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Ex-archiver striver Crossroads: Time to sell all the products

Patent licensing logic has no room for product operations

Crossroads Systems has sold its StrongBox archiving products business to StrongBox Data Solutions, Inc. of Canada for just $1.85m in cash.

That's just $50,000 more than last quarter's $1.8m revenues, from which Crossroads recorded a $538,000 loss.

In the prior three quarters of its fiscal 2015 year, losses had exceeded revenues and the business looked to be on the way out.

That, combined with Crossroads' focus on IP licensing, meant the products business sale was not unexpected and had been foreshadowed in its most recent quarterly results statement.

The low price shows the state of the business. StrongBox Data Solutions (SDS) gets the entire Crossroads product portfolio and maintenance business, including the StrongBox and SPHiNX (virtual tape) storage products. Some 27 of Crossroads' employees have transitioned to SDS. Crossroads says the "existing product customers and partners should see no disruption in service."

SDS, a mostly Canadian firm, has its head office in Austin, Texas. Its CEO, David Cerf, has written a letter from there on the company's relatively new website, in which he said:

I want to ensure you of our commitment to the StrongBox product line, and our commitment that we will continue to deliver the highest quality service and support for our customers around the world.

He added: "SDS is a portfolio company of Partner One Capital which owns several enterprise software companies. SDS will also continue to operate in Europe with its subsidiary StrongBox Data Solutions GmbH."

Partner One Capital is a private equity outfit based in Montreal.

Richard Coleman, Crossroads' president and CEO, said: "We believe the sale of our product business is clearly in shareholders' best interests as it significantly reduces our cash burn."

Seeing how he and his execs and activist investor-controlled board have shown little or no interest in driving the product business forwards by flogging it off, customers and partners can only be relieved that's it's now in new hands.

David Cerf, who became SDS CEO this month, was previously EVP for Business and Corporate Development at Crossroads. He joined Crossroads in January 2005.

It appears that private equity-funded SDS has been set up to take the StrongBox business out of Crossroads.

El Reg opines

Archiving is a difficult business to be in these days. Amazon Glacier and its ilk offer cheap public cloud archiving. IBM, Oracle, and SpectraLogic offer massive capacity tape libraries which small companies cannot emulate or compete against. Disk-based archives are eating into the tape archive business, offering faster access while costing more than tape. Tiering older data off them to tape or the cloud in order to combat this is relatively common place.

Quantum, for example, does this, and is increasingly placing its disk-tape product technologies inside a niche market's workflow, as with entertainment and media, which requires specialist workflow expertise.

So there appears to be no future for small, generalist archival product businesses. They have to offer a technology or niche speciality edge to be viable businesses. It's going to be interesting to see how SDS reacts to this situation and avoids going to the great archive of failed businesses in the sky. We wish it good luck. ®

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