomizer specifically designed for the unique requirements of linear tape recording. The result of this innovative encoding solution is one of the highest encoding efficiencies ever created with PRML technology.

Jack Wolf, a Chaired Professor at the University of California at San Diego Center for Magnetic Recording Research, said," I have been aware of the development of this exciting technology for more than two years now. The Overland Data engineering team has overcome significant roadblocks in applying PRML to linear tape. I am pleased to see the successful results of their diligent efforts."

Overland Data is a leading manufacturer of high-performance scalable tape solutions for high-capacity backup, interchange, HSM and archival storage. The company offers three complete technology choices: Quantum DLT, 18- and 36-track and 9-track, designed for workstations, networks and mid-range systems. Overland Data's award-winning products meet the critical needs of end users, distributors and OEMs in industries worldwide. -0- EDITOR'S NOTE: See additional quotes from other industry leaders, which is attached, for reference and use. VR2 is a claimed trademark of Overland Data worldwide. DLT is a claimed trademark of Quantum Corporation Worldwide. IBM, Magstar and Magstar MP are trademarks of IBM Corp.

(a) A trademark or a trade name of an entity other than Overland Data.

Except for the factual statements made herein, the information contained in this news release consists of forward looking statements that involve risks and uncertainties. The company's actual results could differ materially from those contained in such statements. The VR2 technology has been tested by the company to date on only one platform and has not been successfully incorporated in a production level product. Factors that could cause or contribute to such differences include potential technical difficulties and time delays associated with further development of the VR2 technology to permit it to be incorporated in volume production, timing and market acceptance of new product introductions by the company and its competitors, ultimate market acceptance of VR2 technology by the company's customers and new alternative product offerings by competitors, general competition and price pressures in the marketplace. Reference is also made to other factors set forth in the company's filings with the Securities and Exchange Commission including the "Risk Factors," "Management's Discussion and Analysis" and other sections of the company's Form 10-K for the most recently completed fiscal year. -0- ADDITIONAL QUOTES FROM INDUSTRY AUTHORITIES

STORAGE INDUSTRY ANALYST International Data Corp. (IDC)

IDC revenue forecasts, which are measured in terms of OEM value, show worldwide linear tape technologies totaled at $1.7 billion in 1997. IDC forecasts an increase to $2.3 billion by the year 2000 and to $2.7 billion by year 2002, with drive unit shipments forecasted to remain close to 3.8 billion for all linear technologies. Bob Amatruda, Senior Analyst for Tape and Removable Storage at International Data Corp., said, "I believe the implementation of VR2 will have a significant impact on all linear tape technologies."

EDITOR Karen Franse, Senior Editor, VARBusiness

According to VARBusiness' 1997 VAR Sales Trends Study, 81 percent of VARs are involved in selling or specifying tape backup systems to their customers. Once the technology has proved itself, VR2 stands to make a significant impact in increasing those numbers. In theory, more VARs will be able to sell tape technology to their end-user clients because they'll be able to get higher capacities and faster data transfer rates for less money.

Per VARBusiness' research, VARs are already making 20 percent gross profit margins on their tape backup system sales, nearing the top in terms of profit margin on peripheral items. But with tape products that can offer more for less and do it in a shorter come-to-market development time, VARs may be able to earn even more margin, making tape sales a profit center for them and a must-have for their clients.

-0-

NOTE TO EDITORS: Due to electronic news system parameters, the "squared" typographic symbol cannot be transmitted. All references to VR2 within this release should be interpreted as VR squared.

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