BakBone Software is closing its one-year-old ColdSpark business and returning to its backup software roots to avoid cash losses.
This follows the ousting of CEO Jim Johnson and the appointment of Steve Martin, BakBone's now triple-titled SVP, CFO and interim CEO. He's putting the financial house back in order by closing the ColdSpark operation immediately, taking a $300,000 cash expense and a non-cash charge of $12.6m for the lost goodwill. Someone made a big mistake.
Presumably Scott Brown, general manager of Bakbone's Message Management division and the co-founder of ColdSpark, will lose his job, as will everyone else in the division located in Broomfield, Colorado.
A released statement has Martin saying: "Our Board of Directors and senior management team have concluded that the best opportunity for BakBone to gain consistent profitability and generate returns to shareholders is by focusing our resources on our core storage and data protection markets."
For the board to take these steps just one year after the acquisition (which we must presume it agreed to at the time) suggests they were looking into a cash-draining chasm.
Martin said that by getting the focus back on to the NetVault backup software products and channel: "We believe that BakBone will be a more focused and financially-capable company.
"Furthermore, we expect our realigned strategy will eliminate the risk of ColdSpark's comparatively longer sales cycle, stabilise our cash utilisation and position the Company to generate enhanced returns for our shareholders."
That indicates that cash utilisation has been unstable, that ColdSpark sales have cost a lot and that profitability has been falling.
Bakbone bought ColdSpark for $16m a year ago, wanting to get into the enterprise message management market. The existing backup products and ColdSpark were to become components of an integrated data protection strategy. That's in ruins now.
Bakbone says it will effect a smooth transition for ColdSpark customers, but doesn't say to what.
Something drastic appears to have happened in Bakbone's fourth quarter to cause CEO blood-letting and the closing down of ColdSpark.
Bakbone said in its last 10K SEC filing that ColdSpark operations had brought in $662,000 for the nine months ending December 31 2009, and an operational loss of $2.9m.
When announcing that Jim Johnson had ceased to be CEO, Bakbone said: "Bookings for the fiscal fourth quarter ended March 31, 2010 are currently expected to be approximately $14.1 million, which would enable the Company to achieve full fiscal year bookings within the lower end of guidance of $56.5 million to $57.5 million."
The full 2010 results will be announced next month and shareholders will eagerly await them.
BakBone said it expects to exercise its right to limit the cash component of its June 2010 obligations to ColdSpark shareholders under the May 2009 acquisition agreement to approximately $810,000. At the time of the acquisition it said it would pay $15.938m for ColdSpark - $8.125m in cash and the rest in shares. There's going to be a lot of disappointed ColdSpark employees and shareholders.
Steve Duplessie, ESG's senior analyst, tweeted this about the Bakbone events: "Is it really a surprise that Bakbone has shit the bed? Amateurs with handcuffs is not a winning combination. Case of grass being greener." ®