Overland Storage ( OVRL) said a supply agreement it signed with Dell ( DELL) has been terminated by the PC maker.

Under the agreement, Overland expected to supply Dell with two different automated tape libraries. Shipments hadn't started, but they were expected to begin in the near future.

Shares of Overland were sinking 12.7% to $5.79 in extended trading Thursday.

Overland said the costs it has recorded for the Dell arrangement have been significant, and it plans to immediately stop spending on the program.

Although it's still assessing the impact of Dell's decision, Overland believes that the write-off of tools and equipment used specifically for the contract will be relatively small. Other uses can probably be found for most of the assets, Overland said.

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