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Ciprico seeks Chapter 11 protection
The maker of disk drive controllers, which had seen its stock price plummet since in November, is long on ideas but short on cash.
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Ciprico Inc., a St. Louis Park data storage company, has filed for Chapter 11 bankruptcy protection because it ran out of cash before new products could be introduced.
The firm, a maker of controllers that run large groups of disk drive data storage devices, filed in U.S. Bankruptcy Court in Minneapolis on Monday, listing assets of $6.9 million and debts of $7.8 million. It has 45 employees.
The largest secured creditors, whose identities weren't disclosed, were the holders of $5.5 million in convertible debentures. The largest unsecured creditor listed on the filing is Bell Microproducts of Chicago, which is owed about $316,000.
Clint Morrison, an analyst at Minneapolis-based Feltl &Co., said Ciprico spent too much cash last year building a sales force to sell a radical new disk storage product that consisted only of software rather than a computer device. It was said to work on about 80 percent of existing computer servers and workstations, a potential big savings for customers.
"The gist of the situation is that Ciprico had the funds and burned them up too quickly," said Morrison, who spoke to company officials on Monday.
Ciprico CEO Steven Merrifield said the sales force may have been built up too quickly, but that those costs were a small part of Ciprico's problems.
"Revenues for older products fell faster than anyone thought they would, and before we could get new products to market," Merrifield said. In addition, sales of an existing disk drive controller to Hollywood special effects companies were hurt by a strike of entertainment writers, he said.
"But there are people who are interested in the new technology, and we hope the bankruptcy filing will get people to the negotiating table with a firm proposal," Merrifield said.
Potential buyers had been hanging back in the apparent belief that Ciprico might become cheaper to buy if they waited, he said. "Clearly we're trying to make something happen quickly."
Another reason to file bankruptcy was that Ciprico couldn't quickly monetize its assets, which included accounts receivable, inventories and investments. The investments were a particular problem: Ciprico's $1.2 million in mortgage-backed securities are now being valued at $900,000, Merrifield said.
Ciprico stock plunged 73 percent Tuesday to close at about 17 cents a share. Even before the Chapter 11 filing, Ciprico shares were down 92 percent from their 52-week high of $8.48. The shares have declined steeply since November 2007. In its bankruptcy filing, Ciprico said that 1,100 shareholders owned its 5.1 million shares of stock.
The 30-year-old company has delayed filing its first-quarter 2008 results with the Securities and Exchange Commission while negotiating a sale or strategic partnership, Merrifield said. The company laid off 25 people in March.
In its most recent fiscal year, ended Sept. 30, Ciprico reported a loss of $8.1 million on revenue of $8.6 million that was down 28 percent from a year earlier. Ciprico has not been profitable since 1999 as a result of changing markets and being slow to keep up with technology, said Merrifield, who joined the firm 18 months ago.
Steve Alexander • 612-673-4553
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